Rent 4 | Europeans opened slightly higher (Eurostoxx futures +0.4%, S&P futures +0.1%), after a low to high session on Wall Street but somewhat disappointing with growth targets in China.
Yesterday, Sunday, March 5, the 14th edition of the “Two Sessions” began in Beijing: the National People’s Congress, China’s legislative body, and the Chinese People’s Political Consultative Conference, the country’s highest political advisory body. The agenda is expected to transition to a third term for Xi Jinping and the reform of the State Council, perhaps more to national security, the economy and high technology (key in the middle of the technological conflict with the US). in an effort to deal with increasing geopolitical challenges. Yesterday they announced the growth target for 2023, which stood at a modest +5% (vs expectations of +5.5%/+6%), although at the end of the policy there was no Covid and still weak business confidence and uncertainty. real estate sector (20% of gross). No stimuli were reported to reach a higher growth rate. 2013 public deficit is 3% of GDP vs. 2.8% in 2022. Additionally, with a longer-term focus, we should expect new measures to tackle pressing issues such as population age, summer excesses and the country’s new growth model.
While waiting for the whole week, we will wait for the American employment data for February, where significant strength in the labor market is still expected. On Wednesday we will know the ADP for private use, with an acceleration forecast (200,000) after a weak figure in January (106,000 vs. 253,000 in December). On the same day the IOLTs survey of vacancies (10.58 million expected) will be published, which we remember rose to 11 million in January, showing the labor market. Even with everything, the highlight of the week will be on Friday, with the official employment report, where the market discount +215,000 non-funding salaries compared to the strongest job creation in January (+517,000, acceleration vs +260,000 in December ); which would keep the unemployment rate at a historic low of 3.4% while wages accelerated to +4.7% yoy vs +4.4% previously.
Powell will also appear before the Senate Banking Committee (Tuesday) and before Congress (Wednesday), in his semi-annual testimony to talk about monetary policy, just before the employment report (Friday) and inflation (Tuesday 14). We expect you to keep your conversation about the need for additional hikes to control inflation and the need for these hikes to remain data-dependent.
In the Eurozone, Investor Sentix confidence will be published for March, which could add some improvement, and we will also know the sales figures for January and the final GDP for 4Q22, which will be revised slightly downward to 0% quarterly (vs. +0, 1% forecasts).
In China we will have big data with CPI and PPI for February, moderately expected in the first to +1.9% yoy (vs +2.1% before) and acceleration in the second case to -1.3% yoy (vs -0.8 %yoy before). Likewise, figures for trade balance, exports and imports will be published in the same month. Finally, mention should be made of Japan’s PPI publication for February (+8.5% yoy vs +9.5% previously).
At the level of central banks, the Bank of Japan will meet on Friday, with no expected changes in monetary policy (repo rate -0.10%, target 10-year IRR 0%) and waiting for a change of governor in April that may entail. further progress in his monetary organization.
As far as our market is concerned, we believe that the frictions seen in fixed incomes, with a significant rise in IRRs and the expectation of higher returns over a longer period of time due to inflation that does not stop, will somehow be transferred to the stock markets. . For this reason, we consider any profit received in equities reasonable, even with the additional deterioration in the cycle due to the extended impediment of more restrictive financial conditions. In this regard, we take a strategic approach to maintain a defensive interest in our portfolios.
