Friday’s rally in North American markets that saw major indices gain 1.2% to 2.0% has levelled off this morning. US index futures are flat and European markets are mixed with the Dax up 0.3% and the FTSE down 0.6%. It’s a quiet day for business news leaving investors to digest recent developments and await this week’s monetary and economic news. The US 10-year treasury note yield is steady near 3.90% and currency trading has been relatively quiet so far.
China’s government announced over the weekend that it is targeting GDP growth of around 5.0% for 2023, down from its 2022 goal of 5.5% but better than the actual reported 2022 GDP growth of 3.0%. This news has weighed on commodity markets in particular, suggesting that investors are ratcheting down their expectations for resource demand. WTI Crude Oil is down 1.2%, Natural Gas is down 13.0% and Copper is down 0.4%.
With earnings season now over, investor focus has shifted back to the economy and monetary policy. Wages and employment dominate the economic calendar this week with US ADP Payrolls on Wednesday and US Nonfarm Payrolls, plus Canada Employment on Friday.
It’s also a potentially big week for central bank decisions and hints on the future of interest rates. The Reserve Bank of Australia meets overnight tonight with another 0.25% increase widely expected. Tuesday, Fed Chair Powell starts two days of testimony to Congress where he may hint toward whether the Fed is considering another 0.25% interest rate increase at its meeting in two weeks, or if it is under pressure to go back up to 0.50% increases. Wednesday the Bank of Canada is expected to officially pause its rate hike program after hinting toward a pause in its last statement.
