By Geoffrey Smith
Investing.com -- China sets its lowest growth target in over 30 years, suggesting that Beijing won't resort to its past tactics of pump-priming this year. Oil and base metals prices fall in response. The European Central Bank's chief economist warns that the ECB is going to have to keep raising rates beyond March. U.S. stock markets don't want to rouse from their weekend sleep, although the sound of another Norfolk Southern train derailment may wake up some. Tesla is cutting prices again, but only for its premium models. Here's what you need to know in financial markets on Monday, 6th March.
1. China growth forecast
Industrial commodities weakened after China's annual parliamentary session ended with the government setting a growth target of around 5%, the lowest in over 30 years.
Premier Li Keqiang, who is making way for a successor more closely allied with President Xi Jinping, said the government's overriding objective was to restore economic stability, which some took as a sign that there will be no return to the debt-fueled growth of previous years. Budget spending will rise only 5.6%, giving a deficit of 3% of GDP.
Recent reports indicate that Xi also intends to install Zhu Hexin, head of one of China's largest state-owned banks, at the helm of the People's Bank of China, further consolidating his control over the main levers of economic power.
2. ECB's Lane flags more rate hikes
A top European Central Bank official signaled there will be more interest rate hikes after the expected 50-basis-point move at next week's policy meeting.
Chief economist Philip Lane warned that underlying price pressures appear to be strong and that the price shocks from the pandemic and the war in Ukraine are only unwinding gradually. Lane, one of the more dovish voices on the ECB's council, made his comments less than a week after data showed core inflation accelerating to 5.6% on the year in February – nearly three times the ECB's 2% target.
In 2021, Lane had been the foremost of those arguing that the inflation spike was likely to be transitory.
3. Stocks set for slow start; Norfolk Southern derailed again
U.S. stocks are set for a muted opening later, with little in the way of either earnings or economic data to move the dial.
Dow Jones futures, S&P 500 futures and Nasdaq 100 futures were all effectively unchanged as of 06:30 ET, holding on to gains made on Friday on a market-wide bout of short-covering.
Stocks likely to be in focus later include railroad operator Norfolk Southern (NYSE:NSC), which suffered a second derailment in the last few weeks with a train outside Springfield, Oh., at the weekend. In contrast to the first derailment, this one didn't result in any spill of hazardous materials.
4. Tesla cuts prices again - for Model S and Model X
Tesla (NASDAQ:TSLA) has cut its prices again, less than two months after its last round of discounting.
The EV maker cut the starting price for its Model S and Model X cars by $5,000 and $10,000 respectively, in the latest sign that customers are gagging at cost levels in an increasingly constrained economic environment.
The company has gained some breathing room on price, thanks to the sharp drop in lithium prices in recent weeks, which promises to bring down the cost of EV batteries over the coming months.
Lithium Carbonate prices in China have fallen 40% from their November highs and hit their lowest in 14 months last week.
5. Oil falls on weak Chinese growth forecast; still unsettled by UAE report
Crude oil prices fell in response to China's economic growth target announcement, which deflated hopes for a big pickup in demand between now and the end of the year.
By 06:45 ET, U.S. crude futures were down 1.5% at $78.50 a barrel, while Brent crude was down 1.5% at $84.52 a barrel.
The market has been unsettled by a report at the end of last week by The Wall Street Journal suggesting that the cohesion of the group of major exporting countries is starting to fray. While Russia has announced a cut in output to reduce the discount it is having to accept on its crude exports, the WSJ reported that the United Arab Emirates is considering leaving the "OPEC+" group, seeking the freedom to use the additional capacity it has built in recent years.