China’s
National People’s Congress gets underway this weekend, and investors will get
an update on the health of the US labour market.
Here’s what to watch in the coming days.
China
Li
Keqiang, China’s premier, delivers the country’s proposed economic targets on
Sunday at the opening of the fifth session of the 12th National People’s
Congress, the country’s top legislature.
While
much of the discussion takes place in closed-door meetings, economists are
paying attention to the Government Work Report and the 2017 growth target. Jian
Chang, economist at Barclays, said their base case is for 6.5 per cent growth.
He also expects the government to maintain the budget deficit at 3 per cent and
inflation target at 3 per cent.
On the
politics front, China-watchers will keep their eyes peeled for clues on who
could make it to China’s 25-member Politburo and possibly the Politburo Standing
Committee (PSC), following a reshuffle of some senior provincial and central
government leaders, particularly with the 19th Party Congress scheduled for
this fall.
UK budget
UK
chancellor Philip Hammond will present his first budget on Wednesday, and economists
expect it to show a decline in gilt issuance.
“The UK
economy has outperformed earlier forecasts, and so there should be a bit more
revenue to play with, leading to the first decline in borrowing in 3 years,”
strategists at TD Securities said. “But we see a cautious budget with few
giveaways as the UK approaches Brexit.”
European Central Bank
Even as
investors prepare for the US central bank to tighten monetary policy, the ECB
is expected to leave rates unchanged when it meets on Thursday.
“The focus
instead is likely to be on possible changes in language, with a number of
voices since the last meeting calling for a change to the ECB’s forward
guidance,” said economists at RBC Capital Markets. “An updated set of staff
macroeconomic projections, which are likely to see an upward revision to
inflation estimates in particular, will add weight to those calls.”
US jobs
The key
US event comes at the end of the week as investors look to see whether Friday’s
US jobs report will cement the Fed’s case for raising rates, on the heels of
hawkish remarks from chair Janet Yellen and a handful of other Fed officials,
alongside a string of upbeat economic data.
The
report, which comes during the central bank’s communications blackout period,
is expected to show the US economy added 190,000 jobs last month, compared with
the 227,000 jobs added in January. They also expect the unemployment rate to
slip to 4.7 per cent, from 4.8 per cent previously.
But even
if payrolls turn up light, Tom Porcelli, economist at RBC Capital Markets,
argues that “wages will be the lynchpin to whether the Fed ‘likes’ this report
enough to vindicate hiking in March”. Economists expect that wages will have
improved.
Average
hourly earnings are projected to rise 0.3 per cent in February from the
previous month, when they climbed 0.1 per cent. That would leave earnings up
2.8 per cent from a year ago, compared with 2.5 per cent in January. And an
uptick in wage inflation would certainly help strengthen the case for a March
move, as the Fed’s preferred inflation measure is near the central bank’s 2 per
cent target.
With Fed
fund futures currently pointing to a 96 per cent chance that the central bank
lifts rates in two weeks, a better-than-expected jobs report could bolster
those odds further.
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