A blessing in disguise

It’s been a calm start to the week as investors weigh up what China’s modest growth target means for the global economy and look ahead to a busy few days.

Safe to say markets were surprised by the decision to target only 5% growth this year while signaling no significant stimulus to turbo-charge the economic recovery. It may well prove to be a wise decision when you consider how well the country has transitioned from zero-Covid to living with it, while policymakers around the world may also be breathing a sigh of relief.

One of the upside risks to inflation this year was a turbo-charged Chinese recovery which would drive up demand for a host of commodities from oil to iron ore and as a result prices. So while we may not get the growth boost, we’re probably getting something far more valuable.

It will be interesting to see if this is something that is referenced by central banks over the coming months as they near the end of their tightening cycles and battle what may be proving to be quite stubborn inflation. We may even get a reference to it from Jerome Powell during his testimonies in Congress over the next couple of days.

In reality, these are not the thrilling affairs they are often played up to be. But this time may be different as the Fed is not exactly in anyone’s good books after delaying the start of tightening and as a result having to go further in order to get a grip on it. And with the cycle now in such an unclear phase, I’m sure the grilling will be extra intense this time around.

There’s no doubt what the main event will likely be this week though. The jobs report on Friday will tell us whether the January data was a blip or something to be more concerned about. No one is expecting a repeat of last month but any indication that the labour market is still red-hot could see a fourth 25 basis point hike be more priced in.

Stabilized for now

Bitcoin has managed to stabilize quite quickly after Friday’s plunge as traders take stock of the situation at Silvergate Capital. Fears naturally resurfaced following reports late last week and just as it seemed cryptos were moving past the FTX debacle. The question now is how widespread the ripple effects will be and how much it will undermine confidence in the space. Bitcoin had already been struggling to break above $24,500-$25,500 resistance and this has just made it that much harder.

For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/

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