Premier Li Keqiang's government work report was released on Sunday at the opening of the National People's Congress, part of the annual "Two Sessions" parliamentary meeting. The 2023 economic growth target was unveiled in the report, on the low side at "around 5%". Analysts' expectations for GDP centred around 5.5%, so this 5% is a disappointment.

The modest GDP growth target has implications for policy stimulus, a lower target will require less of it. It also means less demand for commodities at the margin than would otherwise have been the case.

While the news didn’t rock markets it did send a few shudders through. Stock markets in China dripped a little lower. AUD/USD, as a China proxy trade, traded a gap lower early Monday but has since recovered.

EUR/USD also dipped a small gap down and recovered. Slightly lower demand from China should assist to further ease any lingering Euro area LNG supply worries (not that these are weighing too much now regardless). Also of benefit to the EUR were weekend remarks from European Central Bank President Lagarde, reiterating the need to hike rates ahead to combat still strong inflation.

We also had hawkish remarks over the weekend from Mary Daly, head of the San Francisco Federal Reserve branch.

From Japan over the weekend was news of Japan's unions demanding the biggest wage hike in 25 years at "shunto" spring wage talks. The Bank of Japan is encouraging higher wages to support inflation. Higher wages, the Bank argues, would support demand-pull inflation. This form of inflation, BOJ officials say, would help ensure more sustainable and stable inflation around the Bank's 2% target. If the BOJ can achieve stable 2% inflation there is a case for a reduction in its ultra-loose, ultra-stimulatory policy. At the margin this would be yen supportive and this weekend news seems to have added to yen gains during the session here.

Also over the weekend Saudi Aramco increased most official oil selling prices to Asia for April.

Asian equity markets:

  • Japan’s Nikkei 225 +1.2%

  • China’s Shanghai Composite -0.24%

  • Hong Kong’s Hang Seng +0.13%

  • South Korea’s KOSPI +1%

  • Australia’s S&P/ASX 200 +0.9%

eur wrap chart 06 March 2023