Morning news: Hopeful market awaits Powell’s testimony

A look at the day ahead in European and global markets from Ankur Banerjee

Investors have found their appetite for risky assets at the start of a crucial week, shrugging off disappointment that China has set a modest target for economic growth this year, with European shares set to carry the momentum.

After posting its best weekly performance since the start of the year, the continent-wide STOXX could be aiming for another record high as traders await January retail sales data for the eurozone later in the day.

Meanwhile, the market’s focus is firmly on Fed Chairman Powell’s two-day testimony before the US Congress (on Tuesday and Wednesday) and the February jobs report (due on Friday) which are likely to dictate the US central bank’s path in the near future.

While investors have come to accept (sort of) that the Fed is likely to keep interest rates higher for longer, there are new fears that strong economic data will lead the central bank to return to jumbo hikes.

Hawkish rhetoric from Fed speakers continued over the weekend, with San Francisco Federal Reserve Bank President Mary Daly the latest to warn of the inflationary threat.

The market largely expects Powell to be hawkish this week, but given his testimony comes before the jobs report is released, he is likely to aim to keep all options open.

In China, the country’s leadership set a target of 5% for economic growth this year, which analysts called conservative and pragmatic, as they kicked off the annual session of the National People’s Congress.

In business, the Italian state lender CDP has bid for the fixed network of the former telephone monopoly Telecom Italia, competing with an offer from the American firm KKR.

Key developments that could affect markets on Monday:

Economic events: Eurozone January retail sales, February S&P Global PMI for Germany, France and the Eurozone

Speakers: ECB Chief Economist Philip Lane

Reporting by Ankur Banerjee; Editing by Edmund Klamann

Our standards: Thomson Reuters Trust Principles.