Five things to know before the market trades this week, March 2-8

Visitors passing the entrance to the Mobile World Congress 2015 at Fira Gran Via in Barcelona, Spain, on Feb 28, 2015. With Facebook's Mark Zuckerberg as top draw, the tech world descended on Barcelona on Sunday for the Mobile World Congress. -- PHOT
Visitors passing the entrance to the Mobile World Congress 2015 at Fira Gran Via in Barcelona, Spain, on Feb 28, 2015. With Facebook's Mark Zuckerberg as top draw, the tech world descended on Barcelona on Sunday for the Mobile World Congress. -- PHOTO: BLOOMBERG 

1. Deflation, growth worries for China as parliament meets

China's central bank cut interest rates on Saturday, just days before the annual meeting of the National People's Congress begins on Thursday. It was the latest effort to support the world's second-largest economy as its momentum slows and deflation risks rise.

During the NPC, Premier Li Keqiang is expected to give an annual speech on the state of the economy, including the closely watched official growth objective for this year. Some economists expect Beijing to lower its official growth target to 7 per cent this year, down from 7.5 per cent last year.

Other subjects closely monitored will be whether lawmakers discuss revamping the country's state-owned enterprises, said the Wall Street Journal. While the NPC largely rubber-stamps decisions already made, it can offer a forum for discussion of topics important to Chinese and to China-watchers alike.

Saturday's rate cut - its second time in three months - comes four weeks after the People's Bank of China lowered the level of cash banks must set aside as reserves, leading some to believe the PBOC is growing increasingly worried about deflationary risk. The reference to "real interest rates" in Saturday's statement also implied that sliding prices were an important factor in its decision.

Economists also pointed out that many Chinese companies are carrying staggering debt burdens, so allowing them to refinance at lower rates is seen as a way to put more cash in their pockets.

The rate cut was followed on Sunday by news that China' s manufacturing activity contracted for the second straight month in February, according to an official survey by the National Bureau of Statistics.

Last week's flash HSBC/Markit purchasing managers' index (PMI) showed that activity in Chinese factories edged up to a four-month high in February but export orders shrank at their fastest rate in 20 months. The final HSBC/Markit data is due on Monday and Wednesday.

2. US jobs could signal end of Fed's 'patient' stance

In the United States, jobs data for February on Friday are likely to be the highlight of the economic week, a major data point ahead of the Federal Reserve's rate-setting committee meeting on March 17-18.

Economists polled by Reuters are forecasting a healthy 240,000 rise in non-farm payrolls last month. If confirmed, it would be the 12th straight month of job gains of over 200,000, the longest such streak since a 13-month run in 1994-95.

It should be enough to persuade the Fed that the economy could cope with a rate hike and may prompt it to alter its forward guidance language, in particular dropping its view that it will be "patient" in normalising monetary policy.

The missing part of the Fed action puzzle is inflation. US consumer prices fell year-on-year for the first time since 2009 in January, supporting the view of those that believe the Fed will wait until September to start raising rates, even though core inflation inched up.

"The precise timing is probably based on inflation. Our view is that it will be September, with June an outside possibility,"said Bernd Weidensteiner, economist at Commerzbank.

If inflation is indeed the key, the focus on Friday could be less the jobs figures than average earnings, which posted the greatest absolute gain since mid-2007 in January. The growth is seen easing to a still healthy 0.2 per cent in February, with a SmartEstimate pointing to a stronger 0.3 per cent.

Other US data due this week include the PMI and ISM manufacturing indices, personal income and spending and construction spending, due Monday; motor vehicle sales, due Tuesday; PMI services index, ISM non-manufacturing index, and the Beige Book, due Wednesday; productivity and factory orders, due Thursday; and trade gdata due Friday.

3. More huddling over Greece

Greece may have secured an extension of its bailout last week, but it remains reliant on emergency funding.

The European Central Bank's Governing Council meets in Cyprus on Thursday and may take a decision on whether to accept Greek government bonds as collateral for its direct ECB funding, which it stopped doing at the start of February.

If the ECB does not - and it most likely will not - it could be forced to prolong the provision of Emergency Liquidity Assistance (ELA) to the Greek central bank.

ECB president Mario Draghi is also expected to provide further details on the bank's €1 trillion government bond buying programme, which begins in March. He may face questions about the programme's ability to reach its target, such as how the ECB intends to convince domestic banks to sell their government debt, with the prospect of then parking the money with the ECB at a negative interest rate.

The ECB will also release new economic forecasts. Chief economist Peter Praet said last week that it was likely to revise upward its expectations for growth in the euro zone, with low oil prices and a weak euro helping.

4. Aussies to cut rates amid slew of central bank meetings this week?

The ECB will be just one of many central banks to meet. The Reserve Bank of Australia opens proceedings on Tuesday, its board meeting a month after it surprised markets with a quarter percentage cut to its cash rate to 2.25 per cent.

A wafer-thin majority of economists polled by Reuters expect a further reduction to 2 per cent to spur an economy hit by lower prices for its raw material exports and to keep downward pressure on the Australian dollar.

A day later, it will be the Bank of Canada's turn to decide on rates. It too surprised with a 25 basis point cut to 0.75 per cent at its last meeting in January, citing risks to its outlook from week oil prices. By contrast it is seen holding fire on Wednesday, with a cut seen more likely in the second quarter.

On the same day elsewhere, a rate cut is expected in eastern Europe's largest economy, Poland, to counter declining consumer prices. Brazil's central bank, by contrast, is seen raising interest rates for a third straight time as inflation races above the government's 4.5 per cent target.

The Bank of England is expected to keep rates unchanged at its meeting on Thursday.

5. No Apple but it's the biggest mobile show in town

With Facebook's Mark Zuckerberg as top draw, the tech world descended on Barcelona on Sunday for the Mobile World Congress.

Industry giant Samsung has already unveiled its S6 and S6 Edge, smartphones with a three-sided screen, as the South Korean company tries to reverse profit declines and market-share losses to Apple. HTC will also be unveiling new phones, while others will be exhibiting tablets, smartwatches, operating systems and the like.

Among the big themes this year will be 5G, the faster wireless Internet successor to 4G, and the challenges bringing the developing world online.

Source: Reuters, AFP, Wall Street Journal

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