Markets advanced in Asia overnight. Japan’s Nikkei climbed 1.20 percent after a volatile trading week, while the Hang Seng climbed 1.05 percent even as China lowered its growth forecast for the next seven years. In Australia, the S&P/ASX 200 climbed 0.22 percent.
Markets also advanced in Europe with traders ostensibly reassured by support from central banks around the world. Last week was ripe with conversation about the possible end of monetary stimulus, but the anxiety of the discussion seems to have tapered off for now. Germany’s DAX was up 1.06 percent, London’s FTSE 100 was up 1.56 percent, and the STOXX 50 was up 1.36 percent.
U.S. futures at 8:40 a.m.: DJIA: +0.77%, S&P 500: +0.82%, NASDAQ: +0.96%.
Here are three stories to keep an eye on:
1) China Curbs Growth Expectations: Economists, policymakers, and market observers around the world can agree that China faces massive, unprecedented challenges. The world’s second largest economy grew approximately 10 percent per year over the past 10 years, and Prime Minister Li Keqiang told business leaders in Germany that this rate of growth — although attractive to some international investors — is unsustainable and must be tapered. Instead, he indicated that the nation would aim for about 7 percent growth per year through 2020, and try to double per capita GDP.
The comments indicate that Chinese leadership is willing to tolerate lower growth rates at home as the economy matures. The insane rate of growth left many holes in the nation’s economy, and the new leadership seems keen on patching them in short order. Prime Minister Li told business leaders that pro-market and environmentally-friendly strategies will be a defining characteristic of the next seven years.
2) Bank of Japan Releases Minutes: The minutes from the most-recent Monetary Policy Board meeting in Japan revealed that “members agreed that it was appropriate to maintain the current guideline that the Bank would conduct money market operations so that the monetary base would increase at an annual pace of about 60-70 trillion yen,” with interest bound to a range between zero and 0.1 percent. The 2 percent inflation target over the next two years remains in effect. The BoJ also updated its GDP forecast for 2013 from 2.3 to 2.9 percent, and its 2014 forecast from 0.8 to 1.4 percent.
The news helped stabilize the Nikkei index while it was volatile last week, in the wake of discussions about the future of U.S. monetary policy. The yen also weakened to trade at 102.0315 to the dollar. The minutes noted that members “shared the recognition that the U.S. economy had been on a moderate recovery trend, with the household sector being resilient, and that improvement had begun to spread to the corporate sector as well.”
3) Dear Main Street: The Recovery Has Left You Behind: In 2012, the average CEO of a large public company made about 242 times more money than the average U.S. worker.
An analysis of CEO compensation data by the Associated Press showed that the typical CEO of a large company made $9.7 million, while the average U.S. worker earned $39,900. CEO compensation has never been higher, fueled — like most things these days — by the insane rally in stock prices. The majority of this net increase in compensation over the past few years has come from gains in total stock compensation (+17 percent last year to 44.3 percent of total compensation), and increases in the value of that compensation (+15.83 percent for the S&P 500, including dividends)… (Read more.)
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