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Market movers: China growth, Tesla price cuts, ECB hike

On March 6th, financial markets saw several significant developments:

China sets its lowest growth target in over 30 years, signaling that the government won't rely on its past tactics of pump-priming this year. This announcement caused a drop in oil and base metals prices as industrial commodities weakened. Premier Li Keqiang emphasized the government's primary goal is to restore economic stability, and budget spending will only rise by 5.6%, resulting in a 3% GDP deficit. Xi Jinping, China's president, intends to install Zhu Hexin, the head of one of China's largest state-owned banks, at the helm of the People's Bank of China, further consolidating his control over the main levers of economic power.

The European Central Bank's (ECB) chief economist, Philip Lane, warned that the ECB will have to keep raising interest rates beyond March. Lane noted that underlying price pressures are strong and that price shocks from the pandemic and war in Ukraine are only unwinding gradually. This warning came less than a week after data showed core inflation accelerating to 5.6% on the year in February, nearly three times the ECB's 2% target.

U.S. stock markets were set for a slow start with little in the way of earnings or economic data to move the dial. Dow Jones futures, S&P 500 futures, and Nasdaq 100 futures were all unchanged as of 6:30 ET, holding onto gains made on Friday due to a market-wide bout of short-covering. Railroad operator Norfolk Southern suffered a second derailment in a few weeks with a train outside Springfield, Ohio, over the weekend.

Tesla cut its prices again, less than two months after its last round of discounting. The EV maker cut the starting price for its Model S and Model X cars by $5,000 and $10,000, respectively, in the latest sign that customers are looking for cheaper options in an increasingly constrained economic environment. The company has gained some breathing room on price thanks to the sharp drop in lithium prices in recent weeks, which promises to bring down the cost of EV batteries over the coming months.

Oil prices fell in response to China's economic growth target announcement, which deflated hopes for a significant pickup in demand between now and the end of the year. U.S. crude futures fell by 1.5% to $78.50 a barrel, and Brent crude was down 1.5% at $84.52 a barrel. The market has been unsettled by a report by The Wall Street Journal suggesting that the cohesion of the group of major exporting countries is starting to fray. The United Arab Emirates is considering leaving the "OPEC+" group, seeking the freedom to use the additional capacity it has built in recent years. While Russia has announced a cut in output to reduce the discount it is having to accept on its crude exports.

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