World shares and bonds edged up on Monday as investors assessed a lower growth target from China than many had expected, with testimony from Fed Chairman Jerome Powell and jobs data this week that could decide the pace of future rate hikes.
There was some disappointment that Beijing chose to lowball its growth outlook with a target of 5%, rather than the 5.5%-plus favoured by the market.
Safe-haven government bond prices rallied, with the yield on 10-year Treasuries down 4 basis points to 3.92%, following last week's spike above 4%.
Still, the recent run of data, which has significantly reduced expectations of a recession, has been strong enough to keep investors optimistic.
While Chinese stocks (.CSI300) dropped, MSCI's broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) was still up 0.5% by 0933 GMT, while Japan's Nikkei (.N225) touched a three-month high.
"Sentiment this morning is dominated by the modest, revised growth target in China highlighting a diminished likelihood of more stimulus," said Kristoffer Kjær Lomholt, head of FX, corporate research and chief analyst at Danske Bank.
"The announcement may disappoint some investors, but on the other hand, it could ease some fears of a strong inflationary impact from China," Lomholt added.
Focus was firmly on central banks, ahead of a key speech by Fed Chairman Powell and policy decisions this week from Japan, Australia and Canada.
Markets have become resigned to a higher peak interest rate from the Fed, but are hoping it will stick with quarter-point increases, rather than half-point hikes.
San Francisco Fed President Mary Daly on Saturday reiterated rates may have to go up, but set a high bar for moving back to half-point increases.
The stage is set for Powell's testimony to Congress on Tuesday and Wednesday, where he will no doubt be quizzed on whether larger hikes are needed.
Much, however, might depend on what the February U.S. payrolls report reveals on Friday. Forecasts are centred on a more modest increase of 200,000 following January's barnstorming 517,000 jump that led markets to reprice their interest rate expectations, but risks are on the upside.
"Powell's testimony comes before the payrolls and inflation numbers, therefore, he is likely to avoid committing to a policy path," said Jan Nevruzi, an analyst at NatWest Markets.
"Payrolls are due on the final day when Fed officials can publicly discuss monetary policy, but CPI will be released during the blackout period," he added. "If we end up in a situation where the jobs and inflation numbers present a conflicting view, the outcome of the Fed meeting could become even harder to predict."
The dollar index , which measures the performance of the U.S. currency against six others, was in wait-and-see mode, down 0.1% at 104.53, while the euro held at $1.0633 , just off a recent seven-week low.
