Market sentiment was in a risk-off mode yesterday as driven by China's new growth projection, ongoing geopolitical tensions in the Middle East and concerns about the PSI program in Greece. Crude oil prices traded in a narrow range with the prompt-month WTI contract moving within 105.5 and 107.5 and settling largely flat. Gold price remained pressured with the benchmark Comex contract breaching below 1700 slight before ending the day 1703.9.

Investors appeared to be disappointed by China's Premier Wen Jiabao's announcement that the country's economic growth target is reduced to +7.5% this year while inflation will stayed at +4%. The Chinese government also reiterated to maintain a 'proactive' fiscal policy and a 'prudent' monetary policy. This is the first time that China forecasts its growth at below 8% since 2005. While this may disappoint some investors, the goal is a signal that the government policy has shifted the composition of growth to consumption from exports and investment. Meanwhile, the government set the fiscal deficit target at RMB 800B, or around 1.5% of GDP. The local government deficit (bond issues) increased to RMB, up from RMB 200B in 2011.

While oil prices have eased after the rallies over the past few weeks, tensions over Iran continued to support the black gold, holding it above 100. US President Obama's statement that the US would not rule out military invention in Iran indicated a prolonged threat of war in the Middle East. With likely retaliation from Iran, oil prices would likely to remain strong in the near-term.

Investors were also worried as the Greek PSI deadline approaches. Greek Finance Minister Venizelos told private holders of Greek Government debt that the current PSI offer was the best offer as this is the only one, the only existing offer. Participants of the program include National Bank of Greece SA, Alpha Bank SA, BNP Paribas SA and Commerzbank AG. The Greek government has set a 75% participation rate as a threshold for the transaction to proceed. Investors will give up 53.5% of their principal and exchange the remaining holdings for new Greek government bonds and notes from the EFSF. Venizelos stated that while he would prefer not to trigger Greek CDSs, he would still implement the collective action clauses if needed.

Regarding other macroeconomic events, the RBA has just announced to leave the cash rate unchanged at 4.25%. The Eurozone's GDP probably contracted -0.3% q/q in 4Q11 while Canada's Ivey PMI index is expected to have dropped to 62 in February from 64.1 a month ago.