The Week Ahead
This week kicks-off with global PMIs, and the US ISM manufacturing and we will hear from the Fed’s Musalem later today. Eurozone unemployment and Trump’s speech to Congress and any tariff news will be watched closely on Tuesday, and Saudi Aramco releases its earnings report. The Chinese People’s Political Conservative Conference (CPPCC) starts on Tuesday and concludes the following Monday. On Wednesday morning the China Caixin services PMI print and eurozone services PMI and PPI will garner market focus, and later the US ADP employment, ISM services index and factory orders readings will be of interest. We also have the Fed’s Beige Book, China’s National People’s Congress (CNPC) where Premier Li Qiang may deliver the nation’s growth target for 2025. The ECB rate decision will be a focus for markets on Thursday, expectations are for a 25bp cut to 2.5%; President Lagarde’s new conference follows. US Treasury Secretary Bessent and the Fed’s Waller and Bostic speak on Thursday. China’s trade balance, the eurozone’s GDP, Germany factory orders and the all-important US employment report and consumer credit prints are due on Friday. The Fed’s Powell, Williams, Bowman and Kugler speak on Friday, and we will also hear from the ECB’s Centeno, Nagel, Panetta and Knot and the BoE’s Mann.
Last week trade tensions and prospects of a US economic slowdown saw yields across the US Treasury rally, the 10-year closed 22bps lower, at 4.21%, while the 2-year fell below 4%. The S&P Index gained 1.59% over the week paring the previous weeks’ losses. The dollar enjoyed a 0.94% gain through the week. Meanwhile, Brent crude closed 1.68% lower, at $73.18pb, amid supply resumption in certain regions and global economic growth concerns.
Fed officials uniformly advocate a cautious approach, with Goolsbee and Barkin emphasising a "wait-and-see" stance on Trump's tariffs. Schmid expressed concern over inflation expectations, Hammack noted inflation remains above target, and Harker warned that tariffs could push prices higher while maintaining the current rate policy absent significant data changes.
Elsewhere, China's equity market has become more investible following the DeepSeek news and private sector symposium with President Xi, despite facing challenges from US tariffs. New volatility emerged at the end of the week with the announcement of additional 10% tariffs coinciding with China's Two Sessions. The PBoC has adopted a more accommodative monetary stance with net liquidity injections, while policymakers have committed to proactive macroeconomic policies focusing on domestic demand and market stabilisation. China is expected to raise its fiscal deficit target to 4% while potentially lowering its inflation target to 2%, providing more room for monetary easing. The manufacturing PMI rebounded to 50.2 in February. The RMB faces potential pressure as markets assess Beijing's response to new tariffs.
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