【TrueZhuo Finance】US economic data strong; China may lower economic targets
U.S. services sector expansion in February hit its fastest pace in nearly four years, with ADP data showing the highest increase in U.S. corporate job creation since July. U.S. Treasury Secretary Besant said the universal tariff could be raised from 10% to 15% this week. China's National People's Congress opens on Thursday, with the government likely to lower this year's economic growth target.
Overnight Highlights
U.S. stocks closed higher on Wednesday after reports that Iran had expressed willingness to negotiate, and U.S. President Donald Trump pledged to stabilize the oil market, easing investor anxiety over Middle East conflicts. U.S. Treasury yields rose for a third consecutive session as investors weighed potential inflation risks and the direction of monetary policy after the Iran war pushed up oil prices. The dollar fell, retreating from a multi-month high hit the previous session. Oil prices closed flat, ending a volatile trading day. Gold prices rose, with Middle East conflicts attracting safe-haven buying, and a pause in the dollar's rally also providing support.
International News
The Middle East war situation is confusing. The White House said the U.S. has "completely defeated" the Iranian regime, and the Pentagon plans deeper strikes on targets within the country, but Tehran has not stopped attacks on neighboring countries and Israel. Iran denied reports that its intelligence agency had proactively contacted the U.S. to try to negotiate peace.
Institute for Supply Management (ISM) data showed U.S. services sector expansion in February reached its fastest pace since mid-2022. According to ADP reports, U.S. corporate job creation that month unexpectedly hit its highest level since July.
The Federal Reserve's Beige Book showed that economic activity grew slightly or moderately in most U.S. regions in recent weeks, and while businesses sought to use AI to improve efficiency, employment levels remained generally stable.
Fed Governor Milan again called for an interest rate cut, saying it was too early to judge the impact of the Iran war on the U.S. economy.
U.S. Treasury Secretary Besant said the U.S. universal tariff of 10% on all countries could be raised to 15% this week, and he firmly believes the tariff rate will return to pre-Supreme Court tariff case levels within five months.
The U.S. is reportedly set to maintain a 10% universal tariff on the EU, but due to uncertainty over the tariff outlook, the European Parliament continues to freeze approval procedures for the U.S.-EU trade agreement.
Spanish Prime Minister Sanchez said he would not yield to U.S. trade threats, and the country's foreign minister reportedly denied White House claims that Madrid had agreed to cooperate with the U.S. military.
U.S. money market fund assets rose to a record high of $8.27 trillion, with the outbreak of the Iran war triggering a large influx of safe-haven funds.
Goldman Sachs predicts that if the Middle East situation de-escalates quickly, the Fed has room to cut interest rates twice within the year; investors should view a pullback in U.S. stocks as a buying opportunity.
Broadcom (AVGO.US) CEO Tan Hock Eng said the company expects AI chip sales to exceed $100 billion next year, showing a major breakthrough in a field long dominated by NVIDIA. Broadcom's stock rose about 5% after hours.
Apple (AAPL.US) released the entry-level laptop MacBook Neo, equipped with the iPhone A18 Pro chip, starting at $599.
Greater China News
China's 14th National People's Congress Fourth Session will open in Beijing on Thursday, with Premier Li Qiang delivering the government work report, possibly lowering the economic growth target for the first time since 2023. Bloomberg economists expect the fiscal deficit ratio to be set at 8%.
The NPC spokesperson said head-of-state diplomacy plays an irreplaceable strategic leading role in China-U.S. relations, hinting that China hopes to maintain stable relations with the U.S.
Chinese Foreign Minister Wang Yi said China will send a special envoy for Middle East issues to mediate in regional countries, and energy, economic, and other targets should not be attacked, and shipping lane safety should be better maintained.
Baltic Exchange data shows the cost of shipping 2 million barrels of crude oil from the U.S. to China jumped to a record $29.09 million.
Some Chinese financial institutions are reportedly cutting their exposure to Middle Eastern debt assets to hedge risks.
Commodities & Forex Markets
G-10 currencies rebounded across the board against the dollar after reports that Iran had proposed conditions for discussing an end to the conflict, but Tehran later denied it. WTI crude oil futures stabilized after surging about 11% over the previous two sessions, with traders speculating on the U.S. military's next move to gauge potential impacts on energy markets. Gold rose slightly, boosted by bargain hunting.
Earnings & Economic Data Focus
U.S. Initial Jobless Claims for the week ending Feb 28 (in 10,000) (Previous: 21.2, Forecast: 21.5)
France Industrial Production MoM for Jan (Previous: -0.7%, Forecast: 0.5%)
Source: Golden Horse Capital Management (Hong Kong) Limited
Author: Terry Chow
Proofreader: Gloria Guo
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