As February begins, global markets are closely monitoring the economic and policy shifts that could influence financial stability. With the official start of Trump's second term, trade policies, inflationary pressures, and central bank decisions are shaping investor sentiment. Meanwhile, China’s economy, having met its 2024 targets, is in a transitional phase as policymakers strategize for the next stage of growth.
January’s economic data showed continued divergence between major economies. The U.S. manufacturing sector saw a rebound, with the PMI returning to expansion territory, signaling economic resilience. In contrast, China’s PMI declined, indicating ongoing economic pressure. This disparity has impacted global financial flows, with investors reevaluating risk exposure to Chinese assets.
Trade tensions remain a key market concern. With new U.S. tariffs on Mexico, Canada, and China taking effect, supply chain disruptions and inflation risks are increasing. While China continues supply-side reforms, external demand remains uncertain, making domestic policy adjustments crucial. The Federal Reserve's stance on interest rates further complicates the outlook, as it remains cautious despite inflationary trends.
Inflation remains a pressing issue. The U.S. core PCE inflation stood at 2.8%, reinforcing the Fed’s reluctance to loosen monetary policy. In China, deflationary risks persist, with the GDP deflator still negative at -0.8%. As a response, China’s central bank has signaled a moderately loose monetary policy stance for 2025 to support stable economic growth.
Market analysts are also watching corporate earnings and financial sector stability. DeepSeek, a key player in AI-driven market trends, is expected to influence investor sentiment, particularly in technology stocks. Additionally, with global trade protectionism on the rise, financial markets may experience increased volatility in the coming months.
Looking ahead, China's National People’s Congress in March is expected to unveil more aggressive macroeconomic policies, providing further clarity on growth strategies. Investors should remain cautious as global policy divergence continues to shape market risks and opportunities.
