Global Highlights This Week: Trump's Trade Policies Stirring Up the Situation, and the Release of U.S. CPI and PPI Data

Last week, Trump's capricious trade policies triggered panic selling in the market and also intensified concerns about an economic recession. This week, the U.S. inflation data will become the focus of market attention, and investors will continue to pay close attention to hot issues such as U.S. tariff policies and the Russia-Ukraine conflict.

Although the S&P 500 index rose last Friday, it fell by 3.1% cumulatively last week, marking the largest weekly decline since September 6 last year. The Nasdaq index, which has a large weighting of technology stocks, fell by 3.5% last week and entered the correction zone.

Investors are struggling to cope with the huge policy changes around the world. Trump's repeated imposition of new tariffs on Mexico, Canada, and China has increased people's concerns about an economic recession. Germany's unexpected spending plan has also shaken the market, leading to the selling of German government bonds, which are the benchmark of the European financial market.

Recent U.S. economic data have been disappointing. The only consolation for the stock market is that the Federal Reserve can further cut interest rates this year to deal with the potential slowdown in economic growth. Federal Reserve Chairman Jerome Powell said in a speech last Friday that the central bank is willing to maintain its current wait-and-see stance on interest rates to digest the impact of trade policy changes.

The Federal Reserve actively raised interest rates in 2022 and 2023 to combat inflation, raising interest rates to a 20-year high, and then cut interest rates by 100 basis points last year. Measured by the indicator preferred by the Federal Reserve, the inflation rate dropped to around 2.5% in January. The Federal Reserve's goal is to control the inflation rate at 2% over time.

Economists at ING Group said that business surveys show that some companies are pre-emptively raising prices in response to potential tariffs. Food prices have been rising recently, and energy prices may further exacerbate inflation.

If the U.S. Consumer Price Index (CPI) released this Wednesday confirms that inflation has accelerated again, it may dash the above expectations and trigger a new round of selling.

Bryant vancronkite, a senior portfolio manager at Allspring Global Investments, said: "Overheated CPI data may scare the market. Investors still hope that the Federal Reserve will come to the rescue... But the Federal Reserve's actions will be limited until inflation and inflation expectations decline."

John Velis, a macro strategist at BNY Mellon, pointed out that a CPI higher than expected will weaken the market's expectations of the Federal Reserve's loosening of policies. Investors are also increasingly worried about "stagflation", that is, a situation where economic growth slows down while inflation rises, which is a toxic combination for a wide range of asset classes.

Trade policies remain the focus of attention. After the market decline and corporate lobbying of Trump, the U.S. government lifted some tariffs on goods from Mexico and Canada last Thursday. However, officials have hinted that they plan to impose higher tariffs on many goods from some other countries this month.

Trump gave the two neighboring countries of the United States and its largest trading partners a one-month grace period, exempting a series of goods from a 25% tariff, which sets the stage for another showdown on April 2. This is the second time Trump has lifted tariffs on Mexico and Canada within a month, highlighting the uncertainty of his trade policies.

At the same time, U.S. congressmen are arguing over a spending bill. If the bill is rejected, the U.S. government may shut down on March 15, and the game on this topic will heat up this week.

The Q4 earnings season of U.S. stocks is coming to an end. Companies such as Li Auto, Kohl's, Futu Holdings, Weibo, and Oracle will release their earnings reports.

The Bank of Canada will announce its interest rate decision this Wednesday. Due to the weak employment data in Canada in February and Canada being one of Trump's main tariff targets, the possibility of an interest rate cut is increasing.

Overview of Important Events This Week

Monday (March 10, Eastern Time): Japan's January trade balance, Germany's seasonally adjusted trade balance in January, the Eurozone's Sentix investor confidence index in March, the U.S. one-year inflation expectation of the New York Fed in February, and a meeting between U.S. President Trump and U.S. technology leaders.
Tuesday (March 11, Eastern Time): Revised value of Japan's real GDP annualized quarterly rate in the fourth quarter, the U.S. NFIB small business confidence index in February, the U.S. JOLTs job openings in January, and the first meeting between U.S. and Ukrainian officials in Saudi Arabia.
Wednesday (March 12, Eastern Time): U.S. API crude oil inventories for the week ended March 7, the U.S. unadjusted CPI annual rate in February, the U.S. seasonally adjusted CPI monthly rate in February, the U.S. seasonally adjusted core CPI monthly rate in February, the Bank of Canada's interest rate decision on March 12, U.S. EIA crude oil inventories for the week ended March 7, a speech by European Central Bank President Christine Lagarde, and the release of the monthly oil market report by OPEC.
Thursday (March 13, Eastern Time): U.S. 10-year Treasury bond auction for the week ended March 12, the Eurozone's industrial output monthly rate in January, the U.S. initial jobless claims for the week ended March 8, the U.S. PPI annual rate in February, the U.S. PPI monthly rate in February, U.S. EIA natural gas inventories for the week ended March 7, and the release of the monthly oil market report by the IEA.
Friday (March 14, Eastern Time): Final value of Germany's CPI monthly rate in February, the UK's three-month GDP monthly rate in January, the UK's manufacturing output monthly rate in January, the preliminary value of the U.S. one-year inflation rate expectation in March, and the preliminary value of the University of Michigan consumer sentiment index in March in the United States.