This week's key agenda: Trump's tariff executive order takes effect, U.S. January non-farm payrolls debut, will the Bank of England cut interest rates?

A summary of major financial events from February 3 to February 7, all in Beijing time:

Key focus for the week: The implementation of Trump's tariff executive order may impact the US stock market again; the US January non-farm payroll report is coming, will it remain strong, and what will the annual revision look like; the Bank of England may conduct its third interest rate cut in this cycle.

In addition, the Caixin PMI report for January will be released, and the Hong Kong stock market/A-shares will end the Spring Festival holiday.

Trump's tariff executive order takes effect, will the US stock market face another impact?

Trump fired the first shot in the tariff war, focusing on the broader implications of tariffs.

According to CCTV News, on February 1 local time, US President Trump signed an executive order imposing a 10% tariff on goods imported from China. A 25% tariff will be imposed on imports from Canada and Mexico, and a 10% tariff on energy resources from Canada. The tariffs are set to take effect on the 4th. The White House stated that if retaliatory tariffs are imposed by the US, the US may increase the tariff intensity.

Canada and Mexico vowed to retaliate with countermeasures against US tariffs, while China stated it would "take corresponding countermeasures."

Goldman Sachs economists, including Jenny Grimberg, pointed out that the current US stock market is underpricing the risks of retaliatory or widespread tariffs, so once such tariffs are implemented, the market could easily see a correction.

Data from Truist Advisory Services shows that hedge funds' net long positions in technology stocks have fallen to their lowest level since 2022. The market is reassessing whether technology stocks can continue to lead the bull market under the dual pressures of technological equality and geopolitical tensions.

From an industry perspective, some analysts believe that automakers such as General Motors, Ford, and Stellantis may be significantly affected due to their substantial operations in Mexico and Canada; electric vehicle manufacturers like Tesla, Rivian, and Lucid Group may also be impacted.

Additionally, industrial manufacturers such as Deere & Company, Caterpillar, and Boeing may face difficulties, and US semiconductor manufacturers like Nvidia, Applied Materials, and Broadcom may also be hit.

Non-farm payroll report is coming, will it remain strong?

The US January non-farm payroll report will be released on Friday of that week, with analysts suggesting that the US labor market may see another month of robust growth at the start of 2025, while the highly anticipated annual revision may show that hiring rates over the past few years have been significantly more moderate.

According to the average forecast of economists surveyed by the media, non-farm payrolls are expected to increase by 170,000 in January, following significant growth in the previous two months as the labor market recovers from the impacts of hurricanes and large-scale strikes.

The monthly employment report released on Friday will also include annual revision data from the US Bureau of Labor Statistics, which will compare last March's employment levels with more comprehensive employment figures derived from the quarterly unemployment insurance program survey Goldman Sachs previously stated that the U.S. non-farm payrolls in January will undergo the largest adjustment in history. After the annual benchmark revision of the household survey, it is expected that the total labor force will increase by 2.5 million, household employment will rise by 2.3 million, the labor participation rate will increase by 11 basis points, and the unemployment rate will rise by 4 basis points.

In August, the preliminary estimate from the U.S. Bureau of Labor Statistics indicated that employment numbers were overstated by more than 800,000 for the year ending in March; however, subsequent revisions to the quarterly survey suggest that the adjustment may be smaller.

Bloomberg Economics commented that as part of the BLS annual benchmark testing, employment numbers for March 2024 may be revised down by about 700,000, lower than the preliminary benchmark estimate of -818,000. The updated "birth-death" model predicts that December's employment numbers should be revised down by 234,000. In summary, the revised average monthly employment growth for last year is expected to drop from 182,000 to an estimated 148,000.

For Federal Reserve officials, the expected results of the January employment report and the benchmark revisions may align with their view that labor demand is slowing but still sufficient to support the economy. Additionally, several Federal Reserve officials, including Bowman and Adriana Kugler, will speak in the coming days.

Bank of England Announces Interest Rate Decision

The Bank of England is likely to implement its third rate cut in this cycle, having previously kept rates unchanged, which is another cautious measure to alleviate pressure on the UK economy.

Previously released data showed that the UK's December CPI rose by 2.5% year-on-year, lower than the 2.6% expected by economists and the November figure, with the core inflation rate also declining further. Economists stated that the slightly moderate inflation report should help reassure investors that the Bank of England can continue its gradual easing cycle, with the next rate cut expected in February, and the probability of a rate cut has risen to 80%.

However, given that the inflation rate in the services sector remains more than double the 2% target and wage growth is strong, Bank of England officials are weighing the necessity of stimulating economic expansion against the risk of renewed consumer price pressures. Investors need to pay attention to signals regarding the pace of future measures and voting results to gauge how strongly officials agree on the necessity of rate cuts.

Other Important Data, Meetings, and Events

• China's January Caixin PMI

China will release the Caixin PMI data. Previously, S&P Global reported that China's December Caixin Manufacturing PMI was 50.5, down 1 percentage point from the previous value of 51.5, but still above the expansion line, maintaining expansion for the third consecutive month. The official January Manufacturing PMI fell by 1.0 percentage point to 49.1%, ending three months of expansion and falling back into contraction territory.

• Hong Kong Stock Market/A-shares Set to Open

The Hong Kong stock market will resume trading starting Monday, but southbound and northbound trading will be closed on Monday and Tuesday. The A-share market and Shanghai-Hong Kong/Shenzhen-Hong Kong trading will reopen on Wednesday