Concerns over tariffs and inflation hit hard, with US stocks plunging and the Nasdaq down nearly 3%

Market Overview

Tariff and inflation concerns hit hard, U.S. stocks resumed their decline, the Nasdaq fell nearly 3%, and the S&P 500 dropped nearly 2%, ruining the strong rebound at the start of the week. NVIDIA fell nearly 7% this week; Tesla dropped over 3%, but still gained nearly 6% for the week, ending a nine-week losing streak. CoreWeave's IPO had a rollercoaster first day, dropping over 6% during the day before briefly turning positive, ultimately closing flat. Fears that chip bill funding may fall through led to Wolfspeed dropping nearly 52%.

The China concept index fell over 3%. The pan-European stock index fell over 1% for the week, marking the largest decline in three months.

After U.S. consumer inflation expectations soared, the yield on the 10-year U.S. Treasury bond plunged over 10 basis points during the day; the dollar hit a new daily low. Trump stated that the U.S. and Canada would hold talks, causing the Canadian dollar to briefly surge. The offshore yuan fell over a hundred points during the day, breaching 7.27, but later turned positive. Bitcoin dropped over $4,000 during the day, falling below $84,000.

Brent crude oil fell for the first time in a week, but still rose for three consecutive weeks. Gold hit a new high, rising over 2% this week, marking four consecutive weeks of gains. London copper fell for three straight days.

During the Asian session, A-shares fell throughout the day on reduced volume, gold stocks surged against the trend, the Hang Seng Index fell 1.5%, and both Nio and Haier Smart Home dropped over 7%.

Key News

The Fed's favorite inflation indicator rebounded, with U.S. core PCE in February up 2.79% year-on-year, but personal spending showed almost no growth. Due to tariff impacts, U.S. Michigan long-term inflation expectations hit a 32-year high, and consumer confidence reached a more than two-year low.

Trump stated that his first call with Carney was "very productive", and the U.S. and Canada will hold comprehensive talks, while Carney noted that Trump did not concede on tariff threats. Reports indicate that the EU plans to prepare a "concession list" for tariff negotiations with Trump. India is "appeasing" Trump: planning to eliminate gas tariffs and reduce agricultural import taxes.

Reports suggest that the Trump administration is unexpectedly considering higher taxes on the wealthy.

The State Administration for Market Regulation: will legally review the transactions of Cheung Kong and the port.

CoreWeave's U.S. IPO opened below the offering price, dropping over 6% during the day before closing flat. The company's CEO stated that without NVIDIA as an anchor investor, the IPO would not have been possible.

Former silicon carbide giant Wolfspeed plummeted 50%, with chip bill funding still undecided and convertible bond refinancing facing obstacles.

The U.S. proposed a new mineral agreement, demanding exclusive access to key minerals from Ukraine, significantly raising the asking price without providing security guarantees.

A 7.9 magnitude earthquake in Myanmar is the largest earthquake globally this year! Thailand felt strong tremors, stock trading was suspended, and China initiated an emergency response

Market Report

US and European Stock Markets: The Dow Jones fell 1.69%, the S&P 500 fell 1.97%, and the NASDAQ fell 2.7%. The European STOXX 600 index closed down 0.77%, with a cumulative decline of 1.38% this week.

A-shares: The Shanghai Composite Index fell 0.67%, the Shenzhen Component Index fell 0.57%, and the ChiNext Index fell 0.79%.

Bond Market: The yield on the US 10-year benchmark Treasury bond fell by 11.01 basis points to 4.2494%, roughly flat for the week. The yield on the 2-year Treasury bond fell by 7.80 basis points to 3.9119%, with a cumulative decline of 3.41 basis points this week.

Commodities: WTI May crude oil futures closed down 0.80% at $69.36 per barrel, with a cumulative increase of 1.58% this week. Brent May crude oil futures fell 0.54% to $73.63 per barrel, with a cumulative increase of 2.04% this week. COMEX gold futures rose 0.91% to $3088.90 per ounce, with a cumulative increase of nearly 2% this week.

News Details

Global Highlights

The Fed's favorite inflation indicator rebounds, with the US February core PCE year-on-year at 2.79%, but personal spending has hardly grown. Due to tariff shocks, US Michigan long-term inflation expectations hit a 32-year high, and consumer confidence reached a more than two-year low.

• The PCE report has raised concerns about stubborn inflation and potential stagflation, with traders continuing to bet on a rate cut by the Fed in July.
• The final value of Michigan University's 1-year inflation expectation for March is 5%, higher than the expected 4.9%, with an initial value of 4.9%; the final value of the 5-year inflation expectation for March is 4.1%, the highest since February 1993, higher than the expected 3.9%, with an initial value of 3.9%. After the data was released, US stocks plummeted.

Trump stated that his first call with Carney was "very productive", and the US and Canada will hold comprehensive talks, with Carney stating that Trump did not concede on tariff threats. Reports indicate that the EU plans to prepare a "concession list" for Trump’s tariff negotiations. India is "appeasing" Trump: plans to eliminate natural gas tariffs and reduce agricultural import taxes.

• Trump stated that after the Canadian election, immediate talks on politics, business, and all other aspects would be held between the U.S. and Canada, causing the Canadian dollar to surge temporarily. Carney mentioned that the call was "very constructive," and the two leaders agreed to engage in "comprehensive negotiations" on a new economic and security relationship; he informed Trump that Canada would implement retaliatory tariffs to protect its workers. The Canadian dollar returned to a downward trend.
• The European Commission is drafting a "list of terms" for a potential agreement that will outline the negotiation areas for punitive trade measures, including reducing EU tariffs, joint investments with the U.S., and relaxing certain regulations and standards.
• According to informed sources, India is considering eliminating the import tax on U.S. liquefied natural gas (LNG), while the Indian Ministry of Petroleum has requested companies to increase energy imports as much as possible. Additionally, India is also considering reducing import tariffs on U.S. agricultural products and significantly lowering other barrier requirements.
• Trump wants it both ways: imposing tariffs on cars while prohibiting automakers from raising prices. Industry experts believe that tariffs will almost certainly force U.S. automakers to increase prices. The impact of tariffs on the low-end market may be particularly pronounced, with models priced below $30,000, at least half of which will be severely affected by the new tariffs, and some models may disappear from the market. Due to dealers stockpiling inventory, the effects of the tariffs may not become apparent until May, when car prices could rise by 11% to 12% to offset the impact of the tariffs. Goldman Sachs predicts that Trump's auto tariffs could lead to a surge in new car prices in the U.S. ranging from $5,000 to $15,000.

Reports indicate that the Trump administration unexpectedly considers imposing higher taxes on the wealthy. Some White House officials believe that raising the income tax rate on the wealthiest Americans could create breathing room for other priorities and help mitigate attacks from Democrats as the Republican Party seeks to extend Trump's 2017 tax cuts. Officials also stated that all discussions are currently in the preliminary stages and nothing has been finalized. However, many Republicans may not agree.

The State Administration for Market Regulation: Will conduct a review of the Cheung Kong and port transactions in accordance with the law. The State Administration for Market Regulation stated that it will conduct a review in accordance with the law to protect fair market competition and maintain the public interest. The official website of the State Administration for Market Regulation shows that the Anti-Monopoly Enforcement Division II is responsible for conducting anti-monopoly reviews of operator concentration behaviors in accordance with the law.

CoreWeave's U.S. IPO opened below the offering price on its first day, dropping over 6% during the day before closing flat. Despite support from NVIDIA and strong customer demand, AI cloud computing company CoreWeave ultimately priced its IPO at $40 per share, below the expected range, with a valuation shrinking to $19 billion. It opened down 2.5%, dropped over 6% at one point during the day, then rebounded and briefly turned positive, ultimately closing flat at $40. The CEO admitted, without NVIDIA as an anchor investor, we would not have been able to complete the IPO.

The former silicon carbide giant Wolfspeed plummeted 50%, as funding from the CHIPS Act remains uncertain and convertible bond refinancing faces obstacles. Wolfspeed announced the appointment of a new CEO on Friday, coinciding with a critical moment for the company's fate, as the market worries that the government funding the company is waiting for may not materialize At the same time, Wolfspeed is working to reach an agreement with investors to restructure its $575 million convertible bonds maturing next year. However, analysts point out that at the current price level, unless the company's stock price rebounds to $47.32, the conversion of the bonds into shares is almost hopeless.

The United States has proposed a new mineral agreement, demanding exclusive rights to key minerals in Ukraine, significantly raising the price and providing no security guarantees. This draft greatly exceeds the scope of the preliminary economic agreement reached by both parties last month and has been described by senior Ukrainian officials as "unfair" and even "robbery." The chief diplomatic correspondent of The Wall Street Journal sharply commented: "The latest U.S. proposal essentially turns Ukraine from a sovereign nation into the property of a Delaware company."

A 7.9 magnitude earthquake in Myanmar, the largest earthquake globally this year! Thailand felt strong tremors, stock trading was suspended, and China initiated an emergency response. According to local media reports, the iconic Ava Bridge on the Irrawaddy River in Mandalay, Myanmar, partially collapsed. A building under construction in Bangkok collapsed during the earthquake, resulting in 1 death and 43 missing, prompting Bangkok to declare a state of emergency. The earthquake caused minor injuries to 2 people in Ruili, Yunnan.

Bridgewater: How U.S. policy uncertainty is impacting the economy and markets. Bridgewater believes that the shift in mercantilist policies under the Trump administration has triggered high levels of economic policy uncertainty, which has already begun to suppress private sector activity and affect market confidence before policies are actually implemented. U.S. assets are highly dependent on the continued inflow of funds from foreign investors, but the dramatic changes in the policy environment have made the U.S. no longer seen as a reliable and stable partner, and this risk has not been fully reflected in current U.S. stock prices.

Bridgewater discusses the driving forces behind the surge in gold prices, its prospects, and why gold should be allocated. “You won't find another asset like this. There is no asset that you can buy and hold that has such low correlation with traditional stocks and bonds. It is very rare, and therefore very valuable.”

Domestic Macro

Xi Jinping's speech during a meeting with representatives from the international business community. Xi stated that China has been, is, and will inevitably be an ideal, safe, and proactive investment destination for foreign investors. Working with China means working with opportunities; believing in China means believing in tomorrow; investing in China means investing in the future. He hopes that foreign enterprises will dispel doubts, strengthen confidence, and feel assured to develop in China and share in China's development opportunities.

State Council meeting: Deploying efforts to accelerate the clearance of overdue corporate payments and promote high-quality development measures for agricultural machinery and equipment. The meeting pointed out the need to carry out a new round of expansion for the comprehensive pilot zones for cross-border e-commerce, further broadening coverage. It aims to upgrade the construction of cross-border e-commerce comprehensive pilot zones, promote regulatory innovations in customs, taxation, foreign exchange, and data flow, effectively utilize relevant policies to stabilize foreign trade, and help enterprises expand markets, build brands, and develop better.

Three major soul-searching questions in the market: What is the outlook for stocks? Have interest rate bonds finished declining? Is the economy recovering? Huachuang Securities points out that the current context is: the economy is not collapsing + a massive influx of residents' deposits + capital market trading volume is expected to be relatively active + no major bull market, no style bull market + potential for industry prosperity to band together + the most comfortable monetary policy may have already passed The asset conclusions drawn from this are: the technology industry is expected to form a thematic consensus + looking at stocks as bonds + Hong Kong stocks are likely to outperform A-shares + interest rates and high dividends still have swing opportunities and absolute returns.

Domestic Companies

The developer Manus is seeking financing, with a valuation skyrocketing to $500 million. According to Information, "the world's first universal agent" Manus AI's Chinese parent company Butterfly Effect is seeking a new round of financing, targeting a valuation of at least $500 million, approximately five times the previous round of financing. Due to a surge in user numbers, Manus's server capacity is limited, and operating costs are under pressure; this round of financing is crucial, and analysts say it could become "a landmark event in the agent industry."

China's open-source models dominate the top three, with Qunhe Technology's SpatialLM ranking second on the HuggingFace trends list. SpatialLM is a spatial understanding model independently developed by Qunhe Technology, which can generate physically accurate 3D scene layouts from just a video. Unlike traditional large language models, SpatialLM breaks through the limitations of understanding the geometry and spatial relationships of the physical world, playing a significant role in the spatial cognition and analysis capabilities of humanoid machines.

The "bank of the universe," Industrial and Commercial Bank of China, released its annual report, achieving an average daily net profit of 1.005 billion, with an annual dividend of 109.8 billion.

China Construction Bank's net profit is expected to grow by 1.15% in 2024, with annual dividends exceeding 100 billion.

CICC's Q4 net profit increased by 83.03% year-on-year, with revenue growth of 42.73%.

The first annual report after the merger of Guotai Junan and Haitong has been released, with capital strength ranking first in the industry and a dividend rate as high as 48%.

Great Wall Motors' revenue is expected to exceed 200 billion in 2024, with a year-on-year net profit increase of 80.8% and overseas sales growth of 44.6%.

Midea's revenue is expected to grow by 9.5% year-on-year in 2024, with a net profit increase of 14.3% year-on-year.

SF Holding's annual revenue increased by 10.1% year-on-year, with a net profit increase of 23.5%, and net profit from same-city delivery doubled.

China Duty Free Group's Q4 net profit decreased by 76.92% year-on-year, with revenue down by 19.46%.

Guoquan Food's 2024 revenue increased by 6.2% year-on-year, with operating profit growth of 3.1%, and a slight decline in gross profit margin.

Overseas Macro

Elon Musk and the DOGE team made their first appearance: This is a revolution! Planning to cut $1 trillion in spending before the end of May. Musk stated that the reforms of DOGE are changing the way the U.S. government operates, "the biggest revolution since the American War of Independence." He is confident that he can cut $1 trillion in government spending before the end of May. This means that since Trump took office on January 20, DOGE will achieve this level of cost savings within 130 days.

The trigger for the next financial crisis: Is the Federal Reserve preparing for the "U.S. Treasury storm"? Hedge funds are aggressively betting on U.S. Treasury basis arbitrage trades, with large-scale liquidation risks "just around the corner." CICC analysis states that the essence of this transaction is shorting volatility, and once volatility rises, it can easily trigger the risk of liquidation, leading to a cross-asset sell-off. The resolution of the debt ceiling issue could be a key event triggering market volatility. Experts suggest that if the Federal Reserve wants to intervene in the bond market, it could choose "hedged bond purchases" instead of traditional QE, by buying U.S. Treasuries while selling an equivalent amount of futures contracts to hedge. However, this tool may also trigger moral hazard in rescuing hedge funds.

Deutsche Bank: To deal with allies, Trump has a dollar "nuclear weapon" that is more deterrent than tariffs. Deutsche Bank points out that the Federal Reserve's dollar swap mechanism controls about $97 trillion of the foreign exchange swap market, which is key to maintaining global financial stability and is far more deterrent than tariffs. If Trump targets the Federal Reserve's dollar swap mechanism, for example, by selectively using swap limits as leverage to achieve other policy goals, it will lead to an expansion of cross-currency basis, which will marginally support the dollar. However, in the long term, it will accelerate the process of de-dollarization.

Deutsche Bank: If there is a recession in the U.S. this time, U.S. Treasury yields may not decline. Deutsche Bank believes that if the U.S. economic recession is triggered by negative supply-side shocks, it may raise inflation expectations, limit the Federal Reserve's easing space, or elevate term premiums. Additionally, the recession will lead to the disintegration of the "American exceptionalism" narrative, reducing foreign investors' demand for U.S. Treasuries, thereby pushing up term premiums and neutral interest rates.

Overseas Companies

The image editing capabilities of GPT-4o are so popular that GPUs are melting, and the official channels have finally limited the flow. Industry insiders believe that as the capabilities of foundational large models improve, some star AI startup's image generation tools may become insignificant. After all, if GPT-4o is compared to a knowledgeable and rational designer, then Stable Diffusion is still limited to the level of a graphic designer.

The EU is expected to impose mild penalties on Apple and Meta to avoid straining relations with the U.S. The EU's regulatory pace towards tech giants is being fine-tuned. Although fines will be imposed on Apple and Meta next week, sources reveal that the amounts will be significantly lower than previous antitrust cases.