China’s inflation turns negative, but seasonal factors skew the picture

    Released over the weekend, China’s consumer inflation dipped into negative territory for the first time in over a year, with February’s CPI coming in at -0.7% yoy, weaker than the expected -0.5% yoy, and a sharp reversal from January’s 0.5% yoy gain.

    Core CPI, which strips out food and energy prices, also slipped by -0.1% yoy—its first decline since January 2021—signaling weak underlying demand.

    On a month-over-month basis, consumer prices fell -0.2%, more than the expected -0.1%, reversing some of January’s 0.7% increase.

    While the decline may raise concerns about deflationary pressures, NBS attributed much of the drop to seasonal distortions tied to the timing of the Lunar New Year. Stripping out this factor, NBS estimates that CPI actually rose 0.1% yoy.

    Given these distortions, a clearer picture of China’s inflation trajectory will likely emerge in March when seasonal effects fade.

    Meanwhile, producer prices remained in contraction for the 29th consecutive month, with PPU declining -2.2% yoy, slightly better than January’s -2.3% yoy but still below expectations of -2.1% yoy.

    Canada’s job growth stalls, unemployment rate steady at 6.6%

      Canada’s labor market was stagnant in February, with employment rising by just 1.1k, falling far short of the expected 17.8k increase.

      Unemployment rate held steady at 6.6%, better than expectation of 6.7%, while the labor force participation rate dropped from 65.5% to 65.3%, marking its first decline since September 2024. A notable contraction was seen in total hours worked, which fell by -1.3% mom.

      Despite the weak employment figures, wage growth accelerated, with average hourly wages rising 3.8% yoy, up from January’s 3.5% gain.

      Full Canada employment release here.

      US NFP rises 151k in Feb, slightly below expectations

        US non-farm payroll employment increased by 151k in February, just slightly below expectations of 156k, and broadly in line with the 12-month average of 168k.

        Unemployment rate edged up from 4.0% to 4.1%. Unemployment rate has remained in a narrow range of 4.0% to 4.2% since May 2024. Labor force participation rate slipped from 62.6% to 62.4%.

        Average hourly earnings rose 0.3% mom, in line with forecasts, while the average workweek remained unchanged at 34.1 hours.

        Full US NFP release here.

        NFP in focus: NASDAQ and S&P 500 at risk of deeper correction

          US markets are standing on precarious footing, with investors attention on the February non-farm payrolls report due later in the day. There has been noticeable anxieties surrounding the impact of fiscal and trade policies changes. A set of weaker-than-expected NFP data could be taken as another signal of swift deceleration in the economy and rattle market sentiment further.

          Cooldown in the job market might prompt Fed to resume rate cuts earlier. Markets are currently pricing in 53% chance of a 25bps rate cut in March, reflecting growing belief that Fed will need to act sooner rather than later. However, the immediate market response to downside surprises may not be relief over monetary easing but rather heightened concerns about the pace of economic weakening, given recent policy uncertainties and trade disruptions.

          Markets anticipate 156k increase in NFP for February, up from 143k in January. The unemployment rate is forecast to remain at 4.0%, while average hourly earnings should hold steady at 0.3% m/m.

          The latest indicators paint a mixed picture: ISM Manufacturing PMI Employment subindex dropped to 47.6 from 50.3, while ISM Services PMI Employment inched up to 53.9 from 52.3. Meanwhile, ADP Employment reading of 77k missed last month’s 186k, and the 4-week moving average of jobless claims rose to 224k—its highest level so far this year.

          Technically, NASDAQ has been sliding for two consecutive weeks, now testing its 55-week EMA at 17,874.13. A decisive break below this level would confirm that the index is at least in a correction relative to the broader uptrend from the 10,088.82 low in 2022. The next key support to watch is the 38.2% Fibonacci retracement of 10,088.82 to 20,204.58, which comes in at 16,340.36. Extended losses here could set a negative tone for broader U.S. equities.

          The S&P 500, still trading comfortably above its 55-week EMA at 5,590.31, may follow in the NASDAQ’s footsteps if sentiment sours further. Should the index breach this EMA convincingly, it would likely confirm that the fall from 6,147.43 is a correction of the uptrend from the 3,491.58 low in 2022. This scenario would set a 38.2% retracement target around 5,132.89, marking a significant downside pivot.

          Overall, whether today’s NFP meets, misses, or exceeds expectations, the market’s reaction will hinge on how investors interpret the labor data in the context of looming trade uncertainties and weakening growth momentum. A softer reading could drive near-term Fed cut bets higher but might also deepen concerns that the U.S. economy is losing steam, thereby raising the stakes for traders and policymakers alike.

          Technically, NASDAQ is now eyeing 55 W EMA (now at 17874.13) with the extended decline in the past two weeks. Sustained break there will confirm that it’s at least in correction to the up trend from 10088.82 (2022 low). Next target will be 38.2% retracement of 10088.82 to 20204.58 at 16340.36.

          Extended selloff in NASDAQ could be a prelude to similar development in S&P 500. While it’s still well above 55 W EMA (now at 5590.31), sustained break there will align the outlook with NASDAQ. Fall from 6147.43 would then be correcting the up trend from 3491.58 (2022 low) at least, and target 38.2% retracement of 3491.58 to 6147.43 at 5132.89.

           

          China’s exports rise 2.3% yoy, imports fall -8.4% yoy

            China’s exports rose just 2.3% yoy to USD 539.9B in the January–February period, coming in below forecasts of 5.0% yoy and down sharply from December’s 10.7% yoy.

            Meanwhile, imports sank -8.4% yoy to USD 369.4B, missing expectations of 1.0% yoy growth and marking a noticeable drop from December’s 1.0% yoy.

            As a result, trade balance resulted in USD 170.5B surplus exceeding projections of USD 147.5B.

            Fed’s Bostic: Economy in flux, no rush to adjust policy

              Atlanta Fed President Raphael Bostic emphasized the high level of uncertainty in the US economy due to evolving policies under the Trump administration. With inflation, trade policies, and government spending all in flux, he suggested that meaningful clarity may not emerge until “late spring or summer”. Given this, he reiterated “We’ll have to just sort of really be patient.”

              Speaking overnight, he described the situation as being in “incredible flux,” with rapid shifts in trade and fiscal policies making it difficult to predict economic trends. Given this backdrop, Bostic urged caution, stating, “You’ve got to be patient and not want to get too far ahead.”

              He noted that just this week, there have been significant swings in expectations regarding economic policy. “If I was waiting before to see and get a clear signal about where the economy is going to go, I’m definitely waiting now,” he said.

              Fed’s Waller: No immediate rate cut, but open to future easing

                Fed Governor Christopher Waller suggested that another rate cut at the next FOMC meeting is unlikely, but he remains open to further easing down the line.

                “I would’t say at the next meeting, but could certainly see [cuts] going forward,” he noted. Waller particularly highlighted the February inflation report and the evolving impact of trade policies as key factors in shaping the Fed’s outlook.

                Waller acknowledged the challenges in assessing the economic effects of tariffs, citing changing economic conditions and President Trump’s harder trade stance as factors complicating policy decisions.

                He noted that evaluating the impact of tariffs is more difficult this time, adding, “It’s very hard to eat a 25% tariff out of the profit margins.”

                BoE’s Mann: Larger rate cuts needed as global spillovers worsen

                  BoE MPC member Catherine Mann argued that recent monetary policy actions have been overshadowed by “international spillovers.” Financial market volatility, particularly from cross-border shocks, has disrupted traditional policy signals, making “founding premise for a gradualist approach to monetary policy is no longer valid”.

                  Mann said that larger rate cuts, like the 50bps reduction she supported at the last BoE meeting, would better “cut through this turbulence” and provide clearer guidance to the economy.

                  She believes that a more decisive policy stance would help steer inflation expectations and stabilize economic conditions, rather than allowing uncertainty to linger with smaller, incremental moves.

                  Despite her stance, the BoE opted for a smaller 25bps rate cut in its latest decision, with Mann and dovish member Swati Dhingra being outvoted 7-2.

                   

                  US initial jobless claims fall to 221k, vs exp 236k

                    US initial jobless claims fell -21k to 221k in the week ending March 1, below expectation of 236k. Four-week moving average of initial claims rose 250 to 224k.

                    Continuing claims rose 42k to 1897k in the week ending February 22. Four-week moving average of continuing claims rose 3k to 1866k.

                    Full US jobless claims release here.

                    ECB cuts 25bps as expected, not pre-committing to rate path

                      ECB cut its deposit rate by 25bps to 2.50% as expected. It maintains a data-dependent stance and stressing it is “not pre-committing to a particular rate path” amid rising uncertainty.

                      ECB noted that disinflation process remains on track, with inflation upgrade reflects stronger energy prices. Growth forecasts for 2025 and 2026 were downgraded due to weaker exports and investment, driven partly by trade and broader policy uncertainty.

                      In the new economic projections:

                      • Headline inflation to average 2.3% in 2025, 1.9% in 2026, and 2.0% in 2027.
                      • Core inflation to average 2.2% in 2025, 2.0% in 2026, and 1.9% in 2027.
                      • GDP to grow 0.9% in 2025, 1.2% In 2026, and 1.3% in 2027.

                      Full ECB statement here.

                      Eurozone retail sales fall -0.3% mom in Jan, EU down -0.2% mom

                        Eurozone retail sales volume dropped by -0.3% mom in January, missing expectations of a modest 0.1% mom increase. The decline was driven by weaker demand for non-food products, which fell -0.7% mom, while sales of automotive fuel also slipped by -0.3% mom. In contrast, spending on food, drinks, and tobacco rose by 0.6% mom, offering a slight offset to the overall decline.

                        Meanwhile, retail sales across the broader EU fell -0.2% mom on the month. Among individual EU, Slovakia saw the sharpest contraction, with retail trade volume plunging -9.0%, followed by Lithuania (-4.8%) and Cyprus (-2.2%). On the other hand, Slovenia (+2.3%), Hungary (+2.2%), and the Netherlands (+1.6%) recorded the strongest increases.

                        Full Eurozone retail sales release here.

                        ECB to cut rates, but trade war and fiscal shifts cloud outlook

                          ECB is widely expected to continue its “regular, gradual” easing cycle today, reducing the deposit rate by 25bps to 2.50%. Markets are still pricing in two more cuts this year, but the path forward has become murkier in light of recent geopolitical and economic shifts. Also, interest rates are approaching neutral levels, making further easing a more delicate decision.

                          On one hand, trade tensions with the US loom large, and the fallout from fresh tariffs and retaliatory measures could weigh on Eurozone’s already fragile economic recovery. On the other hand, the announcement of transformational fiscal changes in both Germany and at the European Commission level—aimed at boosting defense and infrastructure spending—could have a significant long-term impact on growth, partially offsetting the headwinds from a trade war.

                          ECB’s new economic projections, to be released alongside today’s decision, are expected to show weaker growth and marginally higher inflation. However, data collection for these forecasts took place weeks ago, rendering them less reflective of the rapidly evolving environment. Thus, their usefulness for predicting medium-term policy moves may be limited, with markets keeping an even closer eye on the ECB’s forward guidance instead.

                          Euro has been exceptionally strong this week, with recent optimism boosted by developments in European fiscal policy. It’s rally is unlikely to be deter by today’s ECB outcome.

                          Technically, EUR/CHF has surged aggressively, now pressing long-term falling channel resistance (at around 0.9620), after decisively breaking above 55 W EMA. Sustained break above this resistance would suggest that the downtrend from 1.2004 (2018 high) has finally bottomed at 0.9204.

                          Sustained trading above the channel resistance will be argue that whole down trend from 1.2004 (2018 high) has completed at 0.9204, on bullish convergence condition in W MACD.

                          In this bullish case, further rise should be seen to 0.9928 structural resistance at least, with prospect of stronger rally, even still as a medium term corrective move.

                          Fed’s Beige Book: Modest growth, rising price pressures, and tariff concerns

                            Fed’s Beige Book report indicated that “economic activity rose slightly” since mid-January, with mixed regional performances. While four Districts saw modest or moderate growth, six reported no change, and two experienced slight contractions.

                            Consumer spending was generally lower, with essential goods seeing steady demand but discretionary spending weakening, particularly among lower-income consumers. However, business expectations remained “slightly optimistic” for the coming months.

                            On the labor front, employment “nudged slightly higher” overall, though wage growth slowed modestly compared to the previous report.

                            While price pressures remained moderate, several Districts noted an uptick in the pace of increase, particularly in manufacturing and construction. Many firms struggled to pass higher input costs onto customers, but expectations of tariffs on imports were already prompting preemptive price hikes in some sectors.

                            Full Fed’s Beige Book report here.

                            US ISM services rises to 53.5, growth across key subcomponents

                              US ISM Services PMI climbed to 53.5 in February, up from 52.8 in January and exceeding expectations of 53.0. The data signaled continued expansion in the services sector, with growth seen across key subcomponents.

                              Business activity showed only a marginal decline from 54.5 to 54.4. New orders ticked up from 51.3 to 52.2, while employment rose from 52.3 to 53.9. Price pressures remain a concern, as the prices subindex jumped from 60.4 to 62.6, reinforcing worries about inflation persistence.

                              While the services sector continues to grow, ISM noted that businesses remain anxious over the impact of tariffs, while some respondents cited federal budget reductions as negatively affecting their outlook.

                              Despite these uncertainties, ISM pointed out that February marked the third consecutive month where all four major subindexes—business activity, new orders, employment, and supplier deliveries—remained in expansion territory, a first since May 2022.

                              The report also indicated that the current level of services activity corresponds to a 1.6% increase in annualized GDP.

                              Full ISM services release here.

                              US ADP jobs grow only 77, hiring slowdown

                                US private sector employment growth slowed sharply in February, with ADP reporting an increase of just 77k jobs, far below market expectations of 140k.

                                The breakdown showed that goods-producing sectors contributed 42k jobs, while service-providing sectors added only 36k. By company size, small businesses shed -12k jobs, while medium-sized firms led hiring with a 46k gain, followed by large businesses with a 37k increase.

                                Wage growth showed little change, with job-changers seeing annual pay gains slow slightly from 6.8% to 6.7%, while job-stayers remained steady at 4.7%.

                                ADP’s chief economist Nela Richardson attributed the hiring slowdown to “policy uncertainty and a slowdown in consumer spending,” which may have prompted layoffs or cautious hiring.

                                Full US ADP employment release here.

                                Eurozone PPI up 0.8% mom 1.8% yoy in Jan, above expectations.

                                  Eurozone producer prices rose sharply by 0.8% mom and 1.8% yoy in January, exceeding expectations of 0.3% mom and 1.4% yoy, respectively.

                                  The monthly increase in Eurozone PPI was primarily driven by a 1.7% mom jump in energy prices, while capital goods and durable consumer goods also saw notable gains of 0.7% mom and 0.6%, respectively. Intermediate goods prices edged up by 0.3% mom, while non-durable consumer goods saw a modest 0.2% mom rise.

                                  The broader EU also recorded a 0.8% mom, 1.8% yoy in producer prices. Among individual member states, Ireland saw the largest monthly price jump at 6.2%, followed by Bulgaria (+5.4%) and Sweden (+2.3%).

                                  However, not all countries experienced inflationary pressures, as Portugal (-2.2%), Austria (-0.6%), Slovenia (-0.5%), and Cyprus (-0.3%) registered price declines.

                                  Full Eurozone PPI release here.

                                  UK PMI services finalized at 51, stagflation risks grow

                                    The UK services sector showed little improvement in February, with PMI Services finalized at 51.0, slightly up from January’s 50.8 but still well below its long-run average of 54.3. Meanwhile, PMI Composite edged lower from 50.6 to 50.5, signaling stagnant overall economic activity as demand conditions continue to weaken both domestically and in export markets.

                                    Tim Moore, Economics Director at S&P Global Market Intelligence, warned of “elevated risk of stagflation on the horizon”. New orders falling at their sharpest rate in over two years. Rising payroll costs and economic uncertainty have eroded business confidence, bringing sentiment to its lowest level since December 2022.

                                    Concerns over slowing growth and persistent inflation pressures have also led to continued job losses, with employment in the services sector contracting for a fifth straight month—the longest period of decline outside of the pandemic since early 2011.

                                    Full UK PMI services final release here.

                                    Eurozone PMI composite finalized at 50.2, barely grow for two months

                                      Eurozone economy showed little momentum in February, with PMI Services finalizing at 50.6, down from 51.3 in January, while PMI Composite was unchanged at 50.2.

                                      The picture was mixed across the region with Spain, Ireland, and Italy showing signs of expansion, while Germany’s services sector slowed and France’s continued its sharp contraction, posting its lowest reading in 13 months at 45.1.

                                      Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, noted that services growth is barely offsetting the prolonged slump in manufacturing. He pointed to rising input costs, particularly wage pressures, as a growing concern for ECB.

                                      Political uncertainty in key economies is also weighing on sentiment. France’s services sector is deteriorating at a much faster pace, likely influenced by unresolved political instability. In contrast, Germany’s services sector, though slowing, remains in expansion, with hopes that post-election stability could support economic recovery.

                                      However, with external risks from trade tensions and weak consumer spending, a decisive rebound in Eurozone remains uncertain.

                                      Full Eurozone PMI services final release here.

                                      Swiss annual CPI ticks down to 0.3% yoy, remains weak

                                        Swiss inflation accelerated on a monthly basis in February, with CPI rising 0.6% mom, slightly above the expected 0.5%. Core CPI, which excludes fresh and seasonal products, energy, and fuel, increased by 0.7% mom. The rise was driven by both domestic and imported product prices, which climbed 0.5% mom and 0.9% mom, respectively.

                                        However, the broader inflation trend remains subdued. On a year-over-year basis, headline CPI slowed to 0.3% yoy from 0.4% yoy, though it was still slightly above expectations of 0.2% yoy. Core CPI remained steady at 0.9% yoy. While domestic product price inflation eased from 1.0% yoy to 0.9% yoy, imported prices continued to contract, staying at -1.5% yoy.

                                        Full Swiss CPI release here.

                                        China’s Caixin PMI services rises to 5.14, but uncertainties rising in employment and income

                                          China’s Caixin Services PMI climbed to 51.4 in February, up from 51.0, beating market expectations of 50.8. Composite PMI also improved slightly to 51.5, signaling steady expansion across both manufacturing and services for the 16th consecutive month.

                                          According to Wang Zhe, Senior Economist at Caixin Insight Group, supply and demand showed improvement in both sectors, supported by robust consumption during the Chinese New Year holiday and technological innovations in select industries. However, “employment saw a slight contraction”, mainly due to weakness in the manufacturing sector.

                                          Concerns remain over China’s broader economic recovery. Wang noted that overall price levels “remained subdued”, with declining sales prices in both manufacturing and services. “Rising uncertainties in employment and household income constraining efforts to boost domestic demand and stabilize the economy,” he added.

                                          Full China Caixin PMI services release here.