Core Conclusions - Recent geopolitical tensions have disturbed inflation expectations, leading to a weak market this week due to hawkish statements from the Federal Reserve [1] - Historically, rising resource prices do not necessarily accompany broad inflation in the U.S., and changes in Federal Reserve policy tend to have a short-term impact on A-shares [2][3] - Short-term disturbances do not alter the overall bullish market trend for the year, with technology being the mid-term focus, alongside strategic resource products and domestic demand-related assets [1][3] Market Performance - The recent hawkish statements from the Federal Reserve have caused global stock markets to weaken, with A-shares lagging behind. The S&P 500 and A-share indices both saw declines of 1.4%, while the Hang Seng Index dropped by 2.0% [1][12] - A-shares experienced a decline of 3.5% for the Shanghai Composite Index and 4.1% for the Wind All A Index in the past week, indicating a relative underperformance compared to global peers [12][13] Historical Context of Resource Prices and Inflation - Over the past 70 years, commodity prices have gone through four significant upward cycles, with varying impacts on U.S. inflation. The 1970s and 2021-2022 saw broad inflation accompanying resource price increases, while the 2003-2008 and 2009-2011 periods did not [2][14] - Factors influencing the different inflation transmission effects include the weight of oil in the economy, the monetary policy environment, wage rigidity, and the drivers of price increases [17][18] Federal Reserve Policy Impact on A-shares - Changes in Federal Reserve policy generally have a short-term impact on A-shares, primarily affecting market sentiment through external market disturbances. Historical data shows that A-shares often recover after initial declines following rate hikes [3][26] - The impact of U.S. monetary policy changes is more pronounced on Hong Kong stocks due to a higher proportion of foreign investment [26][27] Mid-term Market Outlook - Despite short-term volatility due to geopolitical uncertainties and hawkish Fed statements, the bullish market atmosphere for A-shares, which began on September 24, 2024, remains intact. The market is expected to enter the latter half of the bull cycle by 2026 [3][28] - The focus remains on strategic resource products and domestic demand-related assets, with technology continuing to be a key investment theme [29] Investment Opportunities - The technology sector is seen as a primary investment focus, particularly in AI applications and energy sectors, which are expected to benefit from ongoing geopolitical tensions and technological advancements [29][37] - There is potential for recovery in undervalued sectors such as real estate and consumer goods, supported by domestic policies aimed at expanding domestic demand [29][31]

Group 1: Federal Reserve Meeting Outcomes - The Federal Reserve maintained the federal funds rate target range at 3.5% to 3.75% during the March 2026 FOMC meeting[2] - The voting outcome showed only one member, Milan, advocating for a 25 basis point rate cut, while others supported keeping rates unchanged[5] - The number of members supporting larger rate cuts decreased from 8 in December to 5 in March, indicating a cooling of rate cut expectations[9] Group 2: Economic Forecasts and Inflation - The Fed revised GDP growth forecasts upward for 2026 to 2.4% (+0.1pp) and for 2027 to 2.3% (+0.3pp) while keeping the 2026 unemployment rate forecast unchanged at 4.4%[7] - Core PCE inflation forecasts for 2026 and 2027 were raised to 2.7% (+0.3pp) and 2.2% (+0.1pp) respectively[7] - The latest PPI data for February exceeded expectations, raising inflation concerns and leading to a hawkish market reaction[10] Group 3: Market Reactions and Future Rate Expectations - Following the meeting, market expectations for the next rate cut were pushed back to September 2027, with only 0.4 expected cuts remaining for 2026[6] - The 10-year U.S. Treasury yield rose to 4.26%, while major stock indices fell, indicating a shift in market sentiment towards inflation concerns[10] - Brent crude oil prices surged nearly 49% from $72.48 per barrel on February 27 to approximately $109 per barrel by March 19, significantly impacting inflation forecasts[18] Group 4: Risks and Uncertainties - Risks include potential economic and employment weakness exceeding expectations, prolonged U.S.-Iran conflict, and potential loss of Federal Reserve independence[4][19] - The dual risks of stagnation and inflation are highlighted, with weak employment data and declining retail sales indicating economic cooling[15]

Monetary Policy Decisions - The Federal Reserve maintained the federal funds rate target range at 3.50%-3.75%, in line with market expectations, with a probability of over 99% for no rate cut at this meeting[2][5] - The next FOMC meeting is scheduled for April 29, 2026[2] Economic Outlook - The Fed raised its 2026 PCE inflation forecast by 0.3 percentage points, reflecting potential supply shocks[3][10] - Concerns about stagflation were noted, with low job creation levels posing risks to the economy[3][8] Geopolitical Factors - The Fed's decision to pause rate cuts is influenced by ongoing geopolitical tensions, particularly in the Middle East, which could delay future rate cuts[3][14] - Oil prices surged past $105 per barrel following military actions in the region, impacting market stability[13] Market Reactions - Major U.S. stock indices fell, with the Dow Jones down 1.63%, S&P 500 down 1.36%, and Nasdaq down 1.46%[4] - The 10-year Treasury yield rose by 6 basis points to 4.26%, while the 2-year yield increased by 8 basis points to 3.76%[4] Future Rate Cut Expectations - The Fed's future rate cut path will depend heavily on developments in the Middle East, with potential for 2-3 cuts later in 2026 if tensions ease[14] - Current projections suggest a likelihood of no rate cuts until 2027, with market expectations reflecting this outlook[14]

Monetary Policy - The Federal Reserve decided to maintain the interest rate at a target range of 3.5%-3.75%, aligning with expectations, with a voting ratio of 11:1 against further rate cuts[2] - The dot plot indicates one rate cut in 2026 and another in 2027, consistent with previous forecasts[2] Economic Indicators - Unemployment rate remains stable, with job growth described as low; the unemployment rate has shown little change in recent months[10] - Inflation expectations have been raised, with the 2026 PCE and core PCE forecasted at 2.7%, up from previous estimates of 2.4% and 2.5% respectively[13] Economic Growth - The Fed has upgraded its GDP growth forecasts for 2026 and 2027 to 2.4% and 2.3%, respectively, reflecting increased confidence in productivity[3] - The U.S. economy is expected to stabilize, supported by resilient service consumption and improvements in private investment[3] Market Reactions - The probability of a rate cut before December has decreased to 54% from 69.5% following the Fed's announcements[4] - The dollar index strengthened, while major U.S. stock indices saw increased declines, and the 2-year Treasury yield rose to 3.72%[4] Risks - Potential risks include higher-than-expected inflation, tighter monetary policy from the Fed, and unexpected downturns in the U.S. economy[23]

Core Viewpoint - The Federal Reserve decided to maintain interest rates in the range of 3.5%-3.75%, aligning with expectations, with only one member advocating for a rate cut [2] - The Fed's economic growth forecast has been raised, indicating a more hawkish stance, while acknowledging potential downward pressures on the labor market [5] Economic Growth - The Fed maintains an optimistic view on economic conditions, stating that economic activity is expanding at a solid pace [8] - The GDP growth forecasts for 2026 and 2027 have been adjusted upward to 2.4% and 2.3%, respectively, reflecting increased confidence in productivity [8] Employment and Labor Market - Employment growth remains low, with recent data showing a decline in non-farm payrolls by 92,000 in February, while the unemployment rate has shown signs of stabilization [4][5] - The labor market is experiencing a weak balance of supply and demand, with job vacancy rates indicating a potential easing of labor supply constraints [5] Inflation Trends - Inflation remains somewhat elevated, with the Fed raising its PCE inflation forecasts for 2026 to 2.7% [4] - Rising energy prices are expected to contribute to inflationary pressures, with oil prices typically leading energy CPI by 1-2 months [5][9] Interest Rate Outlook - The probability of rate cuts in 2026 has decreased, with market expectations for a rate cut before December dropping from 69.5% to 54% [12] - The Fed's decision to pause rate cuts is influenced by rising inflation expectations and signs of stabilization in the labor market [12]

Inflation Data - The US Consumer Price Index (CPI) for February shows a year-on-year increase of 2.4%, aligning with market expectations and previous values[1] - The core CPI increased by 2.5% year-on-year, marking the lowest level in five years, while the month-on-month growth slowed from 0.3% to 0.2%[1] Housing and Food Prices - Housing costs, which account for over 30% of the consumer price index, rose by 3.3% year-on-year, a decrease from January's growth, contributing to the overall slowdown in inflation[3] - Food and beverage prices, making up 15% of the consumer price index, increased by 3.05% year-on-year, higher than January's figures[3] Energy Prices Impact - Energy prices, which constitute 8% of the consumer price index, saw a monthly increase of 11% and a year-on-year rise of 0.4%[3] - The geopolitical tensions in the Middle East have led to a significant rise in energy prices, with oil prices increasing approximately 50% since late February due to military actions involving the US and Israel[3] Federal Reserve Interest Rate Outlook - The Federal Reserve is expected to maintain interest rates in the upcoming meeting, with a potential reduction of 50 basis points anticipated later this year based on the inflation trend[4] - However, rising energy prices due to geopolitical conflicts may delay the expected timeline for interest rate cuts, with a 25 basis point reduction by year-end now considered more likely according to Chicago rate futures[4]

1. Report Industry Investment Rating - The document does not provide a specific investment rating for the industry [1][3] 2. Core Viewpoints of the Report - High oil prices may push up US inflation, and if WTI oil prices remain above $90 per barrel for a long time, it could drive the US CPI year - on - year increase back above 3% or even 4%, affecting the Fed's interest rate cut expectations and the US Treasury market. The longer high oil prices persist, the greater their upward potential may be [3] - Whether the US can provide escort in the Strait of Hormuz is a key factor for the persistence of oil price shocks. The US government has considered the escort option, but security risks have prevented its implementation [3] - Tensions between the US and Iran around Kharg Island have escalated, increasing the risk of sharp fluctuations in international oil prices [3] - Next week, the international financial and commodity markets should focus on the US - Iran game around Kharg Island and when the US can provide escort in the Strait of Hormuz [1][3] - International oil prices continued to rise, while domestic meat and vegetable prices declined this week. There were also changes in the prices and indicators of other commodities such as copper, aluminum, and steel [3] - The average daily transaction area of commercial housing in 30 large and medium - sized cities in February and March 2026 decreased compared to the same period in 2025 [3] 3. Summary by Relevant Catalogs 3.1 High - frequency Data Scan - Next week, focus on the US - Iran game around Kharg Island and when the US can provide escort in the Strait of Hormuz [1][3] 3.2 High - frequency Data and Important Macroeconomic Indicators Trend Comparison - The document provides multiple charts showing the relationships between high - frequency data and important macroeconomic indicators such as industrial added value, PPI, CPI, etc., including the relationship between copper spot prices and industrial added value, and between RJ/CRB price index and export amount [19][28][55] 3.3 Important High - frequency Indicators in the US, Europe, and Japan - The document shows charts related to US weekly economic indicators, real economic growth rate, initial jobless claims, unemployment rate, and the implied prospects of interest rate hikes/cuts by the central banks of the US, Japan, and the Eurozone [85][89][93] 3.4 Seasonal Trends of High - frequency Data - The document presents the seasonal trends (in terms of month - on - month increases) of various high - frequency data, including 30 - city commercial housing transaction area, LME copper spot settlement price, and Brent crude oil futures settlement price [98][106][112] 3.5 High - frequency Traffic Data in Beijing, Shanghai, Guangzhou, and Shenzhen - The document shows the year - on - year changes in subway passenger volume in Beijing, Shanghai, Guangzhou, and Shenzhen [144][145][146]

Group 1: Inflation Data Overview - The U.S. CPI for February remained stable at 2.4%, matching expectations, while core CPI held at 2.5%[20] - Month-on-month CPI increased by 0.3%, in line with forecasts, and core CPI rose by 0.2%[20] - Super core service CPI increased from 2.7% to 2.8% year-on-year[20] Group 2: Future Inflation Expectations - CPI is expected to rise to around 3% in March and maintain approximately 3.1% in Q2, with core CPI slightly increasing to 2.7%[9] - High oil prices, projected to average $90 per barrel in Q2-Q3, could lead to a 14% increase in gasoline prices, significantly impacting CPI[9] - The delayed impact of last year's government shutdown on rent statistics will affect CPI calculations in April, as rent data will reflect four months instead of two[3] Group 3: Market Reactions and Interest Rate Expectations - Market expectations for interest rate cuts have decreased, with the number of anticipated cuts dropping from 1.545 to 1.19[4] - The first expected interest rate cut has been pushed from September to December due to rising oil prices[4] - Financial markets are currently pricing in stable long-term inflation expectations, with only a 0-10 basis point increase observed since late February[17]

Group 1 - The US dollar index surged to 99.83, the highest level since November 28 [2] - The Japanese yen and Japanese government bonds fell, with the yen breaking below 159.45 against the dollar for the first time since July 2024 [3] - The yield on 10-year Japanese government bonds rose by 5 basis points, while the 5-year yield increased by 4 basis points [3] Group 2 - The Indian rupee fell to a historical low of 92.3575 against the dollar [4] - On March 13, the Chinese yuan's central parity rate against the dollar was lowered by 48 basis points to 6.9007, with onshore and offshore yuan depreciating by 0.15% and 0.08% respectively [4] - The US Consumer Price Index (CPI) rose by 2.4% year-on-year in February, with core CPI increasing by 2.5% [4]

Macro Overview - The core conclusion of the report indicates that the February CPI in the U.S. met market expectations, but this may represent a "calm before the storm" given the recent oil price shocks. The market is now focused on the March CPI data [3] - Following the CPI announcement, U.S. stocks, bonds, and gold prices fell, while the dollar rose, reflecting concerns about future inflation paths. The market now expects only 1.09 rate cuts in 2026 [3] - The report highlights persistent service inflation and rising oil prices due to geopolitical tensions, suggesting that the Federal Reserve may adopt a wait-and-see approach in its upcoming meetings [3] - Significant changes in policy are anticipated after the May Federal Reserve chair transition, with potential for more pronounced rate cuts in the second half of the year [3] Fixed Income - The report discusses the potential and necessity for a reduction in interbank deposit rates, influenced by the new pricing self-discipline mechanism effective from December 1, 2024. This mechanism requires non-bank interbank deposits to align with the 7-day reverse repurchase rate [5] - The growth rate of large banks' interbank deposits significantly slowed from 44.0% in November 2024 to 5.3% in January 2025, but then rebounded to 48.9% by January 2026, indicating a possible need for rate cuts [5] - A reduction in short-term rates could open up new space for long-term rates, with expectations that the 10-year government bond yield may drop to 1.6%-1.7% by mid-year [5] Communication Industry - Broadcom has launched its 3nm 400G PAM-4 DSP, which optimizes solutions for 1.6T transceivers, enhancing bandwidth density and efficiency for AI data centers [6][7] - The introduction of the Taurus DSP is seen as a catalyst for future development, with New Yisheng being the first to launch a 448G full-featured DSP optical module, emphasizing the strategic importance of partnerships in expanding customer opportunities [8] Automotive Industry - NIO's Q4 results exceeded expectations, with strong sales of the ES8 and a positive outlook for 2026, projecting sales of approximately 480,000 vehicles and total revenue of 124.2 billion yuan [9] - The company anticipates gradual improvement in profitability, with non-GAAP net profits expected to reach 4.6 billion yuan in 2026, increasing to 73.1 billion yuan by 2028 [9] Computer Industry - Tonghuashun has launched the iFinD MCP, designed for AI interactions, integrating core financial data to support local deployment of intelligent analysis systems [10] - The company expects significant revenue growth, projecting operating revenues of 84.13 billion yuan in 2026, increasing to 123.54 billion yuan by 2028, with a maintained "buy" rating [10]