On January 22, after a period of narrow-range consolidation, the three major A-share indices turned positive, with the total trading volume for the two markets increasing slightly from the previous day to 2.7 trillion yuan. Domestically, the Chinese economy successfully achieved its full-year 5% growth target for 2025, with price recovery showing notable improvement in the fourth quarter, albeit still relatively weak. The primary characteristics were supply outperforming demand and external demand being stronger than domestic demand. Looking specifically at December, the production side and external demand demonstrated strong resilience; however, investment and consumption remained subdued, with insufficient domestic demand persisting as a core issue. Looking ahead to this year, against the backdrop of strong supply and weak demand, further optimizing supply, restoring price levels, and improving corporate profitability will be crucial objectives. Internationally, influenced by hawkish remarks from Federal Reserve officials and a rising market expectation for Warsh to become the next Fed Chair, expectations for interest rate cuts have been pared back. According to the CME FedWatch Tool, the market now anticipates the first rate cut may be delayed until June, with expectations for fewer than two cuts for the full year of 2026. With the January 30th deadline for the temporary budget agreement between US political parties approaching, the US government faces another potential shutdown test, although the risk for this round is assessed to be lower than in 2025. Given the low base from the fourth quarter of last year, US economic data for the first quarter might still show sequential support.
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