China’s National People’s Congress (NPC) concluded without significant shifts in economic or policy directions, leaving some disappointed, especially those expecting a higher fiscal deficit-to-GDP target. The unchanged target of 3% signaled a cautious budgetary policy approach.

Despite the NPC outcomes, the momentum from AI-driven advancements continues to buoy global equities, including Chinese markets. This ongoing support is expected to offset potential downside risks resulting from the NPC’s outcomes. The optimism surrounding AI technologies and their impact on various sectors remains a driving force for market sentiment and investor confidence.

US Treasury yields started the week by rebounding from previous declines. The 2-year yields surged by seven basis points, while the yield on 10-year bonds climbed by 3.3 to 4.213%. This yield increase may have been spurred by a hawkish comment from the Fed’s Raphael Bostic, suggesting a possible pause in rate cuts after one in the third quarter of this year.

The fluctuating yields had a mixed impact on the US dollar as markets remained cautiously hawkish ahead of Chair Powell’s testimony on Capital Hill.

Tokyo’s inflation accelerated in February, reaching 2.6% year-over-year compared to 1.8% in January, surpassing market expectations of 2.5%. Despite the rise in inflation and robust capital spending data, the USDJPY pair remained relatively stable, primarily influenced by its correlation with 10-year US yields.

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