Morning News

Source: Wall Street News

## Market Overview

Technology stocks weighed on U.S. stocks, with the Nasdaq falling more than 1%, marking the second-largest decline since the tariff shock in April. The S&P 500 posted a third consecutive decline, while Home Depot rose more than 3%, boosting the Dow Jones Industrial Average to a new intraday high. NVIDIA fell 3.5%. Palantir dropped more than 9%, extending its losing streak to five days; Intel rebounded 7%. Homebuilder stocks generally rose.

UK stocks rebounded to a record high. European defense stocks plummeted, with Leonardo falling 10%. After releasing earnings, XPeng Motors rose more than 4%, while Xiaomi's U.S. shares fell more than 2%.

U.S. Treasury yields reversed a three-day rising streak, with the 10-year yield moving away from a two-week high. The U.S. dollar index pulled away from a more than two-week low for two days, having turned lower intraday. The implied volatility of the RMB dropped to a 17-month low. Bitcoin once fell more than $4,000, breaking below the $113,000 mark, and Ethereum dropped more than 6% intraday.

As preparations for a Russia-Ukraine meeting proceed, crude oil fell more than 1%. U.S. oil closed at a more than two-month low, and Brent crude approached a two-month low. Gold's rebound failed, hitting a new more than two-week low.

During the Asian session, A-shares rose intraday but closed lower. Turnover exceeded 2 trillion yuan for five consecutive days. Foxconn Industrial Internet surged to the daily limit, hitting a new high. The Hang Seng Index posted a fourth consecutive decline, with Oriental Select plunging 21%.

## Key News

The talks between Chinese and Indian foreign ministers achieved 10 outcomes. The special representatives on the China-India border issue reached 10-point consensus.

The venue for the U.S.-Russia-Ukraine trilateral meeting is being considered in Budapest, Geneva, or even Russia. U.S. media reported that Trump said Ukraine may need to make territorial concessions to reach a potential agreement.

The U.S. Department of Commerce officially announced on Tuesday that it will include 407 categories of steel and aluminum derivative products such as wind turbines in the tariff list. The scope of Trump's steel and aluminum tariffs has expanded sharply, catching U.S. importers off guard. Despite Trump's tariff exemption, U.S. copper companies still announced price increases.

Meta is considering a comprehensive reduction in the size of its AI department, restructuring the AI team, and seeking to expand the superintelligence department.

Xiaomi's Q2 net profit increased 75.4% year-on-year. Revenue from large household appliances rose 66.2% to a record high, while the mobile phone business dropped 2.1%. During the conference call, it stated that it will firmly not engage in price wars, the automotive business is expected to achieve quarterly profitability in the second half of the year, and it will enter the European electric vehicle market in 2027.

XPeng Motors' Q2 revenue doubled to a new high, with net loss narrowing by 63%. The Q3 revenue and delivery guidance were below expectations.

Pop Mart's first-half net profit surged nearly 400%, revenue in the American market soared 11 times, and revenue from plush products jumped 1276.2%.

A 2 billion investment may pave the way for a larger acquisition transaction. Reports say that SoftBank is in talks with Intel to acquire its chip foundry business.

## Market Closing Quotes

European and American stocks: The S&P 500 closed down 0.59% at 6411.37 points. The Dow Jones Industrial Average rose 0.02% to 44922.27 points. The Nasdaq fell 1.46% to 21314.952 points. Europe's STOXX 600 index closed up 0.69% at 557.81 points.

A-shares: The Shanghai Composite Index fell 0.02% to 3727.29 points, the Shenzhen Component Index fell 0.12% to 11821.63 points, and the ChiNext Index fell 0.17% to 2601.74 points.

Bond market: The yield on the 10-year U.S. benchmark Treasury note fell 2.73 basis points to 4.3062%. The yield on the 2-year U.S. Treasury note fell 1.49 basis points to 3.7480%.

Commodities: COMEX gold futures fell 0.56% to $3359.10 per ounce. WTI September crude oil futures closed down 1.69% at $62.35 per barrel. Brent October crude oil futures closed down 1.21% at $65.79 per barrel.

## Details of Major News

### Global Highlights

Chinese and Indian Foreign Ministers' Talks Achieved 10 Outcomes. According to the website of the Ministry of Foreign Affairs, on August 18, Wang Yi, Member of the Political Bureau of the Communist Party of China Central Committee and Minister of Foreign Affairs, held talks with Indian External Affairs Minister Subrahmanyam Jaishankar in New Delhi. The two sides had positive, constructive, and forward-looking discussions on bilateral, regional, and international issues of common concern and reached 10 outcomes.

Special Representatives on China-India Border Issues Reached 10-Point Consensus. The two sides agreed to set up a boundary demarcation expert group to explore advancing demarcation negotiations in areas where conditions are ripe; establish a working group to promote effective border management and maintain peace and tranquility in the border areas; hold a new round of corps commander-level talks on the western section of the border as soon as possible and establish a corps commander-level talks mechanism for the eastern and middle sections of the border; maintain communication on renewing the memorandum of understanding on cross-border river flood reporting; and reopen three traditional border trade markets, namely Renqinggang-Changu, Pulan-Gongji, and Jiuba-Nanga.

Venues for U.S.-Russia-Ukraine Trilateral Meeting Considered in Budapest, Geneva, and Even Russia. Media reports say that Putin suggested meeting with Zelensky in Russia during a call with Trump on Monday, but the proposal was rejected; Budapest has become the White House's preferred venue for the trilateral meeting, and the U.S. Secret Service is making preparations. Macron believes it should be held in a neutral European country and strongly supports Geneva, which is supported by the Italian Foreign Minister. The Swiss Foreign Minister said that if Putin comes to Switzerland for the meeting, he will be granted "immunity". The Russian Foreign Minister said that all summits must be prepared step by step and gradually. Trump said that the meeting has been "roughly arranged" and it is up to the presidents of Russia and Ukraine to decide.

U.S. Media: Trump Said Ukraine May Need to Make Territorial Concessions to Reach a Potential Agreement. According to Global Times, when asked about possible territorial exchanges in a future Russia-Ukraine agreement, Trump implied that Ukraine may need to make territorial concessions to reach an agreement. "Now they are talking about the Donbas (region). You know, 79% of the Donbas is currently owned and controlled by Russia. So they understand what that means," Trump said.

The U.S. Department of Commerce officially announced on Tuesday that it will include 407 categories of steel and aluminum derivative products such as wind turbines in the tariff list. The scope of Trump's steel and aluminum tariffs has expanded sharply, catching U.S. importers off guard. The U.S. government notified the country late last Friday that 407 kinds of derivative products containing steel and aluminum components were included in the 50% steel and aluminum tariff list, which took effect this Monday. The wide scope of the list and the speed of implementation surprised industry insiders. The list does not exclude goods in transit, and the official guidelines are vague on this. Logistics industry insiders said that this is not a simple addition of tariffs, but a strategic change in the regulatory method for steel and aluminum derivatives.

Despite Trump's tariff exemption, U.S. copper companies still announced price increases. Trump's policy of imposing a 50% tariff on copper products and exempting refined copper has made U.S. local copper processing enterprises the biggest winners. They can not only import copper raw materials at low prices but also reduce overseas competition due to tariff restrictions, thereby increasing prices and expanding profits. Since the United States still imports a large number of copper semi-finished products and finished products every year, although U.S. enterprises will expand production capacity to replace imports in the future, tariffs will push up the prices of end products in the short term. U.S. local copper processing enterprises such as Southwire and Cerro Wire have announced in recent days that they will increase the prices of various copper wire products by 5%. Analysts point out that it will be ordinary American consumers who will ultimately pay for this.

Meta is considering comprehensively reducing the size of its AI department, restructuring the AI team, and seeking to expand the superintelligence department. Media reports say that Meta is splitting its artificial intelligence department into four independent teams and reorganizing thousands of AI employees to accelerate the achievement of the strategic goal of "superintelligence". The restructuring is led by the new Chief AI Officer Wang Tao, involving four major directions: language models, basic research, product development, and infrastructure.

Xiaomi's Q2 net profit increased 75.4% year-on-year, with revenue from large household appliances rising 66.2% to a record high, while the mobile phone business dropped 2.1%. Conference call: Resolutely not engage in price wars, the automotive business is expected to achieve quarterly profitability in the second half of the year, and enter the European electric vehicle market in 2027.

Xiaomi Group's total revenue in Q2 was 116 billion yuan, a year-on-year increase of 30.5%, and adjusted net profit surged 75.4% year-on-year, both hitting record highs. Revenue from innovative business segments such as smart electric vehicles and AI reached 21.3 billion yuan, of which the automotive business contributed 20.6 billion yuan. Revenue from smartphones was 45.5 billion yuan, a year-on-year decrease of 2.1%, mainly affected by the decline in the average selling price.

Lu Weibing said during the conference call that according to the current momentum, Xiaomi Auto is expected to achieve monthly or quarterly profitability in the second half of the year; however, more than 30 billion yuan has been invested in the past three years, and the cumulative loss is still huge, so there is still a long way to go for full profitability. Xiaomi Mobile firmly aims at the "200 million club", that is, plans to enter the global annual shipment volume of 200 million units in the next three to five years. The overall revenue of Xiaomi Group is expected to grow by more than 30% in 2025, and it is fully confident in achieving this goal.

XPeng Motors' Q2 revenue doubled to a new high, net loss narrowed by 63%, and Q3 revenue and delivery guidance were below expectations. Q2 total revenue reached a new high of 18.27 billion yuan, a year-on-year increase of 125.3%, compared with the market expectation of 18.38 billion yuan; net loss was 480 million yuan, narrowing by 63% from 1.28 billion yuan in the same period last year; it is expected to deliver 113,000-118,000 units in Q3, a year-on-year increase of 142.8%-153.6%, which is less than the market expectation of 119,051 units, and revenue will be 19.6 billion to 21 billion yuan, a year-on-year increase of 94%-107.9%, with a market expectation of 21.06 billion yuan.

Pop Mart's first-half net profit surged nearly 400%, revenue in the American market soared 11 times, and revenue from plush products jumped 1276.2%. Pop Mart's first-half revenue was 13.88 billion yuan, a year-on-year surge of 204.4%. Revenue from plush products increased 1276.2% year-on-year, leaping to become the largest category, accounting for 44.2% of total revenue. Revenue from THE MONSTERS was 4.81 billion yuan, accounting for 34.7% of total revenue, a significant increase from 13.7% in the same period last year.

A 2 billion investment may pave the way for a larger acquisition transaction. Report: SoftBank is in talks with Intel to acquire its chip foundry business. According to media reports citing informed sources, Masayoshi Son has met with Intel's new CEO Pat Gelsinger several times since he took office in March this year to discuss potential transaction plans. Acquiring Intel's foundry business is in line with Son's plan to build a complete AI infrastructure. SoftBank already holds shares in OpenAI and NVIDIA and is a driving force behind the Stargate data center project.

Global TACO bull market, which has a bigger bubble? Song Xuetao from Guojin Securities pointed out that when comparing the price-earnings ratios of major stock indexes horizontally, U.S. stocks, Indian stocks, Vietnamese stocks, and German stocks have relatively high absolute levels, and U.S. stocks, German stocks, Taiwan stocks, and French stocks have relatively high price-earnings ratios. When comparing the difference between stock price increases and earnings growth rates of major stock indexes vertically, U.S. stocks are not significantly divorced from the fundamentals of large U.S. enterprises. A-shares and German stocks have higher "non-fundamental premiums", while Taiwan stocks and Korean stocks have the lowest "non-fundamental premiums".

### Domestic Macroeconomics

Three new situations for receiving personal pension, to be implemented from September 1! The notice stipulates three new situations for receiving personal pension: within 12 months before the application date, the medical expenses related to basic medical insurance incurred by oneself (or spouse, minor children), after deducting medical insurance reimbursement, the personal burden (referring to the self-paid part within the scope of the medical insurance catalog) accumulatively exceeds the per capita disposable income of residents in the province (autonomous region, municipality directly under the Central Government) in the previous year; receiving unemployment insurance benefits for a total of 12 months within 2 years before the application date; and receiving the minimum living security for urban and rural areas.

Ministry of Finance: The cumulative growth rate of national general public budget in the first 7 months turned positive for the first time, stamp duty increased by 20.7%, and the revenue of government-managed funds budget decreased slightly year-on-year. In July this year, the national general public budget revenue was 2.0273 trillion yuan, a year-on-year increase of 2.6%, of which central and local revenues increased by 2.2% and 3.1% respectively, with monthly growth rates being the highest so far this year. In the first 7 months of this year, the national general public budget revenue was 13.5839 trillion yuan, an increase of 0.1%, and the cumulative growth rate turned positive for the first time this year, 0.4 percentage points higher than that in the first half of the year. In the first 7 months, stamp duty was 255.9 billion yuan, a year-on-year increase of 20.7%. Among them, securities transaction stamp duty was 93.6 billion yuan, a year-on-year increase of 62.5%. The national government-managed funds budget revenue was 2.3124 trillion yuan, a year-on-year decrease of 0.7%.

Ministry of Industry and Information Technology and other departments: Further standardize the competition order of the photovoltaic industry and curb low-price disorderly competition. The meeting required that first, strengthen industrial regulation. Strengthen the investment management of photovoltaic industry projects and promote the orderly withdrawal of backward production capacity in a market-oriented and legal manner. Second, curb low-price disorderly competition. Improve the price monitoring and product pricing mechanism, and crack down on illegal and irregular behaviors such as selling below cost and false marketing. Third, standardize product quality. Fourth, support industry self-discipline.

### Domestic Companies/Industries

For the first time in history, overseas investment in China's electric vehicle industry chain exceeded domestic investment. Last year, overseas investment by Chinese electric vehicle supply chain enterprises was about 16 billion U.S. dollars, slightly higher than the domestic investment of 15 billion U.S. dollars, breaking the previous pattern where about 80% of investment was concentrated domestically for many years. Among them, about three-quarters of overseas investment came from power battery manufacturers.

Sunny Optical's first-half revenue increased 4.2% year-on-year, net profit surged 52.6%, and the automotive business became a new growth engine.

The upsurge in AI data center construction drives PCB demand, and Han's CNC's Q2 net profit increased 84% year-on-year.

### Overseas Macroeconomics

Bowman, one of the candidates for Fed Chair, avoided talking about whether to take over as Fed Chair and called for a shift in the regulatory thinking on AI and cryptocurrencies. Federal Reserve Vice Chair for Supervision Michelle Bowman said on Tuesday that she will promote new bank capital rules with lighter burdens, crack down on the "debanking" phenomenon of refusing financial services due to ideology, and reiterated her firm stance on interest rate cuts. When asked about her intention to take over as Fed Chair, Bowman avoided the question, saying she was "focused on current work". At the same time, she called on banks and regulators to embrace new technologies such as artificial intelligence and blockchain, otherwise the banking system will gradually become marginalized.

Valuations have soared to "the sky". Could the peace agreement be the trigger for "good news is fully priced in" for U.S. stocks? Although the Russia-Ukraine peace agreement may boost the stock market, the U.S. stock market is already at a historical high, with the risk of "selling the fact". A number of classic valuation models, such as key valuation indicators like the Buffett indicator, CAPE ratio, and price-to-sales ratio, all exceed the long-term average by two to three standard deviations, reaching historical bubble levels such as 1929, 2000, and 2021.

The world's first yen stablecoin is coming. Japanese startup JPYC plans to issue 1 trillion yen in three years. Japanese fintech startup JPYC obtained regulatory approval this week and will issue Japan's first yen-linked stablecoin "JPYC" this autumn, marking Japan's official entry into the global stablecoin competition. The stablecoin will be fully convertible with the yen and supported by domestic savings and Japanese government bonds (JGBs). The company plans to issue 1 trillion yen (6.81 billion U.S. dollars) worth of JPYC stablecoins within three years.

To maintain 8% growth, Vietnam has set off an "infrastructure boom" with 250 projects launched at once. Vietnam has started and completed 250 large-scale projects nationwide with a total investment of 50 billion U.S. dollars. According to official statistics, these projects will contribute 18% of the country's GDP this year. If the government can complete the annual public investment allocation target, it is expected to contribute more than 2 percentage points to the country's GDP growth.

Goldman Sachs' "Beginner's Guide" to the gold market. Goldman Sachs redefined the gold analysis framework, believing that the traditional supply and demand model is invalid, and proposed the "three main driving forces model". 70% of gold price changes are driven by the capital flows of three types of "committed buyers": ETFs, central banks, and speculators. Each net purchase of 100 tons by committed buyers corresponds to a 1.7% increase in gold prices. Gold is essentially an "institutional credibility hedging tool" rather than an inflation hedge. Unlike consumer goods such as oil, gold is hardly consumed but stored.

### Overseas Companies

OpenAI launched an ultra-low-cost ChatGPT subscription in India for the first time, with a monthly fee of less than 5 U.S. dollars. Compared with the free version, ChatGPT Go offers 10 times the number of message sends, image generation times, and file uploads, as well as 2 times the memory. Analysts said that this subscription plan is mainly aimed at users who want to use advanced functions at a lower cost. If the low-price strategy is successful in the Indian market, it will provide valuable experience and data support for OpenAI's entry into other emerging markets.

"Cryptocurrency lending company" is coming. Figure submitted an IPO application, and its founder was once the CEO of "P2P veteran" SoFi. IPO application documents show that Figure achieved a net profit of 29.1 million U.S. dollars in the first half of this year, with revenue of 190.6 million U.S. dollars, successfully reversing the loss in the same period last year. Its business scope covers cryptocurrency mortgage loans and other fields, and it has facilitated more than 16 billion U.S. dollars in lending business on the blockchain. The company was founded in 2018 by Mike Cagney, the former founder of P2P giant SoFi, and this background has brought Figure a profound fintech gene.

Bitcoin miner TeraWulf received 3.2 billion U.S. dollars in support from Google, and its stock price soared nearly 90% in five days. Google provided 3.2 billion U.S. dollars in guarantee support for TeraWulf's expansion of its data center park in exchange for warrants to purchase more than 73 million shares of the company, increasing its stake in the company to 14%. Analysts are optimistic about TeraWulf's transformation prospects, saying that the company is "one of the most suitable miners to convert Bitcoin mining data center capacity into AI computing".

Is software dead, and AI reigns? Goldman Sachs believes that AI has the potential to be a "force multiplier" for industry-leading suppliers. The current stage is similar to the transformation period of the software industry from on-premises deployment to cloud computing in history, when a new batch of leaders emerged, but it also prompted established companies such as Adobe, Intuit, and Autodesk to transform into larger, faster-growing, and more profitable enterprises.

Industries/Concepts

1. AIDC Equipment: Changjiang Securities pointed out that recently, the NV chain and ASIC chain in the AIDC overseas chain have shown a resonance of prosperity. The demand, value, and expected share of domestic imports are increasing. At the current point in time, attention should be paid to links such as transformers, server power supplies, BBU, and circuit breakers that have supply shortages, technological iterations, or incremental logic.

2. Storage: The direction to improve large - model training and inference is not only limited to GPU, HBM, and networking switches, but SSD storage is also an important part. Inference will definitely surpass training to become the core growth pole of computing power demand. Limited by the capacity of HBM/DRAM, overflow data needs to be stored on SSD. Hierarchical cache scheduling algorithms, underlying storage systems that support hierarchical caching, and hardware that improves KVCache read - write performance have become key breakthrough directions.

3. Rare Earths: Huatai Securities pointed out that the price of rare earths may have hit a cyclical bottom in Q1 of 2024. Global praseodymium - neodymium oxide may continue to be in short supply from 2025 to 2026, with the "supply - demand balance/demand" being - 5.8%/- 4.6% respectively. It is expected that the central price of rare earths will continue to rise from 2025 to 2026.

4. Special Integrated Circuits: Guotai Haitong Securities pointed out that judging from the semi - annual report data of many companies in the special integrated circuit industry, there has been an upward trend, and the industry inflection point has been established.

Preview of Today's Major News

China's August 1 - year and 5 - year Loan Prime Rates.

July CPI of the Eurozone and the United Kingdom.

The Federal Reserve releases the minutes of its monetary policy meeting.

Speeches by Federal Reserve Governor Waller and Atlanta Fed President Bostic.

Baidu, Futu, and Target release financial reports.

Google will hold a press conference to launch new Pixel - brand hardware.

Changes in U.S. EIA crude oil inventories last week.

<End of the full text>

Disclaimer: The views in this article only represent the author's personal views and do not constitute investment advice on this platform. This platform does not guarantee the accuracy, completeness, originality, and timeliness of the article information, nor does it bear any responsibility for any losses caused by the use or reliance on the article information.