Morning News

Source: Wall Street Journal  

Market Overview  

Investors focused on the progress of trade talks, digested Federal Reserve policies, and first-quarter earnings data.  

U.S. stocks opened higher on Friday, with the three major indices mostly closing slightly lower, all declining for the week. Tesla initially surged over 7.8%, TSMC rose about 3% at the open before narrowing to less than 1%, and Lyft soared 28% after turning a profit and reporting growth in bookings. The China-concept index fell 1.4% for the week.  

The 10-year U.S. Treasury yield was little changed on Friday but rose about 7 basis points for the week. The dollar index fell over 0.5% at one point before stabilizing above 100. Gold ended a two-day losing streak, while U.S. oil prices rose nearly 2.6% intraday.  

High-level U.S.-China trade talks made substantive progress and reached important consensus. In early Asian trading on Monday, U.S. stock futures rose over 1% intraday, oil futures climbed, gold futures fell over 1.9% intraday, and Bitcoin extended its weekend gains, hovering around the $104,000 mark.  

Highlights  

He Lifeng, China’s Vice Premier and head of the Chinese side in the U.S.-China trade talks, stated at a press conference that the two sides reached important consensus and made substantive progress.  

China’s April CPI fell 0.1% year-on-year, unchanged from the previous month, while the PPI decline widened to 2.7%.  

The People’s Daily published an article calling for accelerating the liberation and development of new quality combat capabilities.  

Japanese Prime Minister Taro Aso reiterated the call for "zero tariffs," demanding the U.S. fully eliminate auto tariffs.  

Shortly after India and Pakistan announced a ceasefire, explosions were reported again in Indian-controlled Kashmir. India accused Pakistan of violating the ceasefire, which Pakistan denied.  

Ukraine is prepared to unconditionally cease fire for at least 30 days, while Putin proposed resuming Russia-Ukraine talks on May 15. Zelensky stated Ukraine is ready to hold talks with Russia.  

Nomura: Japanese life insurers hold an excessively high proportion of dollar-denominated assets; once they start selling or hedging, it could exert significant pressure on the dollar.  

Market Closings  

Global Stocks: The Dow fell 0.29%, the S&P 500 dropped 0.07%, and the Nasdaq closed flat. The European STOXX 600 rose 0.44%.  

Chinese Stocks: The Shanghai Composite fell 0.3%, the Shenzhen Component lost 0.69%, and the ChiNext Index declined 0.87%.  

Bond Markets: The 10-year U.S. Treasury yield was flat at 4.3785%, rising 7.01 basis points for the week. The two-year yield climbed 1.91 basis points to 3.8931%, up 6.70 basis points for the week.  

Commodities: WTI June crude futures rose 1.85% to $61.02 per barrel, up 4.68% for the week. Brent July crude futures gained 1.70% to $63.91 per barrel, up 4.27% for the week. COMEX gold futures rose 0.82% to $3,333.00 per ounce, up 2.80% for the week.

### Key News Details  

#### Global Highlights  

**China-U.S. Trade Talks Achieve Substantive Progress**  

He Lifeng, China's Vice Premier and head of the Chinese delegation for China-U.S. economic and trade talks, stated at a press conference on the evening of the 11th local time that the high-level talks were candid, in-depth, and constructive, resulting in important consensus and substantive progress. Both sides agreed to establish a China-U.S. economic and trade consultation mechanism. Details will be finalized soon, and a joint statement will be released on May 12.  

**China Accelerates Substitution of U.S. Products Ahead of Talks**  

- **Xinhua Commentary**: China's stance on safeguarding the international economic and trade order is unwavering. The essence of this contest is a clash between open cooperation and closed confrontation amid economic globalization. The engagement in Switzerland is a crucial step toward resolving issues, but ultimate resolution requires strategic patience, determination, and support from the international community.  

- **People's Daily Editorial**: Equal dialogue is the correct approach to resolving issues between major powers. While talks are necessary to resolve differences, expecting one or two rounds of negotiations to solve problems is unrealistic. China remains open to dialogue, with ample patience and confidence, and its commitment to safeguarding development interests and upholding international fairness and justice remains unchanged.  

**China's April CPI and PPI Data**  

- CPI fell 0.1% YoY, unchanged from the previous month, while PPI declined 2.7% YoY, widening the drop.  

- CPI rose MoM, driven by food and travel services, while the YoY decline was influenced by falling international oil prices. Domestic gold jewelry prices surged 10.1%, contributing 0.06 percentage points to the MoM CPI increase.  

- PPI fell 0.4% MoM, mainly due to declining international input costs and seasonal drops in domestic energy prices.  

**Analyst Views**:  

- **Huachuang Securities**: PPI's YoY decline widened, reflecting external demand pressures. Domestic demand remains resilient due to policy support.  

- **GF Securities**: PPI declines may persist until August, posing challenges to nominal growth, corporate profits, and tax revenues. Further policy easing is expected.  

**People's Daily Calls for Accelerating New-Quality Combat Capabilities**  

The article emphasizes the need to adapt to modern warfare trends, leveraging smart technology, unmanned equipment, and big data to enhance combat effectiveness.  

**Japan Reiterates Demand for Zero Auto Tariffs**  

Prime Minister Taro Aso insisted on the complete elimination of U.S. auto tariffs, signaling no rush to reach an agreement before July.  

**India-Pakistan Ceasefire Fragile**  

Shortly after announcing a ceasefire, explosions were reported in Indian-controlled Kashmir. India accused Pakistan of violating the truce, which Pakistan denied. Analysts suggest neither side seeks full-scale war, with India focusing on domestic nationalist agendas and Pakistan constrained by economic conditions.  

**Ukraine Offers Unconditional 30-Day Ceasefire**  

Zelensky expressed readiness for talks with Russia, while Putin proposed resuming negotiations on May 15.  

**Fed Faces No-Win Scenario**  

With employment and inflation goals threatened by U.S. tariff policies, the Fed risks criticism regardless of its policy path—tightening, easing, or holding steady.  

**Tariffs Complicate Fed Rate Cuts**  

Short-term Treasury yields fell on rate-cut expectations, but long-term yields rose, potentially undermining the effectiveness of monetary stimulus.  

**Dollar Hegemony Risks**  

HSBC warns that if the U.S. retreats from its role as the global lender of last resort, markets could shift to gold, triggering liquidity shortages and financial turmoil akin to the 1930s or 1970s.  

**Nomura Warns of Yen Pressure from Japanese Insurers**  

Japanese life insurers' heavy exposure to dollar assets (72% of foreign securities) poses risks. Selling 10% of U.S. bonds or increasing hedging could trigger significant yen-buying pressure.  

#### Domestic Macro  

**PBOC Q1 Monetary Policy Report**:  

- Emphasizes dual functions of monetary policy (quantity and structure) and explores macroprudential and financial stability roles.  

- Price recovery lags financial growth, requiring a shift from preventing "price gouging" to curbing "dumping."  

- Government debt remains sustainable due to vast state assets and low liabilities.  

- Further financial support for consumption is planned, including policy guidelines.  

**China's April Trade Data**:  

- Exports rose 8.1% YoY in USD terms, while imports fell 0.2%.  

- Copper ore imports surged 24%, crude oil imports rose 7%, but soybean imports dropped 29%.  

**Analyst Views**:  

- **Shenwan Hongyuan**: "Front-loading" exports may continue in May, but June data is uncertain.  

- **Huachuang Securities**: U.S. import demand is key; tariffs may accelerate its decline.  

- **CSC**: Strong exports but weak production suggest inventory shifts to third countries.  

#### Domestic Companies/Industries  

**Mutual Fund Reforms**:  

CITIC Securities notes underperformance relative to benchmarks, partly due to low bank allocations and excessive trading. Future strategies will focus on core assets rather than marginal pricing.  

**Auto Sales**:  

April passenger vehicle sales rose 14.5% YoY, with NEV sales jumping 33.9%. Exports fell 2%, but NEVs accounted for 44.6%.  

**NVIDIA Plans Modified H20 Chip for China in July**  

**Xiaomi's Lei Jun**: The past month has been the toughest since founding Xiaomi.  

**Unitree Robotics**: All positions are understaffed. CEO Wang Xingxing addresses "bubble" concerns, stressing public acceptance as key.  

**CATL to Issue ~118M H Shares at Up to HK$263 Each**  

#### Overseas Macro  

**Fed Officials Push Back on Rate Cuts**:  

Half of the Fed's policymakers spoke on Friday, with none hinting at imminent cuts. Many stressed inflation control amid trade policy uncertainties.  

**"Shadow Fed Chair" Warsh Criticizes Fed's Tariff Response**:  

If inflation persists due to tariffs, it reflects Fed credibility issues. Public confidence in price stability is itself a prerequisite for stability.  

**Market Lessons from the Past Month**:  

- Overly bearish bets on U.S. stocks and EM currencies failed as markets rebounded.  

- JPMorgan reversed its "underweight" call on Asian currencies after unexpected strength.  

**Ethereum's 72% Surge**:  

Driven by technical upgrades, short squeezes ($437.94M liquidated), and "whale" accumulation.  

**Copper Market Shifts**:  

U.S. draws supply while Europe faces shortages, driving premiums to record highs. Scrap copper demand rises.  

#### Overseas Companies  

**Novo Nordisk's Semaglutide Becomes Top-Selling Drug**:  

Q1 sales hit $6B, surpassing Merck's Keytruda. Patent risks remain a challenge.  

**OpenAI in Talks with Microsoft for New Funding and IPO Path**  

#### Sectors/Themes  

1. **Optical Modules**: Rebounds on renewed institutional interest, with valuation and fundamentals aligning.  

2. **Humanoid Robots**: Tactile sensors critical for dexterity, with applications expanding beyond robotics.  

3. **HarmonyOS**: Huawei to launch HarmonyOS-powered PCs on May 19, boosting domestic ecosystem growth.  

4. **Baijiu**: Q1 earnings stabilize, with top brands resilient. Sector may be near cycle bottom.  

### Upcoming Events  

- China: New yuan loans, aggregate financing, M1, M2.  

- U.S.: April federal budget.  

- Fed Governor Kugler speaks.  

**Disclaimer**: Views expressed are solely the author's and do not constitute investment advice. Accuracy, completeness, and timeliness are not guaranteed, and no liability is accepted for losses arising from reliance on this information.