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Morning News

Source: Wall Street Journal

Market Overview

Trade dynamics have been affecting the nerves of the US stock market. The S&P 500 index made a V-shaped reversal and got off to a thrilling start in June. After the release of the US manufacturing index, the three major US stock indexes hit new intraday lows, the yield on US Treasuries declined somewhat, and the US dollar index hit a new six-week low, approaching a three-year low. After the news that leaders might have a conversation emerged, US stock indexes and the China stock index turned higher, and the yield on US Treasuries rebounded. Meta closed up 3.6%, leading the technology giants, while Tesla fell more than 1%.

With the US steel tariff approaching, the US steel stock Cleveland-Cliffs rose 23%, Ford and General Motors fell nearly 4%, the European stock of Stellantis fell nearly 5%, and the New York copper once rose nearly 6%.

During the session, gold rose nearly 3% and US oil rose more than 5%. After the media reported that the US government had made a 180-degree shift in its policy on the Iran nuclear talks, the gain in crude oil narrowed.

During the Asian session, Hong Kong stocks rebounded in a deep V shape. The Hang Seng Index closed down only 0.57%, and Pop Mart rose more than 4%.

Key News

The US claimed that China violated the consensus of the China-US Geneva economic and trade talks. The spokesperson of the Chinese Ministry of Commerce: China firmly rejects the unreasonable accusations.

Before the Europe-US negotiations, the EU warned the US: If the negotiations fail, the countermeasures will take effect by July 14 at the latest.

The advancement of the tariff policy has encountered obstacles, and the Trump administration has turned to the appellate court for help; The US Commerce Secretary said that even if the tariff policy is cancelled, the US president still has the right to take other actions.

The US ISM manufacturing index in May shrank for the third consecutive month, and the import index hit a 16-year low; The eurozone's May manufacturing PMI was 49.4, with the contraction slowing down and output growing for the third consecutive month, showing signs of recovery.

After the second round of direct negotiations between Russia and Ukraine, it is said that the Russian side is satisfied with the negotiation results, there are large differences between Russia and Ukraine on the ceasefire conditions, and the possibility of a meeting between the leaders of Russia and Ukraine in Turkey cannot be ruled out; On the eve of the Russia-Ukraine talks, several "black swans" emerged. A Ukrainian official claimed that the "Spider Web" operation completely destroyed at least 13 Russian warplanes, while Russian media said it was pure rumor.

The US Treasury Secretary responded to Dimon's "US debt collapse theory": The US will never default. We are in the warning zone, but we will never hit the wall.

Fed Governor Waller, a "popular figure": There is no evidence of long-term inflation rising, and still expects interest rate cuts later this year.

The media reported that the US has made a 180-degree shift in its policy on the Iran nuclear talks, with a secret proposal allowing low-enriched uranium activities; Trump: The US will not allow any uranium enrichment.

Market Closing Reports

Europe and US Stocks: The Dow Jones Industrial Average rose 0.08%, the S&P 500 Index rose 0.41%, and the Nasdaq rose 0.67%. The European STOXX 600 index closed down 0.14%.

A Shares: Closed for trading.

Bond Market: By the end of the bond market session, the yield on the 10-year US Treasury benchmark note was approximately 4.44%, and the yield on the 2-year US Treasury note was approximately 3.94%, both rising about 4 basis points intraday.

Commodities: WTI July crude oil futures rose 2.84%. Brent August crude oil futures rose 2.94%. COMEX August gold futures rose 2.47%. COMEX July copper futures rose 3.87%. London zinc rose nearly 3%, London nickel rose nearly 2%, and London copper rose 1.2%.



**Detailed Key News**  

**Global Highlights**  


The US claimed that China violated the consensus of the China-US Geneva economic and trade talks. A spokesperson for China's Ministry of Commerce stated: China firmly rejects these unreasonable accusations.  

The spokesperson said that after the Geneva talks, the US has successively introduced multiple discriminatory restrictive measures against China, including issuing export control guidelines for AI chips, halting sales of chip design software (EDA) to China, and announcing the revocation of visas for Chinese students. These actions seriously violate the consensus reached in the phone conversation between the two heads of state on January 17, undermine the existing consensus of the Geneva talks, and severely damage China’s legitimate rights and interests.  


The EU warned the US ahead of Europe-US negotiations: If no agreement is reached, countermeasures will take effect by July 14 at the latest. A EU spokesperson said that if a mutually acceptable solution cannot be reached, existing and potential additional EU countermeasures will automatically take effect on July 14, with the possibility of earlier implementation. The spokesperson also noted that the EU does not want to pursue a tariff route and prefers to resolve disputes through negotiations. Media reports said the US urged countries in a letter to negotiation partners to propose their best tariff plans by this Wednesday.  


With tariff policy advancement受阻 (blocked), the Trump administration turned to the appellate court for help. According to CCTV News, on June 2 (local time), the Trump administration requested a federal appellate court to block a previous order by the Federal District Court of the District of Columbia ruling its tariff policy "unlawful."  

According to CCTV, the US Commerce Secretary said: Even if the tariff policy is revoked, the US president still has the authority to take other actions.  


The US ISM manufacturing index contracted for the third consecutive month in May, with the import index hitting a 16-year low. The US ISM manufacturing PMI index was 48.5 in May, below expectations and the previous value. Order volumes contracted for the fourth consecutive month, the import index hit a low since 2009, the export index hit a five-year low, and the prices paid index remained high.  


The eurozone’s May manufacturing PMI was 49.4, with the contraction slowing and output growing for the third consecutive month, indicating signs of recovery. The eurozone manufacturing PMI overall remained in contraction territory but showed a clear improvement trend; German manufacturing output grew for three consecutive months, boosted by export orders; French manufacturing further recovered, with a warming labor market; Italian manufacturing remained in recession, but signs of improvement are emerging.  


After the second round of direct Russia-Ukraine negotiations, it was reported that a possible meeting between Russian and Ukrainian leaders in Istanbul cannot be ruled out. Reports said the Russian delegation was satisfied with the results of the second round of negotiations and submitted a peace memorandum to Ukraine; Ukraine demanded at least a 30-day unconditional ceasefire in air, sea, and land domains. It is too early to discuss the timing of a leaders’ meeting. Media noted that the two sides have significant differences on ceasefire conditions.  


On the eve of the second Russia-Ukraine talks, several "black swans" emerged. Ukraine revealed that it launched a special operation against Russia on June 1, destroying 41 Russian strategic bombers with drones, with approximately 34% of strategic bombers at major Russian airports attacked. Russian media called Ukraine’s claims pure谣言 (rumors).  

Did Ukraine’s "large-scale surprise attack" severely damage Russia? For Russia, strategic bombers like the Tu-95 and Tu-22 are irreplaceable strategic assets. If they suffer irreparable losses, it would mean a weakening of Russia’s strategic nuclear strike capability. Theoretically, an attack on strategic nuclear carriers would cross the most untouchable red line for a nuclear-armed state, and the Russian military should respond with the strongest countermeasures.  


The US Treasury Secretary responded to Dimon’s "US debt collapse theory": The US will never default. We are in a warning zone but will never hit a wall. In response to JPMorgan CEO Jamie Dimon’s warning that the US bond market would "collapse," US Treasury Secretary Janet Yellen firmly stated, "The US will never default," and dismissed Dimon’s prediction, noting that similar forecasts in his career have never come true.  


Federal Reserve Governor Christopher Waller, a "prominent figure": No evidence of long-term inflation rising; still expects rate cuts later this year. Waller said tariffs would push up inflation "in the coming months" and supported ignoring short-term price increases in policy-making as long as inflation expectations remain stable. Assuming the effective tariff rate approaches a lower tariff scenario, potential inflation continues to make progress toward the 2% target, and the labor market remains strong, this would support a "good news-style" rate cut later this year.  


Media reported a 180-degree shift in US policy on Iran nuclear talks, with a secret proposal allowing low-enriched uranium activities. Trump: Impossible. The plan would allow Iran to carry out limited low-level uranium enrichment on its territory for a待定 (to-be-determined) period, contradicting previous public statements by senior US officials. Sources told media that the US new proposal shows greater flexibility on these two key issues. Trump later insisted the US would not allow any uranium enrichment by Iran.  


**Domestic Macro**  

Securities Times: Multiple regions adopt measures to strictly prevent illegal outflow of strategic minerals. The Office of the National Export Control Work Coordination Mechanism has issued and implemented the *Overall Deployment for Strengthening Full-Chain Control of Strategic Mineral Exports* after process review. Guizhou will strictly follow the division of labor in the *Overall Deployment* to carry out relevant work. Hunan Province will earnestly implement local regulatory responsibilities, conduct systematic inspections of strategic mineral export enterprises in Hunan and establish ledgers, guide enterprises to strengthen compliance system construction, and improve their compliance awareness and capabilities to ensure measures are effectively implemented. Guangxi will continue to supervise and manage national strategic mineral exploration and mining.  


**Domestic Companies**  

After a new round of major price cuts, BYD’s sales rose, but its stock price fell. BYD’s sales surged in May, selling 382,000 vehicles, a new annual high, with overseas sales also hitting a record. The "内卷 (involutionary) price cuts" boosted sales but severely impacted the stock price, which has fallen over 17% from its all-time high. Citi estimates that dealer foot traffic for BYD may have surged 30-40% month-on-month after the price cuts. However, whether this volume-for-price strategy can be sustained has become a focal point of market attention.  


**Overseas Macro**  

Powell attends Fed International Finance Division event: Honors Fischer, reiterates importance of global economic research, avoids policy outlook. Federal Reserve Chair Jerome Powell delivered remarks on Monday at the 75th anniversary event of the Fed’s International Finance Division (IF), reviewing the department’s historical contributions to global economic research and praising its role in addressing financial crises and the pandemic. However, at a time when the market is highly focused on the Fed’s rate policy trajectory, Powell did not comment on the current US economic situation or future rate prospects in his speech.  


30-year US Treasuries become unwanted, with star institutions eager to avoid them: "Short them if possible." Media reports that due to concerns about the US’s growing federal budget deficit and debt burden, institutions like DoubleLine Capital, PIMCO, and TCW Group are avoiding 30-year US Treasuries and shifting to short-term bonds. The 30-year Treasury has performed particularly weakly this year, with yields rising, while yields on 2-year, 5-year, and 10-year bonds have fallen. Analysts note this divergence is rare, last seen for a full year in 2001. Meanwhile, in a brief moment on Monday morning, the yield on 20-year US Treasuries briefly inverted with the 30-year by nearly the largest margin in four years, briefly falling less than 1 basis point below the 30-year.  


Saudi Arabia pushes for production increases, acting unilaterally and breaking traditions, with even OPEC internal guessing the reasons. Saudi Arabia is reshaping the OPEC+ landscape with unprecedented dominance, pushing for significant production increases for three consecutive months, with a 411,000 bpd increase in July. This strategic shift breaks traditional consultation mechanisms, unstoppable even by opposition from major oil producers like Russia. Analysts call it a "strategic realignment with geopolitical intent."  

Morgan Stanley expects OPEC+ to increase production three more times; Goldman Sachs expects one remaining increase. Wall Street has significant分歧 (disagreements) on OPEC+’s future production path. Goldman Sachs believes OPEC+ will only carry out one more production increase in August, projecting oil supply will loosen in September. Morgan Stanley predicts continuous production increases over the next three months, emphasizing a "disconnect" between quotas and actual output. Both sides, however, maintain bearish expectations for oil prices, arguing that the impact of US tariffs, accelerating non-OPEC supply, and potential oversupply will suppress year-end prices.  


**Overseas Companies**  

At next week’s annual WWDC developer conference, Apple’s AI is still unlikely to bring "surprises." The highly anticipated annual conference may fail to demonstrate Apple’s determination to catch up in AI, instead highlighting its shortcomings. Analysts note that Apple’s core AI features (such as the new Siri) have been repeatedly delayed, its announcements are mostly brand packaging, and it has only opened a 3-billion-parameter small model to developers, far inferior to competitors.  

Elon Musk’s xAI launches a $300 million stock sale at an $113 billion group valuation. The transaction will allow employees to sell shares to new investors, with the company valued at $113 billion—consistent with the price when Musk’s xAI acquired its social media platform X in March.  


**Industries/Concepts**  

1. **Magnetic sensors**: Huachuang Securities notes that magnetic sensors are core devices in the intelligent sensing layer, benefiting from the development of markets like robotics and automotive electronics, plus demand recovery in new energy, industrial control, and consumer electronics. With multiple scenarios resonating, the market is expected to grow continuously. Currently, overseas leaders dominate market share, leaving broad space for domestic manufacturers to substitute.  

2. **Pharmaceutical formulations**: Huachuang Securities points out that after eight years of centralized procurement, major in-hospital generic chemical drug products have mostly been included, and enterprises have generally absorbed the impact of national procurement of major products. However, judging from actual performance in 2023 and 2024, centralized procurement still caused some disruptions to the operations of certain enterprises. Now that centralized procurement is being optimized, the formulations sector is看好 (favored) for performance and valuation recovery opportunities.  

3. **Coal**: Minsheng Securities reports that recent port inventories have begun to accelerate de-stocking amid marginally improved replenishment demand from terminal power plants. After peak-season demand is fully released, a new round of coal price rebounds is expected. Additionally, the板块’s (sector’s) stable high dividend yield enhances its deterministic value, and the sector may迎来 (see) a valuation upgrade.  

4. **Gaming**: Since May, newly launched games have performed prominently; monitor marginal changes in products. GF Securities notes that multiple game companies have launched new products with strong data, which are expected to drive further corporate growth after launch.  


**Upcoming Key News for Today**  

- China’s May Caixin manufacturing PMI.  

- Xiaomi Group’s 2025 Investor Day.  

- Speech by Bank of Japan Governor Kazuo Ueda.  

- Japan’s Ministry of Finance conducts 10-year government bond auction.  

- South Korea holds general elections.  

- Eurozone May CPI.  

- US April JOLTS job openings.  

- US April factory orders and durable goods orders.  

- Speeches by Chicago Fed President Austan Goolsbee and Dallas Fed President Lorie Logan.  


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**Disclaimer**: The views in this article represent only the author’s personal opinions and do not constitute investment advice from this platform. This platform makes no guarantees regarding the accuracy, completeness, originality, or timeliness of the article’s information, nor will it assume responsibility for any losses arising from the use of or reliance on this information.


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