Morning News

Source: Wall Street Journal

### Market Overview  

The positive U.S. employment data temporarily alleviated investors' concerns about economic growth, pushing U.S. stocks higher. The Dow Jones Industrial Average recorded four consecutive gains. Chip stocks outperformed the broader market for two consecutive days, with Nvidia rising nearly 3%, leading the Dow. Nvidia's market capitalization returned to the top position for the first time in over four months. Nuclear power stock Constellation initially rose more than 9% at the open but later turned negative; Wells Fargo surged nearly 10% in after-hours trading; the China概指数 (China Concept Index) rose for two consecutive days.  

Following the release of U.S. job vacancy data, U.S. Treasury yields rose to new daily highs; the U.S. Dollar Index accelerated its rebound, avoiding further decline toward a three-year low; gold prices continued to fall, while crude oil prices rose sharply, with gold dropping over 1% intraday and crude oil surging 2% to a two-week high.  

During the Asian trading session, A-shares closed higher across the board. The innovative drug sector was active, with the Hang Seng Index and Hang Seng Tech Index both rising over 1%. Lao Pu Gold (老铺黄金) hit a new high with a gain of over 6%, while most commodities and government bonds declined.  

### Key News  

- The White House stated that leaders of China and the U.S. would hold talks this week, to which the Chinese Foreign Ministry responded: "No information is available." The U.S. accused China of violating the Geneva talks consensus, and the Foreign Ministry reiterated: "Pressure and coercion are not the correct way to engage with China." Wang Yi met with Nicholas Burns, the new U.S. Ambassador to China (Note: "庞德伟" is corrected to the official name "Nicholas Burns").  

- The European Union plans to restrict Chinese companies from participating in public procurement of medical devices. The Chinese Foreign Ministry and Ministry of Commerce stated they will resolutely safeguard the legitimate rights and interests of Chinese enterprises.  

- Trump announced that steel and aluminum tariffs would be raised to 50% on June 4, while tariffs on steel and aluminum imported from the UK will remain at 25%. The White House confirmed it has written to "urge" trade partners to "submit plans." Media previously reported that Trump issued an "ultimatum," demanding countries provide their "best trade plans" by Wednesday.  

- Musk sharply criticized Trump's spending bill, calling it "disgusting" and lawmakers who support it "shameful."  

- The OECD lowered its global growth forecast for the second time this year, stating the U.S. is one of the countries hardest hit by tariffs, cutting its U.S. economic growth forecast from 2.8% to 1.6%.  

- U.S. JOLTS job openings unexpectedly increased in April, with hiring and layoffs both rising, while voluntary resignations decreased.  

- The U.S. Bureau of Labor Statistics previewed Friday's key nonfarm payroll report: Many data in the April employment report will be revised, but key indicators such as the unemployment rate will not be affected.  

- The preliminary estimate of eurozone harmonized CPI growth in May was 1.9% year-on-year, falling below the ECB's 2% target for the first time in eight months, supporting further ECB rate cuts.  

- "Inflation is not a one-time event": Senior Fed officials warned collectively that tariffs could trigger persistent inflation or even stagflation.  

- Lee Jae-myung was elected President of South Korea and delivered a thank-you speech, stating he will engage in dialogue with North Korea after taking office.  

- Japan's 10-year government bond auction saw strong demand, with Thursday's 30-year bond auction becoming the next test. Reports said the Japanese government will urge more domestic investors to hold Japanese government bonds.  

- At Xiaomi's investor conference: The pricing of YU7 will be determined one or two days before its launch; the standard version will not be only 20,000 yuan more expensive than the SU7. Lei Jun said he opposes "involution" and price wars, and the automotive business is expected to be profitable in Q3 and Q4.  

### Market Closing Reports  

- **Europe and U.S. Stocks**:  

 - Dow Jones: +0.51%  

 - S&P 500: +0.58%  

 - Nasdaq: +0.81%  

 - European STOXX 600: +0.09%  

- **A-Shares**:  

 - Shanghai Composite: +0.43%  

 - Shenzhen Component: +0.16%  

 - ChiNext: +0.48%  

- **Bond Market**:  

 - U.S. 10-year Treasury yield: ~4.45% (up ~1 basis point intraday)  

 - U.S. 2-year Treasury yield: ~3.95% (up ~1 basis point intraday)  

- **Commodities**:  

 - WTI July crude oil futures: +1.42%  

 - Brent August crude oil futures: +1.55%  

 - COMEX August gold futures: -0.59%  

 - LME tin: +2.2%, LME copper: +0.2%, LME nickel: -0.6%

Detailed Top News

Global Highlights

The White House stated that leaders of China and the U.S. would hold talks this week, to which the Chinese Foreign Ministry responded. According to the Global Times, at the Foreign Ministry's regular press conference on June 3, a reporter asked for comments on the White House's claim about the talks. Spokesperson Lin Jian replied, "I have no information to provide."

The U.S. accused China of violating the Geneva talks consensus, and the Foreign Ministry reiterated: Pressure and coercion are not the correct way to engage with China. According to People's Daily, Spokesperson Lin Jian stated that the U.S. has smeared and accused China without factual basis, imposed extreme suppression measures such as chip export controls, suspension of chip design software sales, and revocation of Chinese students' visas, severely undermining the Geneva consensus and violating China's legitimate rights. China firmly opposes this and has lodged solemn representations.

Wang Yi met with Nicholas Burns, the new U.S. Ambassador to China. Wang Yi emphasized that after the Geneva economic and trade talks, China has earnestly and strictly implemented the consensus reached by both sides. However, it is regrettable that the U.S. has recently introduced a series of negative measures on trumped-up grounds, harming China's legitimate rights. China firmly opposes this. The U.S. should work together with China to earnestly implement the important consensus reached in the phone conversation between the two heads of state in January this year and create necessary conditions for bringing China-U.S. relations back on track.

The European Union plans to restrict Chinese companies from participating in public procurement of medical devices. In response, Foreign Ministry Spokesperson Lin Jian said China will resolutely safeguard the legitimate rights and interests of Chinese enterprises; a Ministry of Commerce spokesperson stated that China firmly opposes this protectionist practice, hopes the EU will correct its mistake, and will closely monitor the EU's follow-up actions and take measures to firmly safeguard Chinese companies' legal rights.

Trump announced that steel and aluminum tariffs would be raised to 50% on June 4, and the White House confirmed sending letters to "urge" trade partners to "submit plans." According to CCTV News, the White House issued a statement saying President Trump will raise tariffs on imported steel, aluminum, and their derivatives from 25% to 50%, effective at 12:01 a.m. ET on June 4, 2025. Tariffs on steel and aluminum imported from the U.K. will remain at 25%.

Media reported that Trump issued an "ultimatum": hoping countries will provide "best trade plans" by Wednesday. With only five weeks left before the July 8 tariff restoration deadline, the Trump administration sent urgent letters demanding countries submit their best trade negotiation plans by Wednesday. This move exposes Washington's anxiety under self-imposed deadlines and brings new uncertainties to global markets.

Is this undermining after leaving? Musk fiercely criticized Trump's spending bill, calling it "disgusting" and supporting lawmakers "shameful." Musk posted that the bill would surge the already huge U.S. government budget deficit to $2.5 trillion, burdening Americans with unsustainable debt, and "Congress is bankrupting America." Trump recently warned lawmakers that voters would not forgive them if they oppose the bill.

The focal point of Senate negotiations on Trump's "Great Beauty Act": the debt ceiling clause. As Trump's Great Beauty Act advances in the Senate, the debt ceiling clause has become a key concern. Hardline senators have publicly opposed it, demanding the removal of the debt ceiling clause that "ignites national debt." Trump angrily retorted that voters would not forgive lawmakers if they oppose the bill!

The OECD lowered its global growth forecast for the second time this year, stating that the U.S. is one of the countries hardest hit by tariffs. The OECD slashed the 2025 global economic growth forecast from 3.3% to 2.9%, and cut the U.S. growth projection from 2.8% to 1.6%, warning that even as weak economic activity outweighs the impact of spending cuts and tariff revenue, the U.S. budget deficit will further expand.

U.S. JOLTS job openings unexpectedly increased in April, with more hires and layoffs but fewer voluntary quits. April JOLTS job openings reached 7.391 million, above the forecast of 7.1 million and up from 7.192 million in March. Hires rose to a nearly one-year high in April, while layoffs hit their highest level since October last year. The number of voluntary quits decreased in April.

The U.S. Bureau of Labor Statistics previewed Friday's key nonfarm payroll report: many data in the April employment report will be corrected. The Bureau of Labor Statistics said on its website Tuesday that it will correct numerous data in the April employment report when releasing the May report on Friday, June 6. The bureau noted the revision is due to minor errors in weights from a redesigned Current Population Survey sample and emphasized it will not affect key indicators like the unemployment rate.

The eurozone's preliminary May harmonized CPI rose 1.9% year-on-year, falling below the ECB's 2% target for the first time in eight months, supporting further ECB rate cuts. Core inflation also cooled to 2.3%, with services being the main factor dragging down overall inflation—the sector's price growth slowed sharply from 4.0% to 3.2%, the lowest since March 2022.

Inflation is not a "one-off": Fed officials jointly warned of fears that tariffs could trigger persistent inflation or even stagflation. Although traditional economic models suggest tariffs cause only one-time inflationary shocks, multiple Fed officials on Tuesday unusually expressed strong concerns that Trump's erratic and delayed tariff policies could spark more persistent and complex inflationary pressures, with lagging impacts on the economy and employment. Chicago Fed President Goolsbee even said the White House's trade policies could lead the U.S. into "stagflation."

Lee Jae-myung elected South Korean president, delivered a thank-you speech, and said he will dialogue with North Korea after taking office. According to CCTV, multiple South Korean media reported on June 3 that Lee Jae-myung had been elected the new president. In the early morning of June 4, Lee Jae-myung, the presidential candidate of the Democratic Party of Korea, arrived at a rally in front of the National Assembly in Seoul's Yeouido district and delivered a speech thanking the Korean people. He said he would stabilize the peninsula's situation as soon as possible, engage in dialogue with North Korea, and seek win-win outcomes.

Japan's 10-year government bond auction saw strong demand, with Thursday's 30-year auction becoming the next test. In this 2.6 trillion yen 10-year bond auction, the bid-to-cover ratio surged from 2.54 last month to 3.66, far exceeding the average of the past year. Investors are closely watching Thursday's 30-year auction, which will determine whether the market is prepared for the "normalization" pains after the Bank of Japan exits its ultra-loose policy.

Report: The Japanese government will call on more domestic investors to hold Japanese government bonds. The report said the Japanese government is urging domestic investors to increase their holdings of government bonds to curb further yield increases. The government has also postponed the much-watched target of achieving a primary budget surplus from this year to fiscal 2025 or 2026.

Xiaomi Investor Conference: YU7 pricing will be determined one or two days before launch, with auto business expected to be profitable in Q3-Q4. Lei Jun said the YU7's price cannot be the rumored 235,900 yuan, and the standard version will not be just 20,000 yuan higher than the SU7 standard version; opposing involution and avoiding price wars, automotive chips are under development and expected to be launched soon.

Is GPT-5 launching in July? OpenAI internal leaks + Altman's crazy hints reveal the upcoming moment is "terrifying." Recently, Tibor Blaho, a renowned predictor and AIPRM chief engineer, hinted in an interview that OpenAI will launch a major product in July, widely speculated to be GPT-5. OpenAI CEO Altman himself confirmed that o3 pro is also coming soon.

Driven by surging AI demand, Meta signs a 20-year nuclear power deal with Constellation. Meta signed a 20-year nuclear power purchase agreement to exclusively buy about 1.1 gigawatts of power from Illinois' Clinton nuclear plant starting mid-2027, while Microsoft, Google, and Amazon are also actively entering the nuclear power market. Constellation's CEO said the company is negotiating similar deals with multiple clients and expects agreements within 6-12 months.

The Fed lifts asset size restrictions on Wells Fargo, which rebounds from scandal shadows and surges 10% in after-hours trading. The Fed announced Tuesday that Wells Fargo has met all conditions of the 2018 regulatory action, so it has decided to lift restrictions on its asset size. The Fed said it has completed reviews of Wells Fargo's rectification measures, third-party assessments, and its own corporate governance and risk management systems.

Stablecoins are in the spotlight as the "first stablecoin stock" plans to IPO on Thursday. Circle's business model is simple and appealing: the company issues stablecoins pegged 1:1 to the U.S. dollar and invests users' deposited dollars in short-term U.S. Treasuries to earn risk-free returns. But behind this seemingly "perfect" money-printing model, the company's profits are heavily eroded by stablecoin distributors like Coinbase; its revenue is highly dependent on interest rate trends, and its performance is closely tied to the volatile crypto market.

Domestic Macro

China's May Caixin manufacturing PMI fell to 48.3, with a significant contraction in new orders. In May, manufacturing supply and demand both declined, external demand was significantly dragged down, employment continued to contract, prices remained weak, logistics were delayed, inventories were basically stable, and business sentiment rebounded slightly from low levels.

Domestic Companies

TSMC CEO: 2025 sales growth in dollar terms will be in the mid-20% range, with record profits. C.C. Wei said tariff policies pose potential uncertainties and risks, but so far, "no change in customer behavior has been seen," and AI demand remains strong; enterprise AI is another source of AI demand supporting structural trends for years to come; TSMC expects its advanced process sales share to continue rising this year, reaching 70-80%.

NIO's Q1 revenue increased 21.5% year-on-year but fell 38.9% quarter-on-quarter, with a vehicle gross margin of 10%; Q2 delivery guidance expects a 71-78% quarter-on-quarter increase. NIO reported a net loss of 6.75 billion yuan in Q1, up 30.2% year-on-year but down 5.1% quarter-on-quarter; it delivered 42,094 new vehicles, up 40% year-on-year but down 42.1% quarter-on-quarter. It expects Q2 revenue of 19.5-20.1 billion yuan, up 11.8-15.0% year-on-year.

Overseas Macro

Trump's "Great Beauty Act" hides a "capital tax minefield," warns Morgan Stanley: if the Senate does not clarify, markets will face shocks. Morgan Stanley believes that Section 899 of the Great Beauty Act effectively creates space for the U.S. government to "turn trade wars into capital wars." If U.S. Treasuries are included in Section 899's tax scope, the Treasury yield curve is expected to steepen further, increasing downside risks for the dollar. Currently, markets hope the Senate will clarify the application of Section 899 in the final legislation.

"Asset taxes" spark new concerns, and the dollar hits a "new record" low. The dollar has fallen 8.4% in the first five months of this year, its worst ever start against a basket of global currencies. Analysts note that issues around the "potential bargaining power" of overseas holdings of U.S. assets may be weakening the momentum for global surplus funds to flow back to U.S. markets, and the rush to find alternatives to U.S. assets is further pressuring the dollar.

Wall Street has mastered the "TACO trade": shorting U.S. stocks after Trump's outbursts and going long five days later. Nomura's research shows that since early February, shorting S&P 500 futures immediately after Trump's trade threats and going long five days later has yielded a 12% return. In contrast, investors holding the benchmark index have gained almost nothing after a series of volatile swings.

With reference to the 50% steel and aluminum tariffs, the "tariff-driven price hike" risk for base and platinum group metals like copper, nickel, and platinum is underestimated. Trump plans to raise steel and aluminum tariffs to 50% from June 4. Citi believes this tariff hammer could expand to copper, platinum group metals, and other base metals in the future. Citi notes legal obstacles may force the U.S. government to more actively use Section 232. Related research reports are being accelerated, and tariffs could be implemented in Q3 2025. Base metal prices may fall 10% in Q3, particularly copper.

Morgan Stanley comments on U.S. nuclear power plans: making uranium great again. Morgan Stanley believes the U.S. goal of 400 gigawatts of nuclear power capacity by 2050 highlights the Trump administration's policy shift to support nuclear power, a trend that strengthens the long-term demand outlook for uranium and maintains a positive view on uranium prices in 2025.

Over 3,000 U.S. private credit deals rated by a small 20-person team, reviving subprime crisis ghosts. In a four-bedroom colonial house in suburban Philadelphia, Egan-Jones, a ratings agency with just 20 staff, has rated over 3,000 private credit deals, leveraging nearly $1 trillion in insurance funds. Compared to large agencies like S&P and Moody's, which take months to complete ratings, Egan-Jones typically provides preliminary assessments within 24 hours and formal ratings in under five days, with rating rationales on just one flimsy page.

Despite OPEC+ continuing to increase production, the Russia-Ukraine conflict and Iran nuclear issue drive oil prices higher: "the most panicked moment has passed, but short positions are at a yearly high." OPEC+ is increasing production but below expectations, with some members opposing output hikes, indicating strict supply discipline. Escalating geopolitical tensions from the Russia-Ukraine conflict and the Iran nuclear issue reduce the likelihood of sanctioned producers increasing output. Analysts note the most severe fears have dissipated, and short positions at a yearly high create conditions for price surges.

Iran's foreign minister: continuing uranium enrichment is Iran's red line. On June 3 local time, Iranian Foreign Minister Araghchi stressed that continuing uranium enrichment is Iran's red line, a reality understood by all countries.

Ukraine's "Trojan horse strategy" rewrites the "war model," and Musk: "drones are the future masters of the battlefield." Drone warfare may signal a new inflection point in the form of war: future conflicts may increasingly feature covert, mobile, and hard-to-detect drone attacks. Sequoia Capital partner Shaun Maguire said, "Drones worth less than $1 million caused over $1 billion in losses. Critical infrastructure is no longer safe."

Overseas Companies

Luxury brands out, defense stocks in: Rheinmetall to replace Kering in the Euro Stoxx 50. JPMorgan said the adjustment will take effect on June 20. Rheinmetall's stock has surged about 200% year-to-date, jumping 26% in May alone, pushing its market cap to nearly €87 billion. Against the backdrop of the ongoing Russia-Ukraine conflict and European countries revisiting defense budgets, defense companies have become direct beneficiaries. In contrast, Kering has fallen 28% this year.

Sectors/Concepts

Nitrocellulose: Guosheng Securities' report notes that nitrocellulose supply has continuously and sharply contracted, with recent accidents adding to the shortage. As a hazardous chemical, it is difficult to store and form effective inventories, while downstream demand is insensitive to costs, making price elasticity promising.

Short Drama: The overseas short drama market is in high-growth phase. In April 2025, total downloads of overseas short drama apps reached about 103 million, up 4.27% month-on-month, with total in-app purchase revenue of about $122 million, up 4.95% month-on-month. Given the current supply-demand mismatch in the anime short drama market (small new release volume vs. huge potential anime audience) and the relatively low AI technology requirements and costs for anime shorts, AI anime short dramas are expected to grow strongly in the short term.

Military Industry: With electronics companies' orders gradually confirmed in May, the market has a solid understanding of the order logic, and the correction is expected to end soon. Following the gradual anticipation of semi-annual reports, the promotion of the 15th Five-Year Plan, and the launch of a new military trade cycle, the military industry is expected to rise gradually, with June being the best time to pay attention.

Heavy Trucks: May heavy truck terminal sales are expected to grow by over 20% year-on-year, significantly higher than April's 6% growth. As local scrapping and renewal policies are gradually implemented, domestic demand in June and Q3 is expected to enter a boom cycle of accelerating monthly year-on-year growth and quarterly month-on-month increases. Combined with accelerated channel inventory destocking, the growth elasticity at the wholesale end will further increase.

Upcoming Key Events of the Day

Final May services and composite PMI for the U.S. and eurozone.

U.S. May ADP employment change.

Fed's Beige Book economic report.

Speeches by Atlanta Fed President Bostic and Fed Governor Cook.

Bank of Canada interest rate decision.

U.S. weekly EIA crude oil inventory changes.

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