Morning News

Source: Wall Street News

### Market Overview  

Concerns over escalated Middle East conflicts triggered by Trump caused the three major U.S. stock indexes to retreat. Tesla fell nearly 4%, leading losses among the "Magnificent Seven" tech giants. A U.S. Senate bill proposing the gradual elimination of solar tax incentives sent photovoltaic stocks plummeting, with Sunrun dropping 40%. Verve Therapeutics, a gene-editing company that agreed to be acquired by Eli Lilly at a 130% premium, surged 81.5%. The China概指数 (China概Index) fell nearly 2%, while Chinese concept stock RGC, a brain regeneration technology firm, rose 30%.  

After the release of U.S. retail sales data, U.S. Treasury yields hit intraday lows. Following Trump's warning to Iran, the U.S. dollar index expanded its gains, erasing declines since the Israeli attacks. Bitcoin briefly fell by over $5,000, breaking below the 104,000 yuan threshold.  

Trump's warning to Iran fueled a sharp rebound in crude oil, which surged 5% intraday and closed at a near five-month high. Silver futures rose over 2% intraday to a record high, while gold futures turned lower intraday, continuing to pull back from closing record highs.  

During Asian trading hours, declines in A-shares and Hong Kong stocks widened in the afternoon. Brain-computer interface concepts remained active, the Hang Seng Index fell below 24,000, innovative drugs plunged, and the "Three Treasures of New Consumption" declined.  

### Key News  

- Trump claimed to have full control of Iran's airspace, knowing where Khamenei is but not planning to assassinate him currently. He warned that U.S. patience is wearing thin, called on Iran to "unconditionally surrender," and was reported to have met with national security teams in the White House Situation Room to consider possible strikes on Iran, sending crude oil up 5% intraday.  

- The Israeli military said it had destroyed Iran's uranium enrichment facilities. Israel's National Security Advisor stated that military operations would not end unless Iran's Fordo nuclear facility is destroyed. The International Atomic Energy Agency (IAEA) confirmed for the first time that Israeli forces directly damaged underground facilities at Iran's largest uranium enrichment plant. Media reported that Trump is increasingly inclined to use U.S. military assets to airstrike Iranian nuclear facilities, but diplomatic solutions are not ruled out if Iran makes major concessions.  

- "New Fed News Agency" (Nick Timiraos): If not for tariffs, the Fed would have cut rates this week.  

- U.S. retail sales fell 0.9% month-on-month in May, the largest decline in two years. The manufacturing outlook became increasingly blurred, with U.S. industrial output falling for the second time in three months.  

- The U.S. tariff dispute entered the Supreme Court for the first time, as two toy companies challenged Trump's tariffs.  

- The U.S. Senate voted to pass a stablecoin bill, and the House is expected to vote within weeks.  

- The Bank of Japan (BOJ) kept interest rates unchanged and will slow the pace of balance sheet reduction starting next fiscal year. BOJ Governor: Accelerated reduction of bond purchases could disrupt market stability; rates will be raised if the economic outlook meets expectations.  

- "De-dollarization" accelerated, with the number of central banks planning to increase gold holdings hitting a record high. JPMorgan: If gold prices remain at current levels, there is a 70% chance the People's Bank of China will pause purchases in June. Citi warns: Gold prices will fall below $3,000 after Q3.  

- A $20 billion AI unicorn fights back: MiniMax's first inference model benchmarks against DeepSeek, with computing costs of only $530,000.  

### Market Close Data  

- European and U.S. stocks: The Dow fell 0.7%, the S&P 500 dropped 0.84%, and the Nasdaq declined 0.91%. The European STOXX 600 index fell 0.85%.  

- A-shares: The Shanghai Composite Index fell 0.04%, the Shenzhen Component Index dropped 0.12%, and the ChiNext Index declined 0.36%.  

- Bond market: By the end of trading, the yield on the 10-year U.S. Treasury note was about 4.39%, down nearly 6 basis points on the day; the yield on the 2-year Treasury note was about 3.95%, down nearly 2 basis points.  

- Commodities: WTI July crude oil futures rose 4.28%. Brent August crude oil futures rose 4.4%. COMEX August gold futures fell 0.3%. COMEX July silver futures rose 1.93%. Lead on the LME fell about 1.6%, tin fell about 1.1%, and aluminum rose nearly 1.5%.

### Details of Key News  

#### Global Highlights  

- Trump warned that U.S. patience is wearing thin, called on Iran to "unconditionally surrender," and was reported to be considering strikes on Iran, sending crude oil up 5% intraday. Trump said on Tuesday that the U.S. has full control of Iran's airspace and knows exactly where Iranian Supreme Leader Khamenei is, but will not assassinate him for now—though U.S. patience is exhausted.  

- Media reported on Monday that the White House was considering talks with Iran this week on nuclear issues and a ceasefire, using whether to provide Israel with bunker-busting bombs as a key bargaining chip. Such bombs are necessary to destroy Iran's Fordo underground uranium enrichment facility, which Israel does not possess. Trump denied engaging in peace talks with Iran on Tuesday, stating he has not主动 contacted (initiated contact with) Iran for "peace negotiations" and is "not in the mood." "If Iran wants to negotiate, they know how to reach me."  

- Media reported that Trump met with the national security team in the White House Situation Room to discuss countermeasures, weighing whether the U.S. should further intervene in the Israel-Iran conflict and considering a range of options, including U.S. strikes on Iran. Trump is increasingly inclined to use U.S. military assets to airstrike Iranian nuclear facilities but remains open to diplomatic solutions if Iran makes major concessions.  

- Report: U.S. Defense Secretary is heading to the White House Situation Room to meet with Trump and his national security team. According to Huanqiu.com, U.S. Defense Secretary Hegseth did not reveal the specific reason for the meeting but said these actions aim to "ensure the safety of our people." Meanwhile, the U.S. has redeployed naval ships and military aircraft in the Middle East to respond to the escalating Israel-Iran conflict.  

- Israel's Defense Minister said Tehran will face a "major" airstrike; Iran's Armed Forces Chief of Staff said a real punitive strike against Israel will be launched in the near future.  

- A Houthi armed official in Yemen said they will support Iran against Israel.  

- The Israeli military said it has destroyed Iran's uranium enrichment facilities, and the International Atomic Energy Agency (IAEA) confirmed for the first time that Israel directly damaged underground facilities at Iran's largest uranium enrichment plant. IAEA Director-General said last Friday that the ground facilities of Iran's Natanz uranium enrichment plant were destroyed in the attack, and centrifuges may have been damaged due to power outages in underground cascade halls. On Tuesday, the IAEA said satellite image analysis found more signs that Natanz's underground uranium enrichment workshop was directly impacted.  

- Israel's National Security Advisor said military operations will not end unless Iran's Fordo nuclear facility is destroyed.  

- Has Iran ever truly blockaded the Strait of Hormuz in history? Throughout history, Iran has indeed impacted the Strait of Hormuz during wars and repeatedly threatened to blockade it, but it has never carried out a complete, sustained, and comprehensive blockade in the true sense.  

- "New Fed News Agency": The Fed would have cut rates this week if not for tariffs. Timiraos wrote that "the Fed doesn't want to make mistakes" and must weigh two key factors: rising inflation expectations and a deteriorating labor market—assessing which is more likely and which carries a higher cost.  

- U.S. retail sales fell 0.9% month-on-month in May, the largest decline in two years, dragged down by lower car purchases. April's growth was revised from +0.1% to -0.1%. The data indicates that the panic buying to avoid price hikes from potential tariffs has subsided.  

- The manufacturing outlook is increasingly blurred, with U.S. industrial output falling for the second time in three months. Due to declining utility output and weak manufacturing under falling demand, U.S. industrial output fell 0.2% month-on-month in May, the second decline in three months, below market expectations. Although auto assembly rebounded, driving manufacturing up 0.1% slightly, manufacturing excluding autos has declined for two consecutive months, with machinery and metal products performing weakly.  

- The U.S. tariff dispute enters the Supreme Court for the first time, as two toy companies challenge Trump's tariffs. Two U.S. family-owned toy companies filed a direct application with the Supreme Court on Tuesday to challenge Trump's tariffs, alleging he abused the International Emergency Economic Powers Act of 1977 to overstep his authority in levying taxes. They requested the Supreme Court to expedite hearings, potentially rendering a final ruling by the end of the year. The petition also asks the Supreme Court to take the unusual step of hearing the case directly before the federal appellate court rules. The plaintiffs claim tariffs have severely disrupted supply chains and caused huge losses.  

- The U.S. Senate votes to pass a stablecoin bill. The Senate passed the GENIUS Act with a 68-30 vote. Next, the bill will be sent to the House, which will decide whether to advance its own stablecoin bill or adopt the Senate's version. The House is expected to vote within the next few weeks.  

- The Bank of Japan (BOJ) keeps interest rates unchanged and will slow balance sheet reduction starting next fiscal year. BOJ Governor: Accelerated reduction of bond purchases could disrupt market stability; rates will be raised if the economic outlook meets expectations.  

- The BOJ plans to reduce monthly bond holdings from 400 billion yen to 200 billion yen per quarter starting April 2026, equivalent to the bond purchase level before implementing ultra-loose monetary policy in 2013.  

- Ueda Kazuo said at the meeting that the pace of bond purchase reduction will be slowed due to concerns about shocks from bond market volatility, as too rapid a reduction could destabilize markets.  

- "De-dollarization" accelerates, with the number of central banks planning to increase gold holdings hitting a record high. JPMorgan: If gold prices remain at current levels, there is a 70% chance the People's Bank of China will pause purchases in June. Citi warns: Gold prices will fall below $3,000 after Q3.  

- World Gold Council data shows that 43% of central banks surveyed expect to increase gold reserves in the next 12 months, up sharply from 29% last year and the highest in the eight-year history of the survey; nearly three-quarters of respondents expect central banks' U.S. dollar-denominated reserves to decline within five years.  

- JPMorgan believes the People's Bank of China slowed gold purchases to 60,000 ounces in May, the same level as before the pause in early 2024. If gold prices remain current, the probability of a June pause has increased to about 70%. Combined with expectations that Sino-U.S. trade tensions may ease, JPMorgan sees short-term correction risks for gold.  

- Citi believes that under the baseline scenario, as global growth confidence improves, Trump's trade policy turns milder, and the Fed shifts from a tightening to neutral stance, gold's appeal as a safe-haven asset will weaken. It expects gold prices to gradually decline after reaching a high of $3,100-$3,500 in Q3, falling to $2,500-$2,700 by the second half of 2026.  

- A $20 billion AI unicorn fights back: MiniMax's first inference model benchmarks against DeepSeek, with computing costs of only $530,000. AI startup MiniMax released its first inference model, M1, which was trained using 512 NVIDIA H800 GPUs for three weeks at a rental cost of $537,400. In multiple benchmark tests, M1 outperforms DeepSeek's latest R1-0528 model, requiring only 25% of DeepSeek's computing resources to generate 100K tokens.  

#### Domestic Companies  

- Valuations have run their course—what's next for Chinese concept stocks? UBS highlights: AI, profit margins, new markets. UBS believes the first-half rally in Chinese internet stocks was driven by valuations rather than earnings improvements, especially for AI-concept stocks. Small and mid-cap stocks outperformed large caps. In the second half, investors should focus on AI monetization, overseas expansion, and profit margin restructuring. The commercialization of AI is accelerating, with three early monetizable areas: cloud services, advertising, and AI agencies. Under policy guidance, commission rates for internet platforms are expected to standardize, shifting from commissions to advertising revenue.  

- Alibaba releases upgraded Qwen3, fully compatible with Apple's MLX architecture in preparation for domestic Apple devices. This means Qwen3 can be easily deployed on Mac Pro, Mac Studio, Mac mini, MacBook, iPad, and even memory-constrained iPhones.  

- Morgan Stanley: China is the world's largest robotics market, with drones accounting for 40%, and the industry scale will double within four years! Morgan Stanley analysts believe China has established a complete supply chain from robot design to assembly, achieving large-scale localized production of key components. China's robotics market size will increase to $108 billion by 2028, with a CAGR of 23%, driven by drones, mobile robots, and collaborative robots. Key components such as motors, batteries, sensors, and vision systems will be the most promising investment targets, with sensors and vision systems expected to grow fastest.  

- Goldman Sachs on China's innovative drug boom: More deals to come, focus on CXO opportunities. Goldman Sachs says surging biotech licensing deals are driving sector revaluation, expecting this momentum to continue with more deals on the horizon. CDMO/CRO may迎来 (usher in) second-order investment opportunities, as companies with higher exposure to late-stage and commercial manufacturing demonstrate more resilient profitability.  

#### Overseas Macro  

- How will the most sensitive "capital tax" change? The U.S. Senate modifies Section 899 of the "Big Beautiful" bill: delays and lowers the cap. The official implementation of Section 899 will be postponed to 2027, and the tax rate cap for calendar year filers will be reduced from 20% in the House version to 15%, increasing by 5 percentage points annually.  

- JPMorgan's most accurate team during this rally warns again: Be cautious on U.S. stocks tactically. As U.S. stocks rebound strongly and the S&P 500 confirms a bull market, JPMorgan's market intelligence team suddenly signaled a turnaround, warning of an impending market correction. It believes multiple risks are accumulating, including escalating geopolitical tensions, surging inflation pressures, investor profit-taking needs, and tight market positioning.  

- Bank of America fund manager survey: Trade war concerns ease, "long gold" fever cools, dollar underweight reaches most extreme in 20 years. The BofA survey shows investor sentiment has significantly warmed, cash allocations have fallen to a three-month low, trade war concerns have eased but remain the biggest tail risk, and investors are underweight the dollar by 31%. BofA proposes three contrarian trades: long dollar, short gold; long U.S. stocks, short European stocks; long consumer stocks, short banks. In the Chinese market, AI remains the most favored theme, followed by healthcare.  

- Lagarde publishes a rare article calling to seize the euro's "global moment"! Lagarde said this transformative moment presents an opportunity for Europe: a "global euro" moment, emphasizing that "Europe must consolidate three fundamental pillars: geopolitical credibility, economic resilience, and sound laws and institutions."  

- Russian energy official states: Global crude oil production needs to increase. Russia's Deputy Prime Minister said global demand for crude oil is rising, and the OPEC+ alliance is ready to flexibly adjust production according to market changes. Earlier on Tuesday, CCTV reported that Trump said the U.S. would暂缓 (delay) imposing sanctions on Russia to reach a deal.  

- IEA's latest forecast: Oil supply will far exceed demand this year. The IEA said global oil markets will remain well-supplied in 2025 as long as Middle East crude supplies are not severely disrupted, projecting global oil production to increase by 1.8 million barrels per day to 104.9 million barrels per day in 2025. The IEA also said a supply surplus could persist for the rest of the decade.  

- Goldman Sachs: Oil price gains are due to "short-term geopolitical shocks," peaking at $90/barrel, falling back to $59 in Q4. Goldman Sachs said if Iran's export infrastructure is potentially damaged, reducing Iranian supply by 1.75 million barrels per day for six months, Brent crude could rise to just over $90/barrel in the summer, while strong supply growth outside U.S. shale oil would push Brent back to $59 in Q4 2025.  

- The European Commission plans to fully ban imports of Russian oil and natural gas. According to CCTV News, the European Commission proposed a legislative draft on the 17th, stating that the EU will gradually stop importing Russian natural gas and oil by the end of 2027. This proposal further advances the energy roadmap adopted by the European Commission last month. European Commission President von der Leyen said the proposal aims to eliminate the EU's dependence on Russian fossil fuels.  

#### Overseas Companies  

- Report: Musk's xAI burns $1 billion monthly, far exceeding revenue, and latest debt financing fails to gain traction. Media reported that xAI, Musk's AI startup, burns up to $1 billion monthly. xAI is currently seeking to raise $9.3 billion through debt and equity, with plans to spend more than half of it within the next three months. Morgan Stanley assisted in raising $5 billion in debt financing, but investor interest was lukewarm, though it still expects all to be sold and the transaction completed on time.  

- Hedge fund explains why it cleared NVIDIA: "This stock made me the most money in my life, but it's time to sell—you can't fall in love with a stock." Jonah Cheng, a hedge fund manager overseeing $100 million, fully liquidated NVIDIA in Q1 after the stock helped his fund surge 42% last year. The move was driven by multiple concerns, including delays in GB200 racks, inventory risks, lack of upward revisions to earnings forecasts, and a slowdown in cloud computing company spending.  

- After Google, Meta's demand explodes—will ASICs surpass NVIDIA GPUs next year? Nomura Securities said Meta plans to launch several high-spec AI ASIC chips between late 2025 and 2026, with a total volume of 1-1.5 million units. Driven by this, ASIC shipments are expected to exceed NVIDIA GPUs at some point in 2026.  

#### Industries/Concepts  

1. **Baseband chips**: Dongwu Securities notes that baseband chips are key components for smartphones to achieve communication functions, and communication capabilities are indispensable for mobile phones. Basebands are also the final piece of the puzzle for realizing self-developed mobile SoCs. It is optimistic about domestic manufacturers gradually breaking through 5G baseband capabilities, ultimately aiming to achieve large-scale integration of mobile SoC chips.  

2. **PCB**: China Merchants Securities states that after entering Q2, AI-driven prosperity has kept PCB capacity utilization rates high. The PCB/CCL industry has both cyclical and growth attributes, and innovations in computing power and AI edge-side applications are expected to open up new growth space for the industry.  

3. **Civil aviation**: Huatai Securities points out that airline capacity steadily increased year-on-year in May, with supply from the three major airlines + Spring Airlines + Juneyao Airlines up 6.0% year-on-year, while load factors remained high, up 3.2 percentage points to 84.6% year-on-year. Additionally, industry revenue levels have continued to improve recently, with estimated bare ticket prices rising year-on-year for eight consecutive weeks, and the peak summer travel season is expected to further catalyze growth.  

4. **Gaming**: Kaiyuan Securities notes that China's gaming industry remains highly prosperous, with high-quality content driving demand growth. Judging from the number of game licenses issued this year, there is further growth. Meanwhile, new games in 2025 have shown strong performance, and their launches will bring performance flexibility to related companies.  

#### Upcoming Key News for Today  

- 2025 Lujiazui Forum is held in Shanghai.  

- Eurozone and UK CPI for May.  

- U.S. initial jobless claims last week.  

- U.S. housing starts and building permits for May.  

- U.S. EIA crude oil inventory changes last week.  

- Federal Reserve announces interest rate decision, and Fed Chair Powell holds a press conference.  

- NVIDIA CEO Jensen Huang delivers a keynote speech.  

- U.S. long-term capital inflows in April.  

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