Morning News

Source: Wall Street Journal  

**Market Overview**  

On Thursday, the S&P 500 closed near a record high, with tech stocks leading the Nasdaq higher. Nvidia hit another all-time closing high, while Meta rose nearly 2.5%, leading the "Magnificent Seven" tech giants. Xiaomi surged nearly 12% at one point after CEO Lei Jun announced that pre-orders for the YU7 had exceeded expectations.  

U.S. economic data reinforced market expectations of at least two Fed rate cuts this year. Treasury yields fell across the board, with the 2-year yield dropping over 6 basis points. The U.S. dollar index declined for the fourth straight day, hitting a three-year low. Both onshore and offshore yuan strengthened past 7.16 against the dollar, reaching a seven-month high.  

Industrial metals broadly rose, though gold prices ended flat. Platinum jumped over 4.9%, while COMEX copper futures surged as much as 3.3%. WTI crude initially gained nearly 2% before paring gains.  

During Asian trading, A-shares and H-shares fell collectively, while stablecoin-related stocks rallied. Guotai Junan International swung wildly with over 100% volatility. Government bonds retreated, the yuan hit its highest level since November last year, and commodities advanced.  

**Key News**  

- The Trump administration will remove the "capital tax" provision (Section 899) from its draft tax legislation.  

- Fed officials signaled they are not ready to support a rate cut at the July meeting. The White House stated Trump will not decide on the next Fed chair soon.  

- The White House downplayed the July 9 negotiation deadline, suggesting it could be extended as the S&P approaches record highs. Reports indicate the EU may lower tariffs on U.S. goods to expedite a trade deal, while U.S.-India trade talks face hurdles as deadlines loom.  

- Contradicting the U.S., European officials confirmed Iran’s uranium stockpile remains intact, pushing oil prices higher.  

- U.S. Q1 GDP was revised down to -0.5%, with personal consumption posting its weakest performance since the pandemic. Continuing jobless claims rose to their highest since November 2021. May durable goods orders surged 16.4% MoM, the largest increase since July 2014.  

- Xiaomi’s launch event: The YU7 standard edition is priced at ¥253,500, AI glasses start at ¥1,999, and the company pledged continued investment in assisted driving, with an upgraded XLA AI model coming later this year.  

- Joe Tsai and Eddie Wu’s shareholder letter: Alibaba will act like a startup in the AI era.  

**Market Closes**  

- **Stocks**:  

 - S&P 500: +0.80% to 6,141.02  

 - Dow: +0.94% to 43,386.84  

 - Nasdaq: +0.97% to 20,167.91  

 - Europe STOXX 600: +0.09% to 537.48  

 - **A-shares**:  

   - Shanghai Composite: -0.22% to 3,448.45  

   - Shenzhen Component: -0.48% to 10,343.48  

   - ChiNext: -0.66% to 2,114.43  

- **Bonds**:  

 - 10-year U.S. Treasury yield: -4.11 bps to 4.2495%  

 - 2-year yield: -6.55 bps to 3.7152%  

- **Commodities**:  

 - WTI August crude: +0.49% to $65.24/barrel  

 - Brent August crude: +0.07% to $67.73/barrel  

 - COMEX gold: Flat at $3,343.50/oz

### Key News Details  

#### Global Highlights  

- **Trump Administration Removes "Capital Tax" Provision from Draft Legislation**: On Thursday, U.S. Treasury Secretary Besant requested Congress to remove the controversial Section 899 ("capital tax") from the tax bill. The Treasury announced an agreement with G7 allies to exempt U.S. companies from certain foreign taxes in exchange for dropping the retaliatory tax proposal, easing Wall Street concerns.  

- **Besant's Strategy: Shifting U.S. Debt**: Deutsche Bank notes that the U.S. faces twin deficits (fiscal and trade). Without fiscal tightening, the likely path is a "Pennsylvania Plan"—shifting Treasury holdings from foreign to domestic investors via measures like dollar stablecoins and tax incentives for local bond purchases.  

- **Fed Officials Push Back on July Rate Cut**: Trump-appointed Fed governors Waller and Bowman recently hinted at supporting a July cut if inflation stays controlled, but over a dozen Fed officials have since dismissed this, emphasizing the need for more data to confirm tariff-driven price hikes won’t persistently fuel inflation.  

- **White House: No Immediate Decision on Next Fed Chair**: The White House stated Trump won’t decide soon on Powell’s successor, despite WSJ reports of a potential summer announcement.  

- **July 9 Trade Deadline "Not Critical," May Be Extended**: The White House signaled flexibility on the deadline, with Trump retaining leverage to impose reciprocal tariffs if talks fail. The EU is reportedly considering lowering tariffs on U.S. goods to secure a quick deal, though France insists on full tariff removal.  

- **U.S.-India Trade Talks Stalled**: Disputes over auto parts, steel, and farm tariffs have deadlocked negotiations ahead of Trump’s July 9 deadline.  

- **Europe Contradicts U.S. on Iran Uranium Stocks**: Preliminary intel suggests Iran’s enriched uranium was dispersed before U.S. strikes, countering U.S. claims. Oil prices rose post-reports.  

#### U.S. Economic Data  

- **Q1 GDP Revised Down to -0.5%**: Marking the first contraction in three years, with personal consumption growth slashed to 0.5%—the weakest since COVID. Core PCE inflation edged up to 3.5%.  

- **Jobless Claims Hit Nov 2021 High**: Continuing claims surged, signaling prolonged unemployment, while initial claims held steady, indicating reduced hiring but no mass layoffs.  

- **May Durable Goods Orders +16.4% MoM**: The largest jump since July 2014, driven by a 230% spike in commercial aircraft orders.  

#### Corporate Highlights  

- **Xiaomi Launch Event**: YU7 standard model priced at ¥253,500; AI glasses start at ¥1,999. The company pledged continued investment in assisted driving and an upgraded XLA AI model for late 2024.  

- **Alibaba’s Shareholder Letter**: Joe Tsai and Eddie Wu outlined plans to operate like a startup in the AI era, as FY2025 revenue hit ¥996.35B (+76.8% YoY profit growth), with cloud revenue boosted by AI demand.  

#### Domestic Macro (China)  

- **NDRC: Third-Round Subsidies for Consumer Goods Trade-Ins to Arrive in July**: A further ¥138B in central funds will be allocated in Q3/Q4 to expand the program.  

- **Hong Kong’s Digital Asset Policy 2.0**: Aims to tokenize gold, metals, and renewables under the "LEAP" framework. Stablecoin licensing begins August 1, with the SFC as primary regulator.  

#### Domestic Companies/Industries  

- **Morgan Stanley on Brokerage Rally**: H/A-share brokers surged 12.6%/6.3% in 5 days, fueled by eased geopolitical risks, active港股 trading, and positive regulatory signals.  

- **Pop Mart’s Multi-IP Strategy**: HSBC raised its target price by 53.8% to HK$331.50, citing healthy Labubu price adjustments and sustained consumer interest.  

- **Lao Feng Gold’s Overseas Debut**: Strong Singapore sales (4–10 orders/hour, 95% local customers) prompted JPM to lift its target to HK$1,249, forecasting 68%/76% sales/profit CAGR (2025–27).  

- **TSMC’s $10B Overseas Injection**: A historic move to hedge forex risks amid a surging TWD.  

#### Overseas Macro  

- **UBS: U.S. Stock Squeeze Over, Time to Sell**: The squeeze index spiked 43%, but risk appetite is weakening. Historical trends suggest S&P 500 and Nasdaq could drop 11%/13% in 3 months.  

- **NYC Mayor Primary Shocks Wall Street**: A left-wing candidate’s platform (wealth taxes, rent freezes, free buses, state-run groceries) sparked fears of a business exodus.  

- **Copper Shortage Outside U.S.**: Goldman raised its H2 price forecast to $9,890/t (peak: $10,050/t in August), citing U.S. overstocking (100+ days’ supply) and global shortages (<10 days).  

#### Overseas Companies  

- **Goldman on AI Disrupting Ads**: The $470B ad industry faces AI-driven restructuring, with tech giants like Google/Meta best positioned to profit.  

- **Microsoft-OpenAI AGI Dispute**: Conflicts over AGI definition and licensing terms threaten OpenAI’s IPO plans.  

- **Meta Wins AI Copyright Case**: A U.S. court ruled its use of books for AI training as "fair use."  

- **Meta Poaches OpenAI Talent**: Zuckerberg’s $100M+ offers lured three key researchers, despite Altman’s mockery of Meta’s "cash-driven" culture.  

- **Tesla Turmoil**: Musk fired close ally Omead Afshar, the latest in a string of executive exits.  

#### Industry/Themes  

1. **Medical Devices (PFA Tech)**: Huafu Securities highlights pulsed-field ablation as the next high-growth sector for atrial fibrillation treatment, with Chinese firms set to commercialize in 2025.  

2. **Defense**: Pre-parade rallies historically favor military stocks, with underwater drones, robots, and IT in focus.  

3. **Autonomous Forklifts**: Orient Securities sees logistics as the first viable场景 for embodied AI robots.  

4. **Offshore Wind**: Guosen recommends exports to Europe, where local产能 shortages benefit Chinese cable, monopile, and turbine makers.  

#### Today’s Preview  

- China: May industrial profits.  

- Japan: June Tokyo CPI.  

- U.S.: May income/spending/core PCE; June Michigan sentiment; speeches by Fed’s Williams, Harker, and Cook.  

*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.*  

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