Morning News

Source: Wall Street Journal  

**Market Overview**  
On Friday, reports that Trump is pushing for higher tariffs on the EU, coupled with impending tariffs across multiple industries by August 1 and improved U.S. consumer inflation expectations, led to mixed performances in U.S. stocks. Tech stocks outperformed, supporting a slight rise in the Nasdaq and another intraday record high. Netflix fell over 5% after its earnings report.  

Fed Governor Waller expressed support for a July rate cut, causing the 2-year Treasury yield to drop by about 4 basis points at one point.  

Trump signed a stablecoin bill, with Ethereum briefly surpassing $3,600 intraday and outperforming Bitcoin for the fourth consecutive week, while Bitcoin retreated from its highs.  

Gold rose 0.22%. Oil prices saw an inverted V-shaped reversal, initially rising about 2% before erasing gains.  

In early Asian trading on Monday, U.S. stock futures and gold edged lower, while Bitcoin declined.  

**Key News**  
- Li Qiang attended the groundbreaking ceremony for the hydropower project on the lower reaches of the Yarlung Tsangpo River and announced the start of construction.  
- Exit polls suggest Japan's ruling coalition is expected to lose its majority in the Senate. Japanese media confirmed the loss of a majority. Japanese Prime Minister Shigeru Ishiba stated the coalition would continue to govern.  
- U.S. plans to impose heavy tariffs on Chinese graphite have drawn complaints from American businesses, impacting electric vehicles and raising concerns in multiple countries.  
- After visiting Japan, U.S. Trade Representative Besent signaled optimism, stating that the U.S. and Japan could reach a favorable trade deal following a meeting with Ishiba.  
- Within the Trump administration, Besent was a key opponent to firing Powell, reportedly with "well-reasoned arguments." Reports also indicate Trump-aligned officials pushed for a controversial Fed renovation project.  
- Reports suggest Nvidia's H20 inventory is limited with no plans to resume production. Jensen Huang sold Nvidia shares again, worth approximately $12.94 million.  
- BofA's Hartnett noted that all sell signals for U.S. stocks have been triggered, but the real tipping point for a sell-off may lie in the bond market, not equities.  

**Market Close**  
- **Global Stocks**: The S&P 500 fell 0.01% to 6,296.79; the Dow Jones dropped 0.32% to 44,342.19; the Nasdaq rose 0.05% to 20,895.66. Europe's STOXX 600 dipped 0.01% to 547, down 0.06% for the week.  
- **A Shares**: The Shanghai Composite rose 0.5% to 3,534.48; the Shenzhen Component gained 0.37% to 10,913.84; the ChiNext Index climbed 0.34% to 2,277.15.  
- **Bonds**: The 10-year U.S. Treasury yield fell 3.58 basis points to 4.4155%, up 0.62 basis points weekly. The 2-year yield dropped 3.54 basis points to 3.8691%, down 1.59 basis points for the week.  
- **Commodities**: WTI August crude fell 0.29% to $67.34/barrel, down 1.62% weekly. Brent September crude declined 0.34% to $69.28/barrel, down 1.53% weekly. COMEX gold rose 0.30% to $3,355.40/ounce, down 0.21% weekly.  

### News Details

#### Global Headlines

Li Qiang attended the groundbreaking ceremony of the hydropower project in the lower reaches of the Yarlung Zangbo River and announced the start of the project. The hydropower project in the lower reaches of the Yarlung Zangbo River is located in Nyingchi City, Tibet Autonomous Region. The project mainly adopts the development mode of straightening bends and diverting water through tunnels, with 5 cascade power stations to be built, with a total investment of about 1.2 trillion yuan. The electricity generated by the project will be mainly transmitted and consumed externally, while also meeting the local demand in Tibet.

Exit polls: Japan's ruling coalition is expected to lose its majority in the House of Councillors. Japanese media confirmed that the ruling coalition has lost its majority in the chamber. Japanese Prime Minister Shigeru Ishiba said he will continue to govern. According to CCTV News, it was learned on the 20th local time that Japanese Prime Minister Shigeru Ishiba expressed his willingness to continue in office.

The voting for the Japanese House of Councillors election is a referendum affecting "the ownership of the prime minister, Japan-US negotiations" and related to "inflation to reduce debts and financial repression". The approval rating of the Ishiba cabinet has fallen to 20.8%, a "dangerous level". JPMorgan believes that even if it loses its majority, the Ishiba government may choose to form a minority government instead of seeking to expand the ruling coalition. At the same time, the rise of far-right "parliamentary parties" indicates the right-leaning trend of Japanese politics. Nomura warned that the Ishiba government may resign due to losing the majority, and Japan-US negotiations may be halted; Deutsche Bank said this is a referendum by the public on "financial repression".

The US plan to impose heavy tariffs on Chinese graphite has caused complaints from US companies, impacting electric vehicles and triggering concerns from many countries. According to the Global Times, imposing tariffs on graphite will further exacerbate the tension in the global electric vehicle supply chain. Chinese companies supply more than 90% of the world's graphite, and graphite accounts for about 95% of the anode materials of electric vehicles, with the battery anode accounting for about 7% of the total battery cost. The new tariffs may lead to an increase in the price of batteries produced in the US by about $1,000, which in turn will push up the price of electric vehicles.

Yellen released optimistic signals after visiting Japan, saying after meeting Ishiba that the US and Japan can reach a good trade agreement. US Treasury Secretary Janet Yellen said that the two countries can reach a "good" trade agreement, but hinted that the process may take more time. Despite the positive signals, there are only two weeks left before the US raises the comprehensive tariff on Japanese exports from 10% to 25% on August 1. The lack of specific progress in the negotiations indicates that there is still a considerable distance between the two countries in reaching an agreement, especially the 25% tariff on automobiles remains a major point of divergence.

Media reports say tariffs in multiple industries will be imposed before August 1, covering up to 70% of US imports from a country. Media reports say that following Trump's announcement of copper tariffs to take effect on August 1, the Trump team is discussing issuing announcements on tariffs on wood, chips, critical minerals and pharmaceuticals. These products are all subjects of the Section 232 investigations being conducted by the US Department of Commerce. Trump recently threatened to impose tariffs of up to 200% on pharmaceuticals, saying that the timeline for semiconductor tariffs is similar to that of pharmaceuticals and "not too complicated". Some US lawmakers have urged tariffs of at least 60% on wood products.

Report: Trump pushes for a minimum tariff of 15%-20% on all EU goods. This has further increased the pressure on negotiations and brought them to a deadlock. Analysts point out that this tougher stance is intended to test the EU's "pain points", after the two sides had weeks of negotiations on a framework agreement to maintain a 10% benchmark tariff on most goods.

Within the Trump administration, Yellen is a key opponent of firing Powell, and "has a solid case". Reports say Yellen told Trump that there is no need to remove Powell given the current good economic performance and the market's positive response to Trump's policies. Even if the president forcibly fires Powell, Powell may file a lawsuit, and the lawsuit may drag on until next spring - when Powell's term would end anyway.

A "mole"? Report: Trump-appointed officials pushed for the controversial Fed renovation project. Meeting records show that officials appointed by the Trump administration pushed five years ago for the renovation of the Fed's headquarters to use marble instead of the original Fed's plan - a transparent glass curtain wall design. Now, the White House is using this to attack Powell, accusing the renovation project of being extravagant and wasteful.

Report: NVIDIA H20 inventory is limited, and there are no plans to resume production. Media reports say that NVIDIA has informed Chinese customers that the inventory of its H20 artificial intelligence chips customized for the Chinese market is limited, and there are currently no plans to restart production. The company is communicating with some of its largest Chinese customers to understand their specific chip needs, which will help NVIDIA decide whether it is worth continuing to add H20 orders.

Jensen Huang sold NVIDIA shares again, worth about $12.94 million. In the previous 4 trading days, Jensen Huang sold a total of 300,000 shares, cashing out about $50.92 million. This round of share sales is part of the plan Huang formulated in March, which aims to sell up to 6 million NVIDIA shares by the end of the year.

Bank of America's Hartnett: Regarding US stocks, all sell signals have been triggered, but the real trigger for the sell-off may not be in the stock market, but in the bond market. Hartnett said that once the 30-year US Treasury yield breaks through 5% to a new high and volatility surges, market sentiment will quickly shift from "risk appetite" to "risk aversion". At the same time, there are hidden worries behind the rise of US stocks - market breadth has hit a record low, and signs of economic slowdown have emerged. A bigger variable is that Trump's intervention in the relationship between the White House and the Federal Reserve may repeat the policy disaster of the 1970s.

#### Domestic Macro

The Office of the National Export Control Work Coordination Mechanism has deployed a special campaign: "zero tolerance and heavy blows" against the smuggling and export of strategic minerals, and a number of suspects have been arrested. The meeting required that relevant departments should continue to carry out in-depth special campaigns and further increase law enforcement efforts; study and establish a joint law enforcement coordination center for export control of dual-use items; strictly and quickly investigate and handle major illegal and criminal cases in accordance with the law, and promptly announce a number of typical law enforcement and judicial cases; resolutely prevent circumvention of exports, and include overseas end-users that evade national export control measures in the export control list; formulate and issue guidelines for the compliant export of strategic minerals; guide and warn export enterprises to conduct due diligence to prevent relevant items from being illegally used by military users or for military purposes.

Xinhua Commentary: Continuously stimulate the vitality of the private economy. The article says that local governments and departments should focus on solving the problems that private enterprises have reflected more concentratedly, and effectively implement the existing and new policies to let private enterprises strengthen their confidence in development. Solidly implementing policies and measures to promote the development of the private economy is the current work focus. The vitality of policies lies in implementation. The experience and practices formed in the process of policy implementation should be summarized and promoted in a timely manner. In cases of ineffective implementation, supervision and inspection should be strengthened to correct deviations. At the same time, it is necessary to ask enterprises for their needs, encourage enterprises to put forward demands and suggestions on policy implementation, and further adjust and improve policies according to feedback to improve the accuracy of policy implementation and continuously convert policy dividends into development momentum.

A-shares are standing at a tipping point: two major "water reservoirs" of domestic deposit transfer and overseas capital spillover! GF Securities said that the current stage of the market can be summarized as "the upward returns and downward risks are unequal". The clear policy bottom and the continuous increase in allocation by insurance funds provide support for the market's downside; and once major policies such as the Fourth Plenary Session of the 20th Central Committee and the 15th Five-Year Plan release positive expectations, the two major off-market capital reservoirs (funds from domestic deposit transfer and funds from overseas US dollar spillover) may lead to a large upward space for the market.

Who is paying for the increasingly hot summer? Under high temperature weather, the demand for air conditioners, a "heatstroke prevention artifact", has surged. Recently, air conditioners in Northeast China are "hard to find", and even installation masters have to be transferred from Guangdong to support Northeast China. In recent years, the growth rate of air conditioner ownership in summer resort areas such as Qinghai, Yunnan, Northeast China, and Guizhou has far exceeded the national average. For example, Yunnan has increased nearly 10 times in 9 years, and Jilin and Liaoning have both increased by more than 2 times. The changes in the number of air conditioners in various regions also reflect the trend of climate change to a certain extent.

#### Domestic Companies

Chinese models dominate the top three, with Kimi K2 topping the global open-source model rankings. According to LMArena, a global large model arena, the competition between open-source and closed-source models has further escalated. In the global open-source model rankings, three Chinese open-source models - Kimi K2, DeepSeek R1, and Qwen3 - rank in the top three, ahead of Google's Gemma3 and Meta's Llama4, with Kimi K2 becoming the world's strongest open-source model. The ranking is voted by thousands of developers through dynamic blind tests.

The capital market sends a heavy signal: IPOs of hard technology companies are accelerating, and reviews of high-quality mergers and acquisitions are speeding up. According to Shanghai Securities News, on July 18, China Ship's absorption and merger of China Heavy Industries, and Xinlian Integration's "loss-making revenue and loss" merger both obtained the registration of the China Securities Regulatory Commission; Heyuan Bio became the first registered enterprise after the restart of the fifth set of standards on the Science and Technology Innovation Board; Yushu Technology started IPO counseling. The regulatory authorities approved a number of cases intensively in one day, releasing a signal of accelerating mergers and acquisitions and listings of hard technology companies.

The founder sold Liangpin Puzi. This 19-year-old Wuhan snack giant has finally reached the moment of changing ownership. If this transaction is successfully completed, Changjiang International Trade will hold 21% of Liangpin Puzi's shares and become the controlling shareholder of the company. Public information shows that Changjiang International Trade is a large-scale international trade platform enterprise approved by the Wuhan Municipal Government in May 2022, and its shareholder is Wuhan Financial Holdings (Group) Co., Ltd.

Nearly 80 used Xiaomi YU7 cars are for sale. The Ministry of Industry and Information Technology may introduce new regulations: prohibiting the transfer of new cars within 6 months after registration.

#### Overseas Macro

Trump's biggest trouble is coming. What makes the world哭笑不得 is that this trouble is not his taxation on the world, nor his contempt for US courts, nor his threat to fire the Federal Reserve chairman, but a mysterious painting he created 20 years ago. According to an exclusive disclosure by The Wall Street Journal, he painted an indecent partial figure of a beauty for a special subject at that time. This has to mention the current biggest hot topic in the US - the high-profile "Epstein scandal".

Foreign media: Iran may hold nuclear talks with Britain, France and Germany this week. According to Global Times, Iran has agreed with Britain, France and Germany to hold talks on Iran's nuclear program, which may take place this week. Earlier, Britain, France and Germany warned that if talks are not restarted, sanctions against Iran will be restored. Reuters said that informed sources indicated that all parties have reached an agreement on the principles of the talks, but the time and location of the talks are still under consultation.

#### Overseas Companies

OpenAI's mysterious model "o3-alpha" is blowing up the timeline, far surpassing Claude Sonnet. According to some early tests, this model is surprisingly powerful, capable of generating Minecraft and Grand Theft Auto with one click, and has reached a completely different level in front-end coding - far surpassing Sonnet, o3, Gemini 2.5 Pro or Grok 4.

OpenAI's mysterious new model won the IMO 2025 gold medal, conquering the peak of Olympiad mathematics, causing a sensation in Silicon Valley. OpenAI's mysterious general reasoning model has actually solved 5 difficult problems in IMO 2025. This news has made Greg Brockman and other tycoons excitedly repost it. That is to say, OpenAI may have developed a subversive reasoning technology, completely getting rid of CoT. Another explosive news: GPT-5 is also coming.

JPMorgan's first in-depth report on unlisted companies: OpenAI's "throne" and "shackles". Externally, OpenAI's "throne" seems stable, but the foundation on which its success depends is being eroded; internally, the "invisible shackles" brought by the company's unique structure also pose non-negligible risks to its future.

#### Industries/Concepts

1. TDI: On July 16, Covestro announced force majeure for TDA/TDI, OTDA-based products, and polyether polyol products. Due to the large TDI production capacity of Covestro's German factory, the short-term contraction of overseas supply, coupled with the arrival of the peak demand season and the maintenance of domestic enterprises, is expected to help improve the prosperity of TDI.

2. Hydropower engineering: The hydropower project in the lower reaches of the Yarlung Zangbo River started on July 19. It is conservatively estimated that the total value of water turbine and generator business in related investments is about 53.5-95.4 billion yuan. It may become a new growth point for hydropower equipment after pumped storage after 2030, effectively ensuring full capacity utilization in the industry.

3. Automobile whole vehicles: The cumulative large orders for Zunjie S800 exceeded 8,000 units 50 days after its launch, with large orders continuing to exceed expectations. Recently, the Ministry of Finance and the State Taxation Administration issued a policy to adjust the consumption tax on ultra-luxury cars, which is beneficial to domestic ultra-luxury cars such as Zunjie. In June, HarmonyOS Intelligent Mobility ushered in a delivery boom, achieving a cumulative delivery of 800,000 units in only 39 months, setting the fastest delivery record among new power automobile companies. The new model cycle of HarmonyOS Intelligent Mobility is on the rise.

4. Semiconductor equipment: Dongwu Securities' research report pointed out that the lifting of restrictions on H20 will boost the growth of computing power demand, and attention should be paid to semiconductor equipment industry chains such as advanced packaging, backend testing, and silicon photonics equipment, which are expected to benefit from the growth of AI orders.

#### Today's News Preview

China's July one-year and five-year loan prime rates.

The State Council Information Office holds a series of themed press conferences on "high-quality completion of the '14th Five-Year Plan'".

The results of the 27th House of Councillors election of the Japanese National Diet are announced.

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