Morning News

Source: Wall Street News

 Market Overview

The weak US ISM Services PMI and ADP employment data have intensified market concerns about an economic slowdown or even recession in the country, and rate-cut expectations have soared. US stocks were mixed, with the Dow ending a four-day winning streak and the S&P 500 closing flat. Large tech stocks led the Nasdaq higher, with Meta rising more than 3%, leading the Magnificent Seven. The China stock index rose more than 2%, outperforming the broader US market.

Rate-cut expectations soared, causing US Treasury yields to tumble across the board. The 10-year US Treasury yield dropped more than 10 basis points at one point. The US dollar gave back yesterday's gains and returned to near a two-year low.

The gold price fluctuated higher. Saudi Arabia wants OPEC+ to implement more large-scale oil production increases, and the oil price dropped 2% at one point.

During the Asian session, Chinese stocks, bonds, and commodities all rose. The ChiNext rose more than 1%, government bonds rose in the afternoon, coking coal and coke rebounded strongly, and Hong Kong innovative drugs boomed again.

### Key News

The US ADP data in May was a "disappointment"! The number of jobs added was only 37,000, the lowest since March 2023. After the data was released, Trump called on Powell, saying that interest rates must be lowered now! The US ISM Services PMI in May contracted for the first time in nearly a year, with demand plummeting and prices remaining high. Ignoring tariff threats, the Eurozone PMI unexpectedly grew in May, but demand in Germany and France remained sluggish.

Musk stepped up his attack and called on the American public to take action to "reject" Trump's tax-cut bill. The Congressional Budget Office (CBO) predicts that Trump's spending bill will increase the federal government's budget deficit by $2.4 trillion over the next ten years.

The US Commerce Secretary expects to set aircraft parts tariff standards within this month, and Boeing's decline narrowed. India took a tougher stance and challenged the US on the issue of auto tariffs.

The Fed Beige Book: US economic activity has declined slightly in recent weeks, labor demand has weakened, and inflation expectations have become stronger.

Putin and Trump talked for more than an hour, focusing on the attack on the Russian airport and the Iran nuclear issue.

Saudi Arabia seeks to capture market share and hopes OPEC+ will implement more large-scale oil production increases, causing US oil to drop 1.5%.

New breakthrough in the cloud computing power race: The record-breaking Nvidia GB200 participated in the MLPerf test, with its performance improved by more than twice.

Why are luxury goods not selling? Purchasing power has declined by more than 30% in ten years, and the middle class has been squeezed out!

### Market Closing Reports

- **European and US Stocks**: The Dow fell 0.22%, the S&P 500 rose 0.01%, and the Nasdaq rose 0.32%. The European STOXX 600 index closed up 0.47%.

- **A-shares**: The Shanghai Composite Index rose 0.42%, the Shenzhen Component Index rose 0.87%, and the ChiNext Index rose 1.11%.

- **Bond Market**: The yield on the 10-year US benchmark Treasury note fell 9.86 basis points to 4.3552%. The yield on the two-year US Treasury note fell 8.46 basis points to 3.8665%.

- **Commodities**: WTI July crude oil futures closed down 0.88% at $62.85 per barrel. Brent August crude oil futures closed down 1.17% at $64.86 per barrel. COMEX gold futures rose 0.64% to $3,398.80 per ounce.

News Details  

Global Highlights  

U.S. May ADP Employment "Unexpectedly Weak"! Job growth was only 37,000, the lowest since March 2023. This figure is five standard deviations below the expected 114,000, marking the largest miss since August 2022. After the data release, Trump urged Powell: "Rates must be cut now!"  

U.S. May ISM Services PMI Contracts for the First Time in Nearly a Year, Demand Plummets, Prices Soar. The U.S. May ISM Services PMI index came in at 49.9, significantly below the expected 52 and the previous April reading of 51.6. The new orders index plunged by 5.9 points to 46.4, the largest drop since June 2024. The prices paid index jumped to 68.7, the highest since November 2022. Following the ISM Services PMI release, U.S. stocks and the dollar fell, while Treasuries, gold, and safe-haven currencies rose.  

Ignoring Tariff Threats, Eurozone May PMI Unexpectedly Rises, but Demand in Germany and France Remains Weak. The Eurozone Composite PMI final reading rose to 50.2, exceeding the preliminary and revised contractionary level of 49.5, showing greater resilience in the European economy than initially estimated. However, services activity declined slightly, with the Services PMI hitting a six-month low, while manufacturing output maintained the same modest growth momentum as the previous month.  

Musk Escalates Offensive, Urges Americans to Act and "Veto" Trump's Tax Cut Bill. Musk called on Americans to contact lawmakers to veto the bill. "Call your senators, call your representatives. It’s not right to bankrupt America!" He suggested drafting a new spending bill to avoid a massive deficit increase and prevent the debt ceiling from being raised by $5 trillion. He also reposted and commented on another post, stating that the U.S. is rapidly descending into debt slavery. On the same day, Trump urged Congress to abolish the debt ceiling system.  

U.S. Congressional Budget Office (CBO) Estimates: Trump's Spending Bill Could Increase Federal Budget Deficit by $2.4 Trillion Over the Next Decade. Comments noted that the projection did not account for potential economic stimulus effects.  

U.S. Commerce Secretary Expects to Set Aircraft Parts Tariff Standards This Month, Boeing's Losses Narrow. Commerce Secretary Lutnick said he expects to complete the analysis of aircraft parts tariffs and determine related standards by the end of the month. Boeing's stock, which had fallen over 1% earlier in the day, pared losses to less than 0.1%.  

India Adopts Harder Stance, Challenges U.S. Over Auto Tariffs. On Tuesday, India informed the WTO that the U.S. 25% tariff on imported passenger cars, light trucks, and certain auto parts constitutes "safeguard measures" (i.e., trade restrictions) and affects its exporters. India has sought "consultations" with Washington over the tariffs.  

Fed Beige Book: U.S. Economic Activity Slightly Declined in Recent Weeks, Labor Demand Weakened, Inflation Expectations Strengthened. The Fed's Beige Book showed that economic activity in the U.S. has slightly declined in recent weeks since the last report, indicating that tariffs and high uncertainty are having a cascading effect on the economy. There were widespread reports that contacts expect future costs and prices to rise at a faster pace. In this edition of the Beige Book, the word "tariff" appeared 122 times, up from 107 in the previous report, while "uncertain" and its variants appeared 80 times.  

Putin and Trump Speak for Over an Hour, Focusing on Russian Airport Attacks and Iran Nuclear Issue. Trump revealed on social media that he spoke with Putin for about 1 hour and 15 minutes. He said they discussed Ukraine's attacks on Russian airports and recent incidents, with Putin "very firmly" stating that Russia would respond to the airport attacks. They also discussed Iran's nuclear issue. Trump said Iran must "make a decision soon" on nuclear weapons, adding that he and Putin agree Iran cannot have them. Trump also said Putin indicated he would participate in discussions with Iran and "might help bring things to a quick resolution."  

Saudi Arabia Seeks to Reclaim Market Share, Urges OPEC+ to Implement More Large-Scale Oil Output Increases; U.S. Oil Falls 1.5%. Saudi Arabia's strategic direction has shifted significantly, with the kingdom pushing for OPEC+ to continue accelerating oil supply increases in the coming months to recapture lost market share. Saudi Arabia wants OPEC+ to add at least 411,000 barrels per day in August and possibly September to capitalize on peak summer demand in the Northern Hemisphere. Media reports suggest that while a faction led by Russia advocated pausing increases to assess their impact, Saudi Arabia's stance ultimately prevailed.  

Cloud Computing Power Race Breakthrough: Record-Breaking Nvidia GB200 Participates in MLPerf Test, Performance More Than Doubles. In the MLPerf Inference v5.0 test measuring inference throughput, CoreWeave, Nvidia, and IBM used 2,496 GB200 Blackwell chips to form the largest Nvidia GB200 NVL72 cluster in MLPerf benchmark history. For the largest and most complex Llama 3.1 405B foundational model in the benchmark suite, the cluster completed the entire training process in just 27.3 minutes, achieving more than double the performance improvement compared to similar-scale cluster test submissions.  

Why Are Luxury Goods No Longer Selling? Purchasing Power Has Dropped Over 30% in a Decade, Middle Class Priced Out! Morgan Stanley noted that the affordability of iconic luxury handbags has deteriorated by 10%-33% over the past decade, with luxury price growth far outpacing U.S. disposable income growth, effectively "pricing out" middle-income consumers. However, most brands still need middle-to-upper-middle-class consumers to sustain growth, as relying solely on high-net-worth individuals cannot support the industry's mid-to-high single-digit growth rates.  

Domestic Macro  

RRR Cut and Bond Purchases Restart? China Securities Journal Front Page: PBOC Fine-Tunes Controls, Mid-Year Liquidity Expected to Remain Adequate. A front-page article in China Securities Journal stated that if necessary, the PBOC may further cut the reserve requirement ratio (RRR) to release long-term liquidity and ensure ample liquidity through mid-year and the second half of the year. On the other hand, the PBOC may restart bond trading operations at an appropriate time.  

Domestic Companies  

What Did Xiaomi Say at Investor Day? Full-Year Profit Guidance, AIoT Revenue Targets, Auto Expansion, Self-Developed Auto Chips. Xiaomi expects full-year revenue to grow over 30% YoY, with net profit potentially exceeding 40% growth. AIoT revenue is projected to grow over 30% YoY, with a goal to triple AIoT revenue in three years. Xiaomi said its smart EV business could turn profitable by Q3 2025, with plans to sell smart EVs overseas starting in 2027. On self-reliance in technology, Xiaomi stated it will soon begin producing automotive semiconductors.  

Founder of Qiming Venture Partners: China's Innovative Drugs' "DeepSeek Moment." Gary Rieschel, founding managing partner of Qiming Venture Partners, said that 10 years ago, China was 20 years behind the U.S. in first-in-class drug development. Today, the gap is just 2-3 years. This is an astonishing compression in just a decade. China's biotech ecosystem is maturing, and the "DeepSeek Moment" may arrive when CanSino Biologics' bispecific antibody ivonescimab (AK112) proves twice as effective as Keytruda.  

Overseas Macro  

Breaking Down the Hidden "Capital Tax" in Trump's "Big Beautiful" Bill. According to Bank of America analysis, Section 899 measures could raise the statutory tax rate on U.S.-sourced income from interest, dividends, rents, and royalties by up to 20 percentage points, generating an estimated $12 billion in annual tax revenue. However, the cost could be higher yields, potentially offsetting some revenue gains. A 20-basis-point rise across the yield curve would increase annual interest costs by about $10 billion.  

Allianz CIO: Once Section 899 Is Fully Implemented, U.S. Stocks Could Plunge 10%, Dollar Could Drop 5%. Allianz's CIO believes the clause essentially constitutes "capital controls." Once implemented, U.S. capital outflows could accelerate further, leading to a "major panic moment." The impact could "completely derail what Trump is trying to achieve with his policy agenda."  

Will a 10-Year Treasury Yield of 5% Sink U.S. Stocks? UBS notes that "yields are never an island"—the process of reaching 5% matters more than the outcome. If driven by growth expectations, the S&P 500 could rise to 6,200; but if driven by rising term premiums, stocks would face significant pressure.  

Bank of Canada Holds Rates as Expected, Future Cuts Possible; More Data Needed on Trump Tariff Impact. On Wednesday, the Bank of Canada held rates at 2.75% for the second consecutive time. The BoC governor noted that if economic weakness persists and inflation remains moderate, future rate cuts are possible. The current pause is to await more signals on Trump's trade conflicts, which have become the biggest headwind for Canada's economy. At the same time, given that underlying inflation pressures may be worse than expected, the central bank is proceeding cautiously.  

Japanese Bonds Won’t Collapse, but Summer Could Bring Brief "Stocks-Bonds-Currency Triple Kill." Citi said Japan is unlikely to face a debt crisis like the UK under former PM Truss, but the yen could weaken to 150 against the dollar in the next 2-3 months. The real "multi-kill" risk for Japan's markets is closely tied to the U.S., such as an extreme scenario where U.S. stocks crash and the dollar surges simultaneously.  

Election Outcome Sparks South Korean Stock Rally, Nearing Bull Market! Lee Jae-myung Once Pledged KOSPI at 5,000 to Eliminate "Korea Discount." The KOSPI rose 2.5% on Wednesday, rebounding over 20% from April lows and nearing a bull market. Shares of Hanwha Group and other holding companies surged 18%. The won rose 0.5% against the dollar, extending gains. Markets are betting Lee will push shareholder return reforms to fulfill his campaign promise of "ending the Korea discount and driving the KOSPI to 5,000."  

Lee Jae-myung’s Win Ignites Fiscal Expansion Fears, Korean Bonds Sold Off. After Lee's election as South Korean president, markets expect large-scale fiscal expansion. Analysts predict this year’s planned bond issuance of 207.1 trillion won will be expanded, with 2025 issuance potentially reaching 230 trillion won and next year’s hitting 246 trillion won. The 10-year yield could rise to 3.0% in the second half of the year.  

Iran Gold Prices Soar 80% in a Year as Central Bank Hoards, Citizens Hide Gold Amid Safe-Haven Rush. Under U.S. sanctions, Iranians are flocking to gold for safety, driving local prices up 80% in a year, far outpacing global gold’s 45% rise. In the year to March, Iran imported a record 100 tons of gold worth $8 billion, with analysts suggesting actual imports could be double that.  

Overseas Companies  

Stablecoin Giant Circle Raises IPO Price to $31 Per Share, Raising $1.1 Billion.  

UBS Details AI Infrastructure Boom: Nvidia Holds $1 Trillion Revenue Opportunity, Data Center Revenue Could Double Again? UBS analyst Timothy Arcuri said Nvidia has "tens of gigawatts" of AI infrastructure projects, conservatively valued over $1 trillion. If accurate, Nvidia’s data center revenue could reach $400 billion annually in 2-3 years, nearly double current expectations.  

Tesla’s European Sales Fall for Fifth Straight Month, Germany Plunges 36.2%, Norway a Bright Spot. In May, Tesla’s sales in key European markets fell for the fifth month, dropping 36.2% YoY in Germany to just 1,210 cars. U.K. sales fell over 45%, knocking Tesla out of the top four. While Norwegian sales surged 213%, Musk’s political factors are starting to weigh.  

After Years of Skepticism, Quant Giant AQR Bows to Machines, Uses AI for Investment Decisions. AQR, a long-time "human-controlled" quant fund, has fully embraced "machine-driven" decision-making, using AI and machine learning for trades. Now, AQR not only uses ML algorithms to dynamically adjust factor weights but also lets algorithms identify market patterns and place bets—even if the underlying logic isn’t fully understood.  

From Traditional PE to $800 Billion Full-Industry Asset Manager—The Rise of Apollo. By merging with Athene, Apollo颠覆ed traditional asset management: it’s not just a third-party manager but a capital deployer and one of its own largest investors. Apollo is building a firm more like a merchant, emphasizing principal investing over agency. The company believes this model will ultimately win.  

Industries/Themes  

1. Innovative Drugs: After Sansheng Pharmaceutical sealed a $6 billion+ deal, CSPC Pharmaceutical also announced a $5 billion innovative drug transaction for June. Multiple blockbuster deals have emerged since early this year, signaling a revaluation of domestic innovative drugs.  

2. Fintech: Guosheng Securities noted that with recent U.S. GENIUS Act and Hong Kong’s Stablecoin Ordinance legislation, stablecoin themes are gaining attention. With Circle’s upcoming IPO and Tether’s financials, stablecoins offer a comparable business model, representing a major fintech shift worth watching.  

3. Thermal Insulation Materials: In May 2025, AI-developed "super insulation material" emerged, using "AI + robotics" to screen catalyst materials and formulas in just 7 months—a process that traditionally took 10 years. Performance is over 2x better than aerogels, at just 1/3 the cost.  

4. Bio-Jet Fuel: European procurement has improved, lifting bio-jet fuel prices. Debang Securities believes SAF export tailwinds and price recovery could benefit qualified domestic producers with volume-price upside.  

Today’s Preview  

China May Caixin Services & Composite PMIs.  

U.S. Weekly Initial Jobless Claims.  

U.S. April Trade Balance.  

Eurozone April PPI.  

ECB Rate Decision, Lagarde Press Conference.  

Philadelphia Fed President Harker Speech.  

Japan MoF 30-Year Bond Auction.  

U.S.-Germany Leaders Meeting.  

Broadcom, lululemon Earnings.  

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