Morning News

Source: Wall Street News

- Powell expects a significant rise in inflation pressure, offsetting the optimistic sentiment brought about by Trump's claim during the trading session of US stocks that Iran offered to negotiate. After Powell's press conference, US stocks once turned down across the board, and finally the major stock indexes closed mixed.

- US technology stocks led the gain. The US plans to relax the capital regulations restricting banks' trading of US bonds, and bank stocks are among the top gainers. Circle, the first stock of stablecoins, soared more than 34% after the US Senate passed the stablecoin bill overnight.

- After the Fed's resolution, the yield on US bonds once reached a new daily low, but after Powell's hawkish speech, the yield on US bonds only slightly declined. Gold prices once fell more than 1% from the intraday high. Platinum reached its highest level in 11 years. Crude oil fluctuated widely. Trump said he did not want the US to intervene in the Middle East situation, and oil prices declined during the trading session.

- During the Asian session, the A - share market fluctuated and closed higher. The semiconductor industry chain surged in the afternoon. The Hong Kong stock market closed down more than 1%. The "Three Treasures of New Consumption" diverged. Pop Mart rose more than 1%, and MIXUE Group fell more than 2%.

**Key News**

- Pan Gongsheng made an important statement, involving the transformation of the monetary policy framework. He mentioned stablecoins for the first time and announced eight major financial policies, including the establishment of a trading report library for the inter - bank market, the establishment of an international operation center for digital RMB, and the establishment of a personal credit reporting agency.

- Wu Qing: Set up a growth layer on the Sci - Tech Innovation Board to support the listing of high - quality unprofitable innovative enterprises and pilot the pre - review mechanism for IPOs.

- Li Yunze: Support foreign - funded institutions to participate in more financial business pilots and explore greater - scale financial opening - up.

- Wang Yi, the foreign minister, said that Israel's actions violated international law and the norms of international relations.

- Trump said that Iran wanted to negotiate and did not propose that the US reinforce Israel. The media reported that Trump had approved the attack on Iran but had not yet given the final order. The third US aircraft carrier will be deployed near Israel. The US defense secretary said that all plans were in place, including the situation after the attack on Iran. Khamenei: Iran will not surrender, and any strike by the US will bring irreversible consequences.

- The Fed continued to hold steady, saying that the uncertainty had decreased but was still high. It still expected two interest rate cuts this year, suggesting an increased risk of stagflation. Powell: It is expected that the inflation pressure will rise significantly in the coming months due to tariffs, and the labor market does not call for an interest rate cut.

- Trump called Powell stupid again: It would be good if the interest rate could be cut by 2.5 percentage points. Can I appoint myself to the Fed?

- When the market was volatile in April, the US bonds held by foreign investors were close to a record high. China reduced its holdings of US bonds by $8.2 billion in April. Canada's holdings of US bonds dropped sharply by $57.8 billion in April.

- The price war among AI giants heated up: OpenAI began to sell the enterprise - edition ChatGPT at a discount, putting Microsoft in a passive position.

- US regulators plan to relax capital rules, reduce the capital buffer by 1.5% to promote the trading of government bonds.

- Trump dealt a heavy blow to the US electric vehicle industry. 14 million units of sales were lost, and it may be at the bottom of the world in 2040.

**Market Closing Report**

- European and American stock markets: The S&P 500 index closed down 0.03%, at 5,980.87 points. The Dow Jones Industrial Average closed down 0.10%, at 42,171.66 points. The Nasdaq index closed up 0.13%, at 19,546.27 points. The European STOXX 600 index closed down 0.36%, at 540.33 points.

- A - share market: The Shanghai Composite Index reported 3,388.81 points, up 0.04%. The Shenzhen Component Index reported 10,175.59 points, up 0.24%. The ChiNext Index reported 2,054.73 points, up 0.23%.

- Bond market: The yield on the 10 - year benchmark US Treasury bond was basically flat, at 4.3909%. It traded in the range of 4.4087% - 4.3377% during the day, showing an overall V - shaped trend. The yield on the two - year US Treasury bond fell 1.04 basis points, at 3.9414%.

- Commodities: COMEX gold futures fell 0.67%, at $3,383.90 per ounce. WTI crude oil closed down 0.85%, at $74.50. Brent crude oil closed down 0.87%, at $76.52.

Details of the News

### Global Highlights

- **Pan Gongsheng's Important Statement**: Pan Gongsheng made important remarks on the transformation of the monetary policy framework and mentioned stablecoins for the first time. He stated that over the past year, the People's Bank of China has adhered to a supportive monetary policy stance and has introduced a number of monetary policy measures in terms of quantity, price, and structure, effectively supporting the continuous recovery and improvement of the economy and the stability of the financial market. Pan Gongsheng announced eight major financial policies, including the establishment of a trading report library for the inter - bank market, the establishment of an international operation center for the digital yuan, and the establishment of a personal credit reporting agency.

- **Wu Qing's Announcement**: Wu Qing announced the establishment of a growth layer for the Science and Technology Innovation Board to support the listing of high - quality unprofitable innovative enterprises and pilot a pre - review mechanism for IPOs. He stated that the Science and Technology Innovation Growth Layer of the Science and Technology Innovation Board will be established, and the fifth set of listing standards for unprofitable enterprises on the Science and Technology Innovation Board will be restarted. The Growth Enterprise Market will officially adopt the third set of standards to support the listing of high - quality unprofitable innovative enterprises. At the same time, the first batch of data center REITs nationwide will be approved, the launch of the Science and Technology Innovation Bond ETF will be accelerated, and the research on the RMB foreign exchange futures will be carried out. He also pointed out that greater efforts should be made to cultivate and strengthen patient capital and long - term capital, and promote social security and insurance funds to participate in private equity investment.

- **CSRC's Policy**: The China Securities Regulatory Commission has included all unprofitable high - tech enterprises in the Science and Technology Innovation Growth Layer and piloted a pre - review mechanism for IPOs of high - quality high - tech enterprises. Regarding the entry and exit conditions for enterprises, all unprofitable high - tech enterprises are included in the Science and Technology Innovation Growth Layer, and the exit conditions are implemented with a new - old demarcation. Newly registered unprofitable high - tech enterprises that meet one of the following conditions will be removed from the Science and Technology Innovation Growth Layer: (1) The net profit for the latest two years is positive and the cumulative net profit is not less than 50 million yuan; or (2) The net profit for the latest year is positive and the operating income is not less than 100 million yuan.

- **Li Yunze's Statement**: Li Yunze supports foreign - funded institutions to participate in more financial business pilots and explores greater - scale financial opening - up. He said that the restrictive measures in the banking and insurance fields have been basically lifted. In the next step, the experience and practices of expanding institutional opening - up in free trade zones and free trade ports will be vigorously replicated and promoted, supporting foreign - funded institutions to participate in more financial business pilots, benchmarking against the relevant rules in the financial field of international high - standard economic and trade agreements, and exploring wider - ranging and greater - scale opening - up.

- **Wang Yi's Remarks**: Foreign Minister Wang Yi stated that Israel's actions violate international law and the norms of international relations. The conflict has also interrupted the hard - won indirect negotiation process on the Iranian nuclear issue, making Oman's mediation efforts in vain. China has always advocated the peaceful settlement of all disputes and opposed the use or threat of force. We have immediately expressed our stance against Israel's use of force.

- **Trump's Statements and Related Events**: Trump said that Iran wants to negotiate and did not propose that the United States reinforce Israel. The media reported that Trump has approved the attack on Iran but has not yet issued a final order. Trump is still considering whether to launch a military strike on Iran's nuclear facilities. He said that it may or may not happen and has issued an "ultimatum" to Iran. Iran even suggested negotiating at the White House, but it is too late to talk now. The situation is very different from a week ago, and the next week is crucial. He said that he talks to Netanyahu every day and did not imply providing more US aid during the conversation. After Khamenei said that Iran would never yield, Trump said "good luck to him" and still hinted that diplomatic settlement is "never too late". During Trump's speech, crude oil, which had risen more than 1% intraday, turned down and hit a new daily low, falling more than 2%. Trump later said that he does not want to be involved in the Middle East situation and has not decided whether the US will intervene militarily. The US is not seeking a cease - fire but demanding that "Iran has no nuclear weapons" and that "it is still possible to reach an agreement". The media reported that Trump has not issued a final order to strike Iran and is observing whether Iran will abandon its nuclear program. The third US aircraft carrier will be deployed near Israel. The US Defense Secretary said that all plans have been made, including the situation after the attack on Iran. CCTV quoted US officials and other sources as saying that the US "Ford" aircraft carrier strike group is expected to be deployed to the European theater next week and is likely to sail into the eastern Mediterranean Sea near Israel. There has been a large - scale internet outage in Iran. The relevant Iranian department has temporarily restricted internet access, indicating that Israel is using the communication network for military purposes. Previously, Iran stated that Israel launched a cyber - attack on Iranian banks and Iranian state - run television. The US Defense Secretary said that Iran has the opportunity to reach and should reach an agreement, and Trump's words are meaningful. If the US military participates in the war, Iran is ready to retaliate by launching missiles at US military bases and laying mines in the Strait of Hormuz. Khamenei said that Iran will not surrender, and any US strike will bring irreversible consequences. When the US may militarily intervene in the Israel - Iran conflict, Iran's retaliatory actions have quietly escalated. It has prepared missiles to target US military bases and laid mines in the Strait of Hormuz to trap US warships. Currently, the Israeli military has confirmed that missiles have been launched from Iran towards Israel. The US military commanders have put troops on high alert at military bases throughout the Middle East, involving more than 40,000 troops.

- **Fed's Decisions and Statements**: The Federal Reserve continued to hold off, saying that uncertainty has decreased but is still high, and still expects to cut interest rates twice this year, suggesting an increased risk of stagflation. Powell said that inflationary pressure is expected to rise significantly in the coming months due to tariffs, and the labor market does not call for a rate cut. The Federal Reserve lowered its GDP growth expectations for this year and next, expecting GDP to grow by 1.4% this year, and raised its unemployment rate expectations and PCE inflation expectations for this year, next year, and the year after. The PCE expectation for this year is 3.0%. The "New Fed News Service" said that the Federal Reserve has opened the door to rate cuts in the second half of the year, and to resume rate cuts, it needs to see a weakening of the labor market or strong signs that the price increase caused by tariffs is relatively moderate. The dot - plot interest rate forecast highlights the internal division of the Federal Reserve. Powell said at a press conference that the current US economic situation is stable, the adjustments of trade policies and fiscal policies are still uncertain, and the imposition of tariffs may push up US prices. The impact of tariffs on inflation may be more persistent, and it is expected that there will be a certain increase in inflationary pressure in the coming months. He also said that, for now, it is very uncertain how large the overall impact of tariffs will be, how long it will last, and when it will be fully manifested. He is satisfied with the labor market situation.

- **Trump's Criticism of Powell**: Trump criticized Powell again, saying that it would be good if the interest rate could be cut by 2.5 percentage points. He asked, "Can I appoint myself to the Federal Reserve?" Trump said that the key lending rate of the Federal Reserve should be reduced by at least two percentage points, and it would be good if the interest rate could be cut by 2.5 percentage points. He also said, "We have a person who just refuses to cut interest rates. He is not a smart person. I don't even think he is very political. I think he just hates me. I have called him all kinds of bad names to make him cut interest rates. Can I appoint myself to the Federal Reserve? I would do much better than these people."

- **Foreign Investors' Holdings of US Bonds**: During the market turmoil in April, foreign investors' holdings of US bonds were close to a record high. Japan's holdings of US Treasury bonds increased by $3.7 billion in April, the fourth consecutive month of increase. China's holdings of US bonds decreased by $8.2 billion in April to $757 billion. The holdings of US bonds in the Cayman Islands (considered a popular registration place for hedge funds and other leveraged investors) decreased by $7 billion in April. Canada's holdings of US bonds dropped sharply by $57.8 billion in April to $368.4 billion.

- **AI Giants' Price War**: The price war among AI giants has intensified. OpenAI has started to sell the enterprise - edition ChatGPT at a discount, putting Microsoft in a passive position. OpenAI has started to offer enterprise customers a subscription discount of up to 20% for the enterprise - edition ChatGPT, on the condition that they sign a multi - year contract and purchase additional high - end AI products or API calls. This move directly impacts the sales business of its partner Microsoft. This move by OpenAI may exacerbate the already tense cooperative relationship between the two sides.

- **US Regulatory Changes**: US regulatory agencies plan to relax capital rules, reducing the capital buffer by 1.5% to promote Treasury bond trading. The three major US bank regulatory agencies are planning to reduce the enhanced supplementary leverage ratio (eSLR) by up to 1.5 percentage points to encourage banks to increase their holdings of Treasury bonds, thereby boosting market liquidity. However, some experts question the actual effectiveness of this policy and worry that it may exacerbate systemic risks rather than effectively solve the problems in the Treasury bond market.

- **Trump's Impact on the US Electric Vehicle Industry**: Trump has hit the US electric vehicle industry hard, with 14 million sales gone, and the US may be at the bottom of the global rankings by 2040. Bloomberg New Energy Finance (BNEF) released a report on Wednesday stating that Trump's reversal of the current policies supporting electric vehicles may cause the long - term development of the US electric vehicle industry to lag behind that of China and Europe, and it may even be difficult to reach the global average penetration rate by 2040. BNEF has lowered its US electric vehicle sales forecast for the first time, cutting the sales forecast of battery - powered vehicles by 14 million units by 2030.

### Domestic Macroeconomy

- **Li Qiang's Statements**: Li Qiang emphasized the need to adhere to innovation - driven development, focus on expanding effective demand, and promote the continuous improvement of the economic operation. He pointed out that the high - end, intelligent, and green development of the construction machinery industry is the general trend. It is necessary to benchmark against the international advanced level, actively use technologies such as artificial intelligence and clean energy to promote industrial transformation and upgrading. It is necessary to aggregate industry resources, build a collaborative innovation platform for large, medium - sized, and small enterprises, and promote the complementary advantages and mutual empowerment of enterprises.

- **Central Financial Commission's Policies**: The Central Financial Commission has accelerated the construction of the Shanghai Science and Technology Innovation Financial Reform Pilot Zone and studied and supported the establishment of an export supervision warehouse for the international board of the Shanghai Gold Exchange. The Central Financial Commission has issued the "Opinions on Supporting the Accelerated Construction of the Shanghai International Financial Center", and the main measures include: 1. Deepening the construction of the financial market. 2. Enhancing the level of financial institutions. 3. Improving the financial infrastructure. 4. Expanding high - level two - way opening - up of finance. 5. Improving the quality and efficiency of serving the real economy. 6. Effectively maintaining financial security under the condition of opening - up.

- **Howard Marks' View on the Chinese Market**: Howard Marks is "very optimistic" about the Chinese market. Marks interprets the advantages of the Chinese economy using the "1234" framework. The "one goal" points to the transformation of China's high - quality growth model, which relies on the "two engines" - the green transformation and the digital transformation. There is also the "coordination of three policies", that is, the coordination of monetary policy, fiscal policy, and structural reform policies. The "four" refers to the "four fundamental advantages".

### Domestic Companies

- **Goldman Sachs' Prediction on AI/AR Glasses**: Goldman Sachs predicts that the AI/AR glasses market in China is about to explode, following the growth path of TWS headphones, with sales expected to reach 7 million units by 2030. Goldman Sachs said that the rapid decline in the price threshold will pave the way for large - scale popularization. The average selling price of AI/AR glasses is expected to decline continuously from $306 in 2025 to $192 in 2030. In addition, the continuous improvement of AI functions is becoming the key to product differentiation. Rokid glasses will be connected to multiple large models such as Tongyi Qianwen, and Meta's products will be equipped with self - developed AI models.

### Overseas Macroeconomy

- **G7 Summit and Tariff Risks**: The G7 Summit ended "without an agreement", and the tariff risk entered the "countdown". With only three weeks left until the global tariff deadline on July 9, Trump showed a tough stance at the summit, which was regarded as the "last negotiation opportunity". Not only did he fail to reach any new trade agreements, but he also further strengthened his reliance on tariffs. This put the allies in a dilemma: either accept the high demands of the United States or face punitive tariffs.

- **The Impact of US Debt Issuance on the US Stock Market**: How the US issues its debt is crucial to the US stock market. Historical data shows that whenever the net issuance of medium - and long - term bonds approaches or exceeds 100% of the fiscal deficit, the US stock market is bound to experience a sideways trend or a decline. When the proportion exceeds 85% and the total issuance slows down, the performance of the S&P 500 in 1 - 12 months is significantly lower than the average level. Currently, this proportion is close to 100%, and the growth rate of the total debt issuance is also slowing down, triggering market speculation that the Treasury Department will repeat the "short - term debt bailout" in 2023.

- **Japan's Export Decline**: Japan's exports in May fell for the first time in eight months, shrinking by 1.7%. Japan's exports to the US in May fell by 11.1% year - on - year. More worryingly, the automotive industry, which is the mainstay of Japan's exports, saw a 6.9% decline in global exports in May, with exports to the US plummeting by 24.7%. Estimates by the Japanese Research Institute show that if all threatened tariff measures come into effect, Japan's exports to the US will decline by 20% - 30%.

- **South Korean Central Bank Governor's View on Stablecoins**: The governor of the Bank of Korea, Lee Chang - yong, said that he is not opposed to the won - based stablecoins but is worried about the foreign exchange situation. He warned on Wednesday that the issuance of won - based stablecoins may make them easier to exchange with the US - dollar - based stablecoins, which in turn may increase the demand for the US - dollar - based stablecoins, making it difficult to manage the foreign exchange.

- **The Strait of Hormuz Issue**: Morgan Stanley discussed three possibilities regarding the Strait of Hormuz. Morgan Stanley believes that although Iran has threatened to blockade the Strait of Hormuz, the complete closure of the strait is still a small - probability event. Under the benchmark scenario, military conflicts will not necessarily disrupt oil flows. The scenario of reduced Iranian exports is considered a more likely development direction. Unlike the 10% reduction in global effective capacity caused by the interruption of the Red Sea route, the strategic importance of the Strait of Hormuz mainly lies in the energy transportation field. The tanker shipping sector will benefit significantly from the reduction in the capacity of the "dark fleet", while the container shipping sector will be relatively less affected.

### Overseas Companies

- **Sam Altman's Vision for the Future of AI**: Sam Altman of OpenAI described a future world of rapid AI development in a candid conversation with his brother. He predicted that AI will discover new sciences in 5 - 10 years, AI companions will be everywhere, and humanoid robots will walk on the streets, which will be a landmark moment to make people truly feel that "the future is here". Regarding Meta's billion - dollar talent - poaching campaign, Altman said there is no need to worry as there are significant differences in corporate culture.

- **Silicon Valley Giants' Lobbying for AI Regulation**: Silicon Valley giants such as Amazon, Google, Microsoft, and Meta are pushing the US Senate through lobbying groups to pass an unprecedented proposal: prohibiting states from regulating AI models in the next ten years. Opponents believe that this proposal is "a grab by tech oligarchs trying to concentrate more wealth and power."

- **Marvell's AI Progress**: Marvell shared its latest AI progress, stating that customized computing has fully exploded and the target market has doubled to $94 billion. Marvell has raised its expected potential market size (TAM) for data centers in 2028 from $75 billion last year to $94 billion. Among them, the scale of customized XPU reaches $40 billion, with a compound annual growth rate (CAGR) of 47%. The scale of XPU - supporting components reaches $15 billion, with a CAGR as high as 90%, almost doubling every year.

Industry/Concepts  

1. Construction Machinery: Guosheng Securities pointed out that the construction machinery industry is ushering in an upward cycle resonating both domestically and internationally. Domestically, both excavators and non-excavator equipment are in the replacement cycle, and the third upward cycle began in 2024. Overseas, markets outside Europe, America, and Japan are essentially "China-like" markets, with high potential market space and upper limits of market share. For original equipment manufacturers (OEMs), profit elasticity will significantly exceed revenue growth.  

2. Military Trade: A research report by Changjiang Securities noted that the Middle East is one of the core regions for global military trade, accounting for 26% of worldwide military trade orders. For a long time, complex religious, ethnic, and sovereignty issues in the region have led to continuous conflicts, generating strong demand for military trade. Looking ahead, the share of Chinese equipment in Middle Eastern military trade is expected to rise.  

3. Automotive Glass: Industrial Securities stated that against the backdrop of homogeneous vehicle models, finding differentiated selling points has become an urgent need for automakers to compete on configurations. Dimmable sunroofs address consumers' concerns about sunroofs being "non-sunscreen," effectively solving the main pain points of consumers regarding sunroof glass. The penetration rate of dimmable sunroofs is expected to accelerate.  

4. Civil Explosives: A Pacific Securities report indicated that the civil explosives industry is undergoing accelerated integration, with steady demand growth. Leading civil explosives enterprises are accelerating their overseas expansion, securing projects in Africa, the Middle East, South America, and other regions, demonstrating strong potential for overseas revenue growth.  

**Upcoming Key Events of the Day**  

- China's share of global payments via SWIFT in May.  

- The 2025 Lujiazui Forum is held in Shanghai.  

- The Bank of England announces its interest rate decision.  

- European Central Bank President Christine Lagarde delivers a speech.  

- U.S. financial markets are closed for Juneteenth.  

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