Morning News

Source: Wall Street CN

### Market Overview

Trump's "Reciprocal Tariff 2.0" has launched, with the three major U.S. stock indices all falling without hitting new highs, closing lower for the whole week, while the seven tech giants showed resilience. The pan-European stock index fell more than 1% on Friday.

Tariffs triggered inflation concerns, leading to a sell-off in U.S. Treasuries, with the 10-year U.S. Treasury yield rising nearly 6 basis points.

The U.S. Dollar Index fluctuated above the 97 mark, rebounding 1% for the whole week and moving away from its three-year low. Bitcoin's strength remained undiminished, once rising nearly 5%.

Gold rose for three consecutive days, up more than 1.3% intraday. Silver once rose nearly 3.6%, hitting a nearly 14-year high. Crude oil rose 2.7% as the market speculated that Trump plans to sanction Russian crude oil.

In early Asian time on Monday, the three major U.S. stock index futures opened lower, with S&P 500 and Nasdaq futures down 0.5%; spot gold rose about 0.2% to $3,363.46 per ounce.

### Key News

Chinese and U.S. foreign ministers held a meeting in Kuala Lumpur: agreed to strengthen communication and dialogue and explore expanding areas of cooperation.

The EU proposed three supply chain proposals to "de-risk", and von der Leyen stated on EU-China relations.

Trump said he would impose a 30% tariff on Mexico and the EU, effective August 1. Von der Leyen: The EU postponed its tariff countermeasures against the U.S. until early August. German Vice Chancellor: If trade negotiations with the U.S. fail, we will resolutely counterattack.

Deutsche Bank: "Powell being forced to step down" is a major and underestimated risk. A senior U.S. government official publicly posted a hint: Powell is considering resigning. A senior U.S. government official revealed that Federal Reserve Chairman Powell may consider resigning due to the controversy over the headquarters renovation. The Federal Reserve rarely issued a statement denying excessive renovation: no VIP restaurant, no VIP elevator, no new water features!

Food lovers across the country are frantically placing orders! After the end of Saturday, Meituan released a late battle report: 150 million orders, with an average delivery time of 34 minutes, and the riders' income was announced. The "takeaway subsidy war" restarted over the weekend. JPMorgan Chase: Is it worth it to be so fierce?

NVIDIA CEO Jensen Huang will hold a press conference in Beijing on July 16.

Dalio: The way a country "goes bankrupt" is through currency depreciation. What we need to worry about most now is the stagflation environment, and gold is the only asset that continues to preserve value.

### Market Closing Reports

European and American stock markets: The S&P 500 index closed down 0.33% at 6,259.75 points, with a cumulative weekly decline of 0.31%. The Dow Jones Industrial Average fell 0.63% to 44,371.51 points, with a cumulative weekly decline of 1.02%. The Nasdaq closed down 0.22% at 20,585.53 points, with a cumulative weekly decline of 0.08%. Europe's STOXX 600 index closed down 1.01%, with a cumulative weekly increase of 1.15%.

A-shares: The Shanghai Composite Index rose 0.01% to close at 3,510.18 points; the Shenzhen Component Index rose 0.61% to close at 10,696.1 points; the ChiNext Index rose 0.8% to close at 2,207.1 points.

Bond market: The 10-year U.S. Treasury yield rose 5.96 basis points to 4.4093%, with a cumulative weekly increase of 6.36 basis points. The 2-year U.S. Treasury yield rose 1.29 basis points to 3.885%, with a cumulative weekly increase of 0.5 basis points.

Commodities: WTI crude oil futures for August closed up 2.8% at $68.45 per barrel. Brent crude oil futures for September closed up 2.5% at $70.36 per barrel. COMEX gold futures rose 1.41% to $3,372.70 per ounce.

### Details of Key News

#### Global Highlights

Chinese and U.S. Foreign Ministers meet in Kuala Lumpur: Agree to strengthen communication and dialogue, explore expanding cooperation areas. According to Global Times, this is the first face-to-face meeting between Wang Yi and Rubio. The positive dialogue between the two sides will increase the possibility of a summit between the two heads of state, thereby further easing U.S.-China tensions. Bloomberg reported that the U.S. government has been contacting corporate executives to see if they are interested in accompanying Trump on a possible trip to China this year.

EU proposes three supply chain proposals to "de-risk"; von der Leyen comments on EU-China relations. According to Global Times, the EU recently announced three independent proposals, including an action plan for the chemical industry, a medical countermeasures strategy, and a reserve strategy. Although the reserve strategy does not directly name China, all three proposals target dependence on supply chains with China, aiming to advance the EU's "de-risking" agenda toward China.

Trump says 30% tariffs on Mexico and the EU will take effect on August 1. If Mexico achieves substantial results in cracking down on drug cartels and preventing fentanyl from flowing in, or if the EU is willing to open its trade market to the U.S., eliminate tariffs, non-tariff policies, and other trade barriers, the U.S. may consider making corresponding adjustments to the tariff policy.

Von der Leyen: EU postpones tariff countermeasures against the U.S. until early August. German Vice Chancellor: If trade negotiations with the U.S. fail, we will resolutely counterattack.

The 90-day negotiation period was "fruitless," and Trump is anxious. Trump frantically sent letters to more than 20 countries, unilaterally announcing that starting from August, 30% tariffs will be imposed on Mexico and the EU, and 25%-40% tariffs on Japan, South Korea, etc. Analysts say this may not be a bluff, and August 1 may mark the end of the "TACO" deal.

No matter how well the talks go, the "know-it-all" can change his mind at any time! The loss suffered by Vietnam has made the world afraid. It is reported that policymakers in many countries learned about the tariff rates through Trump's social media. Even traditional ally Canada was imposed a 35% tariff, and Brazil faces a high rate of 50%. Indonesia's Minister of Economic Affairs described negotiating with the U.S. as "going through a maze and returning to the starting point." Analysts say trade agreements seem to depend on one person - Trump, and even carefully constructed agreements may be overturned by his whim.

Deutsche Bank: "Powell being forced to step down" is a major and underestimated risk. Trump recently demanded Powell's resignation on the grounds of "renovation controversy." Deutsche Bank warned that if Powell is forced to step down, it will trigger a 3%-4% plunge in the dollar index within 24 hours and a 30-40 basis point sell-off in U.S. bonds. This move will also impact the independence of the Federal Reserve. ING also agrees that this will lead to a steepening of the yield curve, forming a "toxic combination" for the dollar, and the euro and yen may become safe-haven winners.

A senior U.S. government official posted publicly, implying that Powell is considering resigning. A senior U.S. government official revealed that Federal Reserve Chairman Powell may consider resigning due to the controversy over the headquarters renovation. The cost of the project has surged from $1.9 billion to $2.5 billion, criticized as a "Versailles Palace"-style luxury renovation. Powell is accused of misleading Congress when testifying about project details, and the White House Office of Management and Budget has asked him to explain the cost overruns. The market is worried about the uncertainty caused by the turmoil in the Federal Reserve's leadership, and some believe that his potential successor may pursue a more accommodative monetary policy.

The Federal Reserve rarely issued a statement denying excessive renovation: No VIP restaurant, no VIP elevator, no new water features! The $2.5 billion renovation of the Federal Reserve headquarters was criticized by the White House for serious cost overruns. Budget Director Vought accused Powell of mismanagement or perjury to Congress, pointing directly to his concealment of luxury facilities such as VIP restaurants. The Federal Reserve rarely posted on its official website to defend the renovation project, denying the construction of VIP restaurants, VIP elevators, new water features and other luxury facilities. And this renovation storm may be becoming a new excuse for Trump to remove Powell.

Trump "learned from" Nixon again; will the Federal Reserve Chairman step down because of "excessive renovation"? New Fedwire reporter Timiraos wrote that the controversy surrounding the renovation of the Federal Reserve headquarters may become an excuse for Trump to try to remove Powell due to interest rate differences. The White House advisory group accused Powell of perjury to Congress or violating building permit regulations on the $2.5 billion renovation project. This strategy echoes the 1972 Nixon administration's practice of undermining the Federal Reserve's credibility by spreading false information.

Food lovers across the country are frantically placing orders! After the end of Saturday, Meituan released a late battle report: 150 million orders, with an average delivery time of 34 minutes, and riders' income announced. As of 23:36 on Saturday, Meituan's instant retail orders hit a new high of 150 million. Both the number of orders and income of riders increased. Taking the July weekend as an example, riders' daily income increased by 111%, daily orders increased by 33%, and over 400,000 crowdsourced riders earned more than 500 yuan per day. In addition, in June, the monthly income of national high-frequency crowdsourced riders reached 9,793 yuan.

The "takeaway subsidy war" restarted over the weekend, with coffee and milk tea orders surging. JPMorgan Chase asked: Is it worth it to be so fierce? JPMorgan Chase calculated that if the instant retail market can reach 4 trillion yuan by 2030, the current investment is reasonable. But if the market size is only half of the expected, the current investment intensity is "too radical."

NVIDIA CEO Jensen Huang will hold a press conference in Beijing on July 16. The Ministry of Commerce responded to the rumor that "NVIDIA CEO Jensen Huang plans to visit China": There is no information available at present.

Dalio: The way a country "goes bankrupt" is through currency depreciation. What we need to worry about most now is the stagflation environment, and gold is the only asset that continues to preserve value. Dalio said that countries have two special abilities: printing money and taxing, and will not default and go bankrupt like enterprises and individuals. Instead, they solve debt problems through currency depreciation. The United States will adopt the "Japanese model" to deal with debt problems: printing money, currency depreciation, and artificially lowering interest rates. The U.S. fiscal situation is shocking, and the current challenges facing the United States are similar to those in the 1970s. 80% of currencies in history have disappeared, and gold is the only asset that continues to preserve value. It is recommended to allocate 10-15% of gold in the investment portfolio as a diversification tool.

#### Domestic Macro

Shanghai Stock Exchange issues "Guidelines for Sci-Tech Innovation Growth Layer"; 32 existing unprofitable enterprises enter the Sci-Tech Innovation Growth Layer from now on. The Shanghai Stock Exchange issued the "Guidelines No. 5 for Self-Regulatory Supervision of Listed Companies on the Sci-Tech Innovation Board - Sci-Tech Innovation Growth Layer." A relevant person in charge of the Shanghai Stock Exchange said in a Q&A with reporters that this reform does not set additional listing thresholds for unprofitable enterprises to be included in the Sci-Tech Innovation Growth Layer. The 32 existing unprofitable enterprises will enter the Sci-Tech Innovation Growth Layer from the date of the issuance and implementation of the guidelines, and newly registered unprofitable enterprises will enter from the date of listing. Investors participating in the subscription and trading of newly registered Sci-Tech Innovation Growth Layer stocks need to sign the "Sci-Tech Innovation Growth Layer Risk Disclosure Statement."

A-shares have shown a "bull market atmosphere." Shenwan Hongyuan Securities believes that domestic "anti-involution" policies have promoted the mid-stream manufacturing industry's fundamental expectations to switch to 2026 in advance. The continuous contraction of capital expenditure will improve the long-term supply and demand pattern, and short-term high-elasticity opportunities have emerged. The breakthrough of the Shanghai Composite Index directly boosts risk appetite, and the short-term profit-making effect has spread comprehensively. The market has begun to reflect longer-term logic + rising high-beta assets.

Which industries have better prospects for "anti-involution"? Huatai Securities pointed out that the prospects for "anti-involution" in industries show three-level differentiation: Photovoltaics (46% loss) and batteries (41%) have the clearest short-term price bottom due to high losses forcing production cuts; Steel (64% state-owned enterprises) and coal (84%) have superior policy coordination but need real estate recovery to support demand; Home appliances and machinery, dominated by private enterprises with acceptable profits, have the weakest motivation to reduce production capacity, and the prospects for "anti-involution" are questionable.

Photovoltaics have just been lifted out of the ICU, and major shareholders are ready to run away with buckets? Major shareholders reduce their holdings of their own stocks reasonably, legally, and compliantly due to "personal capital needs," which is okay. Cashing out a little to get some money is a yearning for a better life, which is understandable. However, the entire industry is in "anti-involution," and photovoltaics have just been lifted out of the ICU. Such eagerness still makes investors who are trapped feel uncomfortable.

#### Domestic Companies/Industries

China's AI application market: State-owned enterprises have strong demand, small and medium-sized enterprises accept the subscription system, and C-end monetization is slow. The demand for AI from state-owned enterprises has changed from "building foundations" to "putting it into use," and large orders continue to emerge.

Zong Fuli of Wahaha was sued; the plaintiff claims to be a "half-sibling." News about Zong Fuli being sued went viral. According to the latest report, Wahaha Chairman Zong Fuli was sued in Hong Kong due to an asset dispute, and the three plaintiffs claimed to be Zong Fuli's "half-siblings." Before this, Zong Fuli has always been regarded by the public as the only daughter of Zong Qinghou (deceased).

#### Overseas Macro

When will the impact of tariffs appear? These two U.S. data are closely watched this week. The market expects that the U.S. core CPI in June will have the largest month-on-month increase in five months, and the year-on-year increase will also rebound for the first time since January. At the same time, retail sales will rise slightly after two consecutive months of decline. Although the June data may only reflect "limited tariff transmission," more and more analysts expect that inflationary pressures will show a cumulative effect as corporate pricing gradually adjusts in the second half of the year.

Behind the global stock market's desensitization to Trump's tariffs. GF Securities believes that Trump's "repetitiveness" in the past three months is固然 a reason, but more importantly, fundamentals have begun to become the dominant factor in market pricing. The Beautiful Act has brought expectations of a soft landing in the U.S., and interest rate cuts + fiscal expansion have driven Europe's recovery. From the perspective of static PMI, the world has initially shown a trend of resonant recovery, and the PMIs of the U.S., Europe, ASEAN, Brazil, India, etc. have mostly bottomed out or improved. Looking forward, the market may shift to pricing changes in fundamentals, as in 2020, and gradually become desensitized to exogenous variables such as tariffs, and tariffs should not be regarded as the main trading factor.

Iranian media released details of Israel's attempt to assassinate the Iranian president: leg injuries, exports blocked. Israel launched an attack on the building where Iran's Supreme National Security Council was meeting in June. Six bombs or rockets attacked the building's entrances and exits, and President Pezeshkiyan suffered minor leg injuries. Iran has begun investigating possible spies.

#### Overseas Companies

Sam Altman: Open-source model release delayed. OpenAI's CEO Altman said that the open-source language model originally scheduled to be released next week will be delayed because it needs time for additional security testing and review of high-risk areas, and it is currently uncertain how long this will take.

Because of Microsoft, OpenAI's acquisition of "AI programming unicorn" Windsurf failed, and Google "emerged as the winner." According to OpenAI's existing agreement with Microsoft, Microsoft has the right to access OpenAI's technology, which has become a key obstacle to the deal. Google took the opportunity to "step in" by paying technical license fees to hire Windsurf's CEO and core team, obtaining a non-exclusive license to the technology. This "talent + technology license" model has become a popular strategy for tech giants to acquire AI talents.

Google spent 17 billion yuan to recruit Windsurf; Silicon Valley's "AI talent poaching" has intensified, with 99% of the money going to 1% of people. Whether it's Meta, Google, Apple, or Musk's xAI, major giants are using tens of millions or hundreds of millions of dollars in compensation packages to lure teams from competitors in a short time, just to get a few founders and technical backbones.

A senior Meta employee who left angrily exposed the inside story: Infighting, taking credit, and layoffs at the bottom are all cancers. Meta's departing research scientist Tijmen Blankevoort released a 2,000-word internal complaint letter, exposing the company's deep-seated crises: a "culture of fear" pervades internally, the last-in-first-out system has spawned credit-grabbing, infighting, and territory disputes; departments are seriously fragmented, such as the AI team and hardware department have almost no collaboration; employees are generally lost in vision and work due to fear of layoffs.

Musk spent 2 billion dollars to send Grok 4 to Mars, built a cosmic brain with 200,000 GPUs, and generated a 3D black hole with one sentence. Within 72 hours of its release, Grok 4 became popular in Silicon Valley! The first test on the whole network was amazing. A game can be deployed in 2 minutes, and a complete animation can be produced with one sentence. On the second anniversary of xAI's establishment, Musk's SpaceX will invest 2 billion dollars, and it is said that the model will be sent to Mars in the future.

#### Industries/Concepts

1. Organosilicon: Dow announced that it will close its Barry basic siloxane plant in the UK by mid-2026, which indicates that European production capacity supply will be reduced by nearly one-third, the largest ever withdrawal of upstream organosilicon production capacity in the world. Guohai Securities pointed out that the expected production capacity withdrawal will benefit domestic organosilicon exports, filling the supply and demand gap caused by the withdrawal of European production capacity.

2. Rare earths: Tianfeng Securities research report pointed out that the event that MP Materials will receive billions of dollars in investment from the U.S. Department of Defense this week has become an important catalyst for the sector. The core is that it is expected to open the ceiling for the price increase of rare earth magnetic materials. Looking forward, fundamentals may improve significantly, especially in the third quarter, which is expected to see "both volume and price rise."

3. Central construction enterprises: Guosheng Securities research report pointed out that the business model of China's construction industry is essentially quasi-financial, which is somewhat similar to banks. Previously, the valuation contraction of the construction sector was mainly due to market concerns about slow payment collection by government and real estate developers and demand contraction, while the current market has fully priced in the pessimistic expectations for infrastructure and real estate. Therefore, compared with the banking sector with a similar business model, the current construction sector has an obvious need to catch up in terms of price increases.

4. Coal: Huafu Securities pointed out that the status of coal as a major energy source is difficult to change in the short term. Although the weak macro economy has affected coal demand periodically, the rigid supply and rising costs have effectively supported the bottom of coal prices, and coal prices are still expected to remain volatile. Coal enterprises generally have healthy asset statements, coupled with the overall improvement in dividend ratios, coal stocks still have comparative advantages.

#### Preview of Today's Key News

China's import and export data for June. The State Council Information Office held a press conference to introduce the import and export situation in the first half of 2025.

The State Council Information Office held a press conference, inviting Zou Lan, Vice Governor of the People's Bank of China, to introduce the financial statistics for the first half of 2025.

Trump said he will issue a "major announcement" about Russia.

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