Morning News

Source: Wall Street Journal  

**Market Overview**  

Investors awaited earnings reports from companies like Google and Tesla this week, coupled with the ongoing impact of tariffs on the market. Although the Nasdaq and S&P 500 indices hit new intraday highs on Monday, their closing gains were significantly pared back from the day's peaks.  

Google rose 2.7%, leading the "Magnificent Seven" tech giants. Steel stock Cleveland-Cliffs surged nearly 13%, as its Q2 steel shipments reached a record high.  

U.S. Treasury yields fell across the board, with the 10-year yield dropping over 3 basis points. The dollar declined 0.6%, nearing last week's lows. The yen strengthened, gaining over 1% compared to Friday's close.  

As the dollar weakened, precious metals broadly advanced. Gold rose nearly 1.5%, briefly reclaiming the $3,400 level. Silver climbed over 2%, approaching the record high set the previous Monday.  

During the Asian session, A-shares and H-shares rallied together, with the Shanghai Composite hitting a year-to-date high and the Hang Seng Index reaching its highest level in over three years. Infrastructure stocks surged collectively, while a "fat-finger" error occurred in Hong Kong stocks. Government bonds fell, and commodities broadly rose.  

**Key News**  

U.S. Treasury Secretary Besant: Federal Reserve policy needs re-evaluation; trade negotiations will prioritize quality over deadlines.  

The outlook for a U.S.-EU trade deal dims, as the EU considers a "nuclear option" for countermeasures. U.S. Commerce Secretary: August 1 is the final deadline; Europe is prepared to "fight back."  

U.S. Representative Luna sent a letter to the Justice Department, accusing Powell of perjury twice and proposing criminal charges.  

U.S. Congressional Budget Office: The "Big Beautiful" tax law will increase the government deficit by $3.4 trillion over a decade.  

With his political career in jeopardy, Ishiba Shigeru attempts to "extend his life" through U.S.-Japan trade negotiations.  

Jensen Huang: Take a closer look at Huawei's phones, and you'll understand the technological marvel inside; China's pace of innovation is unstoppable, and its supply chain is a global miracle!  

GPT-5 may launch within two weeks, while GPT-6 may already be in training, Altman teases millions of GPUs. IMO slams OpenAI for self-proclaimed gold medal, stating "none of the 91 judges participated in scoring." Google Gemini Advanced wins IMO 2025 official gold certification: pure natural language end-to-end reasoning. Alibaba launches upgraded Qwen3, outperforming leading closed-source models like Kimi-K2.  

Trump Media holds a cumulative $2 billion in Bitcoin and related assets, with cryptocurrencies becoming a primary source of wealth.  

Amid tariff pressures, NXP reports weak Q2 auto chip sales, with Q3 revenue expected to decline further; shares drop over 5% after hours.  

**Market Closing Prices**  

**Global Stocks**:  

- S&P 500: +0.14%, closing at 6,305.60  

- Dow Jones: -0.04%, closing at 44,323.07  

- Nasdaq: +0.38%, closing at 20,974.18  

- Europe STOXX 600: -0.08%, closing at 546.58  

**A-Shares**:  

- Shanghai Composite: 3,559.79, +0.72%  

- Shenzhen Component: 11,007.49, +0.86%  

- ChiNext: 2,296.88, +0.87%  

**Bond Markets**:  

- U.S. 10-year Treasury yield: -4.57 bps, at 4.3698%  

- U.S. 2-year Treasury yield: -1.89 bps, at 3.8502%  

**Commodities**:  

- COMEX gold futures: +1.57%, at $3,411.20/oz  

- WTI August crude oil futures: -0.21%, at $67.20/barrel  

- Brent September crude oil futures: -0.10%, at $69.21/barrel

**Key News Details**  

**Global Highlights**  

U.S. Treasury Secretary Besant: Federal Reserve policy needs reevaluation; trade negotiations will prioritize quality over deadlines. Besant criticized the Fed's "fearmongering" about tariffs, noting that tariffs have had almost no inflationary effect so far. He emphasized the need to review whether the Fed has successfully fulfilled its duties and made it clear that the Trump administration prioritizes the quality of trade agreements over timelines.  

U.S.-EU trade deal prospects dim as EU considers "nuclear option" countermeasures. Reports indicate that the U.S. has proposed stricter trade conditions, including raising tariffs to 15% or higher, maintaining the current 25% auto tariffs, and possibly imposing 100% tariffs on pharmaceuticals. Faced with these tough demands, Germany has shifted its stance, and the EU is growing increasingly assertive, considering retaliatory measures such as the "anti-coercion instrument."  

No more TACO this time? U.S. Commerce Secretary: August 1 is the final deadline; Europe is preparing to "fight back." U.S. Commerce Secretary Lutnick stated on Sunday that August 1 is a "hard" deadline, after which the EU will face tariffs of at least 30% if no new trade agreement is reached.  

U.S. Representative Luna sends letter to DOJ, accusing Powell of perjury twice and proposing criminal charges. Florida Republican Representative Anna Paulina Luna reportedly sent a letter to the U.S. Department of Justice, accusing Fed Chair Powell of perjury twice and calling for criminal charges. Luna previously wrote on X that she believed Trump would soon fire Powell, but the controversy quickly subsided, and no dismissal has occurred. Later on Monday, the White House press secretary stated that Trump has no plans to fire Powell but emphasized that Powell needs to cut rates.  

Report: Trump administration to inspect Fed renovation project this week. White House Deputy Chief of Staff James Blair revealed that the Trump administration plans to inspect the Fed's $2.5 billion renovation project this week. Powell has informed the administration that the "design plans have changed," while the Fed claims the changes are minor and require no further review.  

U.S. CBO: "Big Beautiful" tax law will increase government deficit by $3.4 trillion over a decade. The Congressional Budget Office (CBO) also estimates that provisions of the "Big Beautiful" bill will result in 10 million Americans losing health insurance by 2034. The White House press secretary dismissed the CBO's deficit estimates as insignificant. Earlier, the CBO projected the bill would increase the U.S. deficit by $3.3 trillion over the next decade.  

Political career in jeopardy: Ishiba Shigeru tries to "extend his life" through U.S.-Japan trade talks. Facing resignation pressure, Ishiba is attempting to buy time by negotiating key trade deals with the Trump administration, particularly on auto tariffs. Historical precedents show that prime ministers who lose their majority in the upper house typically resign within two months. The market has already begun speculating about successors, with younger figures like Shinjiro Koizumi seen as promising candidates.  

Why are the yen and Japanese stock futures rising amid Japan's political upheaval? Analysts suggest that investors had already priced in a worse defeat for the ruling coalition or even Ishiba's resignation. The unwinding of such positions and relief after the political risk event have contributed to the yen's initial rebound. Future price movements will depend on three factors: whether the LDP retains or loses its coalition majority, whether Ishiba remains prime minister, and the outcome of the LDP leadership election if Ishiba steps down.  

Impact of Japan's ruling coalition's crushing defeat: Uncertainty fuels yen bearishness, rate hike prospects shift, and trade talks at risk? Although safe-haven demand briefly boosted the yen, strategists at several investment banks remain pessimistic, with HSBC warning the yen could fall to 152. With the August 1 deadline for U.S.-Japan trade talks looming, political weakness may undermine Japan's bargaining power. Markets fear that Ishiba's resignation could trigger a chain reaction of foreign sell-offs, leading to greater volatility in Japanese assets.  

Jensen Huang: Take a closer look at Huawei phones to see the technological marvel; China's innovation pace is unstoppable, and its supply chain is a global miracle! Huang praised China's supply chain system for its scale, complexity, and technological sophistication, calling it a "global miracle." He emphasized that Huawei is an "extraordinary" tech giant, and a closer look at its phones reveals "technological marvels." Meanwhile, China's pace of innovation is unstoppable, with companies like DeepSeek proving the strength of domestic AI capabilities.  

GPT-5 may launch within two weeks; GPT-6 may already be in training, Altman teases millions of GPUs. Recent leaks suggest GPT-5 could be released in the next two weeks, possibly as a system of multiple models with a "router" that automatically directs prompts to the most suitable model. Meanwhile, GPT-6 has reportedly begun training, with Altman expressing confidence in models over the next 1-2 years and predicting AI will evolve into "AI scientists" capable of discovering new knowledge.  

IMO slams OpenAI for self-proclaimed gold medal: "None of the 91 judges participated in scoring." Netizens call it "shameless hype." Less than 24 hours after OpenAI claimed its new model had won an IMO gold medal, the story took a dramatic turn. OpenAI was not among the AI companies collaborating with the IMO for testing, and none of the 91 official IMO judges evaluated its submissions. This means OpenAI's "gold medal" was entirely self-declared, with no official certification.  

Google Gemini Advanced wins IMO 2025 official gold certification: Pure natural language end-to-end reasoning. Google DeepMind just released a major blog post announcing that its advanced Gemini model, equipped with "Deep Think" capabilities, achieved a gold medal standard at the 2025 International Mathematical Olympiad (IMO), solving 5 out of 6 problems with a total score of 35 points!  

Alibaba launches upgraded Qwen3, outperforming leading closed-source models like Kimi-K2. The new Qwen3 model shows significant improvements in general capabilities, including instruction following, logical reasoning, text comprehension, math, science, programming, and tool usage. It excels in multiple evaluations such as GQPA (knowledge), AIME25 (math), LiveCodeBench (programming), Arena-Hard (human preference alignment), and BFCL (Agent capabilities), surpassing top open-source models like Kimi-K2 and DeepSeek-V3 as well as leading closed-source models like Claude-Opus4-Non-thinking.  

White House's $500 billion AI plan stalls: "Stargate" project sees zero progress in six months. The White House's "Stargate" AI plan, which promised $500 billion in investments to build U.S. AI infrastructure, has made almost no substantive progress in six months, with not even a single data center established. SoftBank and OpenAI, the main backers, have clashed over key terms like location selection, and initial goals have been scaled back to completing only a small data center in Ohio by year-end.  

Trump Media accumulates $2 billion in Bitcoin and related assets; cryptocurrencies become a major wealth source. Trump Media & Technology Group announced it has accumulated approximately $2 billion in Bitcoin and related assets, accounting for two-thirds of its liquid assets. This marks a key step in Trump's cryptocurrency strategy. The company's stock rose after the news, with Trump's personal stake in the company nearing $2.3 billion in value.  

Under tariff pressure, NXP reports weak Q2 auto chip sales; Q3 revenue expected to decline further, shares drop over 5% after hours. NXP's Q2 revenue and profit declines slowed slightly but still exceeded expectations. Auto revenue was roughly flat year-over-year, ending a five-quarter streak of declines. Q3 revenue guidance suggests a drop of up to 6%, with the midpoint of the range indicating a 3% decline. Analysts note that beyond oversupply issues in EV and manufacturing chips, NXP also faces weak demand in auto and industrial sectors.  

**Domestic Macro**  

China's July LPR rates unchanged: One-year and five-year LPR remain at 3% and 3.5%, respectively. Analysts believe financial policy still has significant room for implementation. If policy rates and deposit rates continue to fall, reducing banks' funding costs, the LPR could still see cuts.  

Central Huijin bought 150 billion yuan in April. In early April, Central Huijin clarified its role as a "quasi-stabilization fund" and aggressively increased its holdings in ETFs. Just four CSI 300 ETFs and the Huaxia SSE 50 ETF saw Central Huijin pour in about 150 billion yuan. It also bought growth-style ETFs, with an estimated 10 billion yuan spent in Q2 on the Huaxia CSI 1000 ETF.  

Bull market signal? The barbell strategy is being questioned for the first time. Guotou's Lin Rongxiong argues that while the extreme barbell strategy (banking-microcap stocks) still offers some absolute return potential, its outperformance will decline. The ChiNext board is likely to continue outperforming in Q3. East Money's Chen Guo also notes that mid-year reports show increasing positive signals for earnings, weakening the barbell strategy's underlying logic and suggesting a marginal shift in large- vs. small-cap styles.  

**Domestic Companies/Industries**  

Auto industry "anti-involution": Here's how Guangdong and Anhui, two major "auto powerhouses," plan to act! Guangdong will guide NEV companies toward orderly competition, shifting from "price wars" to "value wars." It will also urge automakers to honor 60-day payment commitments and support the Guangdong Auto Industry Association's role as a third-party organizer. Anhui will actively guide automakers to implement the meeting's spirit, strengthen quality management, fulfill payment commitments, and deepen innovation.  

JD.com invests in three embodied AI companies. Media reports reveal that Qianxun AI completed a 600 million yuan Pre-A+ round led by JD.com; LimX Dynamics secured new funding led strategically by JD.com, with deepened collaboration in retail, logistics, and services; and Zhongqing Robotics closed two funding rounds, including an A1 round led by JD.com.  

**Overseas Macro**  

Trump shares AI-generated video of Obama in handcuffs; U.S. intelligence director alleges he orchestrated "Russiagate" conspiracy. Trump recently posted an AI-generated video on social media showing Obama being arrested, captioned "No one is above the law." U.S. Director of National Intelligence Gabard previously disclosed that the Obama administration attempted to fabricate intelligence in 2016 to overturn Trump's election victory, accusing it of plotting a "treasonous conspiracy."  

Why are investors indifferent to strong U.S. earnings reports? With U.S. stock valuations at current highs, all positive news is already priced in, and any miss will face severe punishment. Corporate guidance is becoming increasingly critical, with the biggest question for S&P 500 earnings being "who will foot the tariff bill."  

Goldman Sachs: The weaker the dollar, the better Mag 7 earnings will be. Goldman notes that every 10% drop in the dollar could boost S&P 500 EPS by about 2-3%. With Mag 7's overseas revenue share averaging nearly 50%, far exceeding the index median, they are expected to benefit disproportionately from dollar weakness.  

BofA's Hartnett: Wall Street will "surrender" before the Fed; only a "big bubble" can pay for the "Big Beautiful" bill. Hartnett predicts that in the coming weeks, Wall Street will preemptively position for a Fed "surrender," inflating asset prices to stimulate nominal GDP growth and dilute debt to cover the bill's massive fiscal spending. If Powell is ousted, markets expect the Fed to cut rates without a recession, further inflating the bubble.  

Is the U.S. stock market "a balloon floating over Wall Street, just waiting to be popped"? Even bulls are bracing for turbulence. The S&P 500's forward P/E ratio of 22x is near post-pandemic highs. Analysts argue that uncertainty around Trump's tariff policies is a potential needle threatening this "perfectly priced" balloon, with any negative economic data or corporate guidance likely triggering a pullback.  

Wall Street's recommended "hedge Powell trade": Buy 2-year, sell 10-year Treasuries! Investors believe that if Trump replaces the Fed chair, the new appointee may be more inclined to cut rates to appease White House pressure, depressing yields on short-term Treasuries like the 2-year. Meanwhile, eroded Fed independence could fuel inflation concerns, pushing up long-term yields like the 10-year and steepening the yield curve. Some analysts argue that breakeven inflation rates are a more effective hedging tool.  

BofA Merrill Lynch: Stablecoins' disruptive impact on traditional bank deposits and payment systems will become "clearly visible" in 2-3 years. BofA expects stablecoin growth to remain modest over the next year, around $25-75 billion, but their disruptive effects on banking and payments will become clearer in 2-3 years. While U.S. megabanks are actively preparing, doubts remain about stablecoins' practical use cases in domestic payments, with cross-border payments seen as the most viable application for now.  

Key intraday trading restrictions for U.S. retail investors may ease: Regulatory proposal lowers threshold from $25,000 to $2,000. The Financial Industry Regulatory Authority (Finra) plans to amend the "pattern day trading rule," which currently restricts investors with margin accounts under $25,000 from making four or more trades using borrowed funds within five business days. The threshold may be lowered to just $2,000.  

Iranian Foreign Minister: Iran has not halted its uranium enrichment program. Foreign Minister Abbas Araghchi stated that Iran cannot abandon uranium enrichment, which is "precious" to the nation and tied to its national pride.  

**Overseas Companies**  

Microsoft server software hit by global cyberattack; over 10,000 companies at risk. Microsoft's core product SharePoint was targeted in a large-scale hack. Security researchers warn of potential widespread data breaches. The attack primarily targets on-premises SharePoint servers, not users of Microsoft's hosted services. Security firms note that over 10,000 companies worldwide may be affected, with intrusions reported in North and South America, the EU, South Africa, Australia, and other regions, spanning government, energy, education, telecom, and other sectors. Microsoft has issued emergency patches, but the漏洞尚未完全修复 (vulnerability is not yet fully fixed).  

Morgan Stanley's latest estimate: By 2028, AI capex will drive tech giants to add $1 trillion in debt. Morgan Stanley predicts that global data center construction will require about $2.9 trillion in investments by 2028, with hyperscale cloud providers' own cash flows covering only $1.4 trillion, leaving a $1.5 trillion funding gap. The firm believes credit markets will be key to bridging this gap, particularly private credit, which could provide around $800 billion. At the macro level, AI-related investments may contribute 40 basis points to U.S. real GDP growth in 2025–2026.  

First foldable iPhone to debut next year—with no innovation. This is Apple's reality now. Analysts note that Apple's first foldable iPhone will adopt a design similar to Samsung's Galaxy Z Fold, with screens supplied by Samsung, lacking disruptive innovation. Still, Apple's brand appeal and strong Chinese demand for foldables may allow it to quickly capture market share.  

Jane Street, after posting $564 million in margin, allowed to resume trading in India. Reports say Jane Street deposited $564 million to regain approval for Indian equity trading after being banned by the Securities and Exchange Board of India for alleged manipulation. Indian regulators continue investigating Jane Street's derivatives, spot, and futures trading.  

Justin Sun to ride Bezos' Blue Origin rocket to space. Blue Origin stated that Sun won the first seat on its New Shepard rocket through a $28 million bid in 2021. Sun calls himself the "youngest Chinese commercial astronaut," emphasizing that the $28 million bid was donated to the Blue Origin Foundation to support 19 space-related charities and inspire the next generation in STEM.  

**Industries/Themes**  

1. **Coal**: Changjiang Securities notes that the coal sector currently suffers from low capacity utilization, high inventory, and poor profitability, indicating significant oversupply. Thus, "anti-involution" measures are likely. Additionally, coal stocks are undervalued, with valuation advantages ranking as coking coal > coking coal > thermal coal, suggesting greater upside for dual-coke equities.  

2. **Infrared thermal imaging**: As drones become mass-consumed on battlefields, infrared thermal imaging has emerged as an indispensable core sensing technology among image sensors. Companies focused on this technology are gaining more growth opportunities with advancements in multispectral fusion, AI, and advanced sensors.  

3. **Nuclear fusion**: On July 18, HHMAX-901, China's first commercial linear field-reversed configuration (FRC) fusion device, achieved plasma ignition at Hanhai Juneng's Chengdu facility. This marks a major breakthrough in China's commercialization of controlled nuclear fusion, particularly for linear FRC technology.  

4. **Hogs**: Kaiyuan Securities points out that early July's plunge in poultry and egg prices dragged down hog and cattle prices. With peak summer heat soon ending, hog, poultry, egg, and cattle prices are expected to rebound collectively by late July or August, with hogs potentially rising above 15.5 yuan/kg. Under policies to control hog capacity and curb "involution," next year's hog prices could be even higher.  

**Today's Key Events Preview**  

- State Council press conference on H1 2025 foreign exchange data.  

- Fed Chair Powell's welcome speech at a regulatory conference.  

- Fed Governor Bowman's remarks.  

- ECB President Lagarde's speech.  

- BoE Governor Bailey's remarks on the BoE's semi-annual Financial Stability Report.  

- SAP and Coca-Cola earnings releases.  

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