Morning News

Source: Wall Street News

## Market Overview

As the "super week" arrives, the upward momentum of U.S. stocks is limited. Chip stocks have supported the S&P 500 and Nasdaq to continue hitting new highs. The S&P 500 turned higher in late trading, narrowly achieving a six-day winning streak. NVIDIA rebounded nearly 2% to a new high, and the chip index rose more than 1%. Tesla rose 3%, leading the gains among tech giants. Germany's Big Three automakers fell more than 3%, while European chip leader ASML rose more than 4%. German bonds stopped a three-day losing streak, and U.S. bonds pulled back.

The EU-U.S. trade deal is seen as beneficial to the United States, leading to a sharp rise in the U.S. dollar. The U.S. Dollar Index rose more than 1% intraday, recording its largest gain in over two months. The euro fell more than 1%, its biggest drop in more than two months.

Trump further threatened to impose sanctions on Russia. Crude oil closed up more than 2%, with Brent crude rebounding to a two-week high, and U.S. crude once rose 3%. Gold fell more than 1% intraday, marking a four-day losing streak. New York copper once dropped more than 6%. In China's night session, coking coal fell more than 10% and coke dropped nearly 4%.

During the Asian session, commodities fell while government bonds rose. Coking coal and coke hit the daily limit down. A-shares pulled up in the afternoon, with the ChiNext Index rising 1%. Computing hardware stocks surged. Hong Kong stocks were divided, and innovative pharmaceutical stocks rose sharply.

## Key News

China-U.S. economic and trade talks have started in Stockholm, Sweden.

China's childcare subsidy policy is here: 3,600 yuan per year for each child under 3 years old.

The "anti-involution" carnival has cooled rapidly. In China's night session, coking coal plummeted more than 10%, and coke closed down nearly 4%.

The U.S. Treasury's borrowing forecast for the third quarter exceeds one trillion, an 82% increase. Bond issuance is accelerating after the debt ceiling was raised. The 5-year U.S. bond auction was unexpectedly weak, with overseas demand hitting a three-year low.

EU leaders defended the EU-U.S. trade deal, but German industry is worried. Think tanks say Europe's biggest regret is not joining China in resisting in April, and the market voted with a sharp drop in the euro.

Trump can't wait and shortened the deadline for the final ultimatum to reach a deal with Russia. Crude oil rose nearly 3% intraday.

Japan's chief negotiator: Only 1-2% of the $550 billion is investment, and the vast majority is loans.

Chile is expected to receive Trump's tariff exemption. New York copper once fell more than 6%, and copper stock prices generally declined.

Tesla placed a $16.5 billion chip order with Samsung. Musk said he will personally participate in improving production efficiency.

Goldman Sachs summarized the latest trends of humanoid robots at this year's World Artificial Intelligence Conference: shifting from "showing off skills" to "getting work done", and wheels are more popular than bipedal.

## Market Closing Quotes

European and U.S. stock markets: The S&P 500 rose 0.02% to 6,389.7 points. The Dow Jones Industrial Average fell 0.14% to 44,837.56 points. The Nasdaq rose 0.33% to 21,178.58 points. Europe's STOXX 600 Index fell 0.22% to 548.76 points.

A-shares: The Shanghai Composite Index rose 0.12% to 3,597.94 points. The Shenzhen Component Index rose 0.44% to 11,217.58 points. The ChiNext Index rose 0.96% to 2,362.6 points.

Bond market: By the end of the bond market session, the yield on the 10-year U.S. Treasury note was about 4.41%, up more than 2 basis points intraday. The yield on the 2-year U.S. Treasury note was about 3.93%, up about 1 basis point intraday.

Commodities: WTI September crude oil futures closed up 2.38% at $66.71 per barrel. Brent September crude oil futures closed up 2.34% at $70.04 per barrel. COMEX August gold futures closed down 0.77% at $3,310 per ounce. London tin closed down about 1% at $33,713 per ton. COMEX September copper futures closed down 2.93% at $5.6155 per pound.

## Details of Key News

### Global Highlights

China-U.S. economic and trade talks have started in Stockholm, Sweden. According to Xinhua News Agency, on July 28 local time, the economic and trade teams of China and the United States held China-U.S. economic and trade talks in Stockholm, Sweden.

China's childcare subsidy policy is here: 3,600 yuan per year for each child under 3 years old. The childcare subsidy system will start from January 1, 2025, providing subsidies for children under 3 years old born in accordance with laws and regulations. The childcare subsidy will be issued annually, with the current national basic standard being 3,600 yuan per child per year, and the subsidy will be issued until the child reaches 3 years old. Among them, for infants born before January 1, 2025 and under 3 years old, the subsidy will be calculated and issued according to the number of months eligible for the subsidy. The childcare subsidy issued in accordance with the provisions of the childcare subsidy system is exempt from personal income tax.

The "anti-involution" carnival has cooled rapidly, with domestic coking coal plummeting more than 10% in night trading. After the exchange issued an announcement on trading limits last Friday, coking coal has fallen sharply for two consecutive trading days in night sessions. Analysts believe that the previous trading based on expectations of coal production restrictions has overdrawn the room for coking coal price increases. After the exchange took action, the market trading atmosphere has obviously cooled down, and the trading logic of coking coal is shifting from emotion-driven to supply and demand fundamentals. The industry expects that the phased supply shortage situation will ease in the short term, and coking coal may still fall.

The U.S. Treasury's borrowing forecast for the third quarter exceeds one trillion, an 82% increase, and bond issuance is accelerating after the debt ceiling was raised. The U.S. Treasury Department announced on Monday that it expects net borrowing of nearly $1.01 trillion in the third quarter, more than $450 billion higher than the estimate announced in April. Excluding the impact of a lower cash balance at the beginning of the quarter, it is $60 billion higher than the April forecast. Actual borrowing in the second quarter was only $65 billion, far lower than the $514 billion estimated in April, mainly due to the need to avoid hitting the debt ceiling, the Treasury's general account consumed more cash. In April, it was assumed that the cash balance at the end of June would be $850 billion, but in reality, it was almost half of that.

The 5-year U.S. bond auction was unexpectedly weak, with overseas demand hitting a three-year low. The winning yield of this 5-year U.S. bond auction was 3.983%, which was higher than 3.879% in June, and recorded the largest tail spread for this maturity bond auction since October last year. The indirect subscription ratio, representing overseas demand, was the lowest in three years. The market remains relatively calm about the weak demand for U.S. bonds this time, but some comments predict that this "complacency" will soon change.

What do we think of the EU-U.S. trade agreement? EU leaders defend it, while German industry is worried, and the market votes with a sharp drop in the euro. German Chancellor Merz said in a statement on Sunday night: "The agreement has successfully avoided a trade conflict that would have severely impacted Germany's export-oriented economy." However, Clemens Fuest, President of the German Ifo Institute for Economic Research, used harsh words, calling the agreement a "humiliation" that reflects the power imbalance between the EU and the United States.

After being "taken advantage of" by Trump, Europe's biggest regret is that "it did not stand with China in April to resist". A diplomat bluntly said that Trump is a "bully on campus", and the EU "did not stand with others to resist him". "Those who are not united will be hanged separately." European think tank figures believe that if the EU and China had resisted together, it would have dealt a huge blow to Trump.

Disputes arose immediately after the talks, with the U.S. and Europe holding different views on the details of the tariff agreement. Trump said that the agreement does not include pharmaceutical products, implying that this field may face higher tariffs, while von der Leyen clearly stated that "the EU agrees to a 15% tariff on pharmaceutical products". On the issue of steel and aluminum tariffs, Trump insisted that the 50% tariff rate "remains unchanged", while von der Leyen said that "tariffs will be reduced and a quota system will be introduced".

Hungarian Prime Minister: The European Commission has no money to invest in the U.S., and Trump "ate von der Leyen for breakfast". According to CCTV News, Hungarian Prime Minister Orbán believes that the EU-U.S. agreement is worse than the UK-U.S. agreement. Orbán strongly questioned the EU's plan to invest in the U.S. and purchase military equipment and energy from the U.S., because the European Commission has neither funds nor an army. Orbán's remarks clearly indicate that the EU-U.S. trade agreement will eventually be paid for by EU member states. Orbán also said that compared with Trump, European Commission President von der Leyen is a "lightweight negotiator", and it can be said that Trump "ate von der Leyen for breakfast".

Deutsche Bank comments on the EU-U.S. trade agreement: The EU has made major concessions, which may affect long-term development. Deutsche Bank pointed out that although the EU-U.S. trade agreement has avoided the escalation of a trade war, the economic costs and investment transfers it brings need to be carefully evaluated. Key impacts include that the EU's commitment to invest $600 billion in the U.S. may weaken its long-term growth potential. The reduction of tariffs on the automotive industry from 25% to 15% is beneficial to the EU. The European Central Bank's pressure to cut interest rates has eased, and the 2% policy rate may become the end of this easing cycle.

A U.S. official said that Trump has the right to restore higher tariff levels if other countries fail to fulfill their investment commitments. According to CCTV News, the official said that the EU hopes to continue discussions with the U.S. on steel and aluminum tariffs. The agreement reached by the U.S. and the EU stipulates that the applicable tariff will be the higher of the "most-favored-nation rate" or 15%. The U.S. currently does not, and is not expected to eventually impose tariffs on aircraft.

Trump can't wait and shortens the deadline for the final ultimatum to reach an agreement with Russia, with crude oil rising nearly 3% intraday. Trump has shortened the deadline for Russia to reach a Russia-Ukraine agreement to 10 to 12 days, after saying two weeks ago that he would give 50 days. On Monday, he said, "There is no reason to wait any longer. The United States has not seen any progress." Before realizing that Russia has no intention of quickly ending the Russia-Ukraine conflict, he had envisaged "a lot of trade" with Russia, and Russia's rare earth mines were potential trade targets.

Japanese chief negotiator: Only 1-2% of the $550 billion is investment, and the vast majority is loans. Ryo Masahiro Akazawa clarified that the U.S.-Japan agreement does not directly transfer $550 billion in cash to the U.S., but is achieved through a combination of different financial instruments. For the loan part that constitutes the main body of the fund, Japan will charge interest. Although Japan has lost some in the distribution of investment income, the benefit of capital savings brought by low tariffs is greater.

Chile is expected to receive Trump's tariff exemption, with New York copper once falling more than 6% and copper mining stocks generally declining. Chilean Finance Minister Mario Marcel believes that there is hope to exclude copper from high tariffs. Marcel said that more than half of Chile's exports to the U.S. are copper and wood. If these are excluded from the negotiation results, the agreement will be of little benefit to Chile. At the same time, Marcel clearly stated that Chile will not impose retaliatory tariffs on U.S. products.

On the eve of the Mag 7 earnings tsunami, Goldman Sachs put forward seven key observations! Microsoft, Meta, Apple, Amazon, and Qualcomm will release earnings reports this week. Goldman Sachs pointed out that this earnings season shows obvious negative asymmetry: good news may not lead to rises, but bad news is likely to trigger sharp declines; the upsurge in retail/speculative trading has obviously returned, and Goldman Sachs' speculative trading index is approaching an all-time high; data on AI-related capital expenditures have further confirmed the sustainability of the artificial intelligence investment theme.

This week, tech giants' trillion-dollar earnings reports have "set a very high threshold". This week, Microsoft, Meta, Apple, and Amazon will release their earnings reports one after another, with "a very high threshold": their combined market value of $11.3 trillion is crucial to the trend of the S&P 500 index; investors' expectations for high valuations, even if earnings expectations have been lowered, still require "truly eye-catching" results to maintain the stock price momentum; and the test of capital expenditures and "monetization", as the market expects to see actual returns from aggressive investments in AI infrastructure, rather than just future commitments.

Zhipu's new flagship model GLM-4.5 is here, specially built for intelligent agent applications. The model adopts a Mixture of Experts (MoE) architecture. GLM-4.5 has a total parameter count of 355 billion, with 32 billion active parameters; GLM-4.5-Air has a total parameter count of 106 billion, with 12 billion active parameters; the API call price is as low as 0.8 yuan per million tokens for input and 2 yuan per million tokens for output.

The viral CoWoP roadmap brings new stories to PCB. Simply put, CoWoP = CoWoS - packaging substrate. This seemingly simple "subtraction" is a huge leap in technology. This means that the motherboard (PCB) itself must have part of the high-precision wiring capabilities that were previously provided by the packaging substrate. For NVIDIA, "the performance bottleneck is shifted from chip process to packaging/system-level interconnection; once this is really achieved, other manufacturers will continue to be left behind. It elevates competition from the 'chip dimension' to the 'system dimension', using the complexity of system engineering to build a new moat.

Goldman Sachs summarizes the latest trends of humanoid robots at WAIC: shifting from "showing off skills" to "getting work done", and wheels are more popular than bipedal. Goldman Sachs believes that at WAIC 2025, wheeled robots have become the mainstream because they are easier to deploy quickly and accelerate short-term commercialization. Application scenarios have expanded to industry, services, medical care, etc. However, the fine operation of robot hands remains a major bottleneck. Although costs have decreased, the overall inflection point has not yet arrived, and more clear signals are needed to support the performance of related stocks.

### Domestic Macro

The Ministry of Foreign Affairs responds to whether China will accept a "suboptimal agreement" with the United States. Guo Jiakun said that China has always advocated that all parties resolve economic and trade differences through equal dialogue and consultation, maintain a good international economic and trade cooperation environment, and abide by WTO rules. At the same time, we firmly oppose any party reaching a deal at the expense of China's interests.

State Administration for Market Regulation: Govern enterprises' inferior and low-price competition in accordance with laws and regulations. The meeting requires that efforts should be made to strengthen the domestic big market, accelerate the improvement of basic market supervision systems, strive to break down local protection and market segmentation, and govern enterprises' inferior and low-price competition in accordance with laws and regulations. It is necessary to enhance the supervision capacity for food, drugs, industrial products, and special equipment safety, strengthen the whole-chain supervision of food safety, improve the drug safety supervision capacity, raise the level of industrial product quality and safety, and improve the quality and efficiency of special equipment safety supervision.

Shanghai Municipal Commission of Economy and Informatization: Strive to realize the full opening of autonomous driving in Pudong within the year, excluding areas such as Lujiazui. According to The Paper, Han Dadong, second-level inspector of the Shanghai Municipal Commission of Economy and Informatization and director of the Automobile Industry Department, said that Shanghai will orderly expand the open areas for autonomous driving, striving to realize the full opening of autonomous driving test roads in Pudong New Area within this year, and simultaneously promote the opening of areas such as Fengxian and Minhang. The full opening of Pudong within the year does not include key areas such as Lujiazui, because the current road conditions in these key areas are already relatively busy; Minhang District will open key areas such as Hongqiao Hub; Fengxian District will not open fully for the time being because there are not enough applications at present.

Yu Yongding: How to boost consumption? From the perspective of macro-control, promoting consumption and increasing the growth rate of consumption is completely correct. However, in the face of economic pressure, directly promoting consumption faces many challenges. Yu Yongding believes that infrastructure investment should play a greater role in stimulating economic growth. China's infrastructure investment space is far from "saturated". In view of the severe external challenges China will face in 2025, he suggests that the government can arrange some large projects similar to those in the implementation of the "4 trillion stimulus plan" in the "15th Five-Year Plan".

Why can't we use real estate market data for stock investment? China's stock market reflects cross-border capital flows, and under this framework, housing prices will definitely lag far behind stock prices. Only when the stock market rises enough to reverse the risk preference of the vast majority of people will the real estate market stabilize and rise again.

China's price rise cycle is established, and the era of overseas inflation begins. Huafu Securities believes that domestic manufacturing capacity utilization has improved, export price growth has turned positive, and coupled with the promotion of the "anti-involution" policy, the upward trend of China's price cycle may have been established. As an important global manufacturing exporter, overseas may be affected by this and enter an era of long-term inflation. In addition, after China's price recovery, the RMB is expected to appreciate faster, so attention should be paid to the risks of dollar assets.

Emerging market ETFs recorded capital inflows for the ninth consecutive week, with China's capital attraction scale surging and ranking first. Last week, investors net bought emerging market stock and bond ETFs for the ninth consecutive week. Among them, the scale of capital attracted by Chinese assets more than doubled month-on-month, ranking first. Analysts said that despite the high valuations of emerging markets, investors are still optimistic about their performance. As trade tensions ease and the Federal Reserve approaches interest rate cuts, this change will continue to bring funds to emerging markets.

### Domestic Companies

Laopu Gold has fallen 30% from its high! Wall Street: The revenue growth rate of the first-half performance is "slow", and the pricing strategy in the second half is the key. Laopu Gold achieved strong year-on-year growth in the first half of the year, but its performance was slightly lower than the high expectations of analysts. Morgan Stanley believes that the pricing strategy in the second half of the year will be the key to testing the company's ability to balance profits and demand elasticity. If the price increase is less than 10%, the gross profit margin pressure may continue; if the price increase exceeds 10%, it may face the risk of reduced sales demand, unless the company launches new popular products.

Wuxi AppTec's first-half net profit doubled, and it raised its full-year sales forecast. Wuxi AppTec's performance in the first half of 2025 was impressive, with operating income of 20.8 billion yuan, a year-on-year increase of 20.64%, and net profit attributable to the parent company surged 101.92% year-on-year. The company expects that the revenue of continuing operations will return to double-digit growth in 2025, with the growth rate raised from 10-15% to 13-17%, and the overall annual revenue raised from 41.5-43 billion yuan to 42.5-43.5 billion yuan.

Hengrui Medicine authorized PDE3/4 and other projects to GSK, with a scale of 12 billion US dollars setting a record. Hengrui Medicine authorized PDE3/4 inhibitors and 11 projects covering oncology, respiratory, autoimmunity and other fields to GlaxoSmithKline. According to the agreement, the latter will pay 500 million US dollars in advance, with option exercise fees and milestone payments of about 12 billion US dollars, setting a new record for Hengrui Medicine's overseas authorization transactions.

Overseas Companies

Musk outlines Tesla's "ultimate vision": a $30 trillion empire driven by robots, AI, and autonomous driving. Musk has once again redefined the boundaries of people's imagination of Tesla. He depicts a future that is no longer confined to automobiles, but a massive business empire built on AI, robotics, autonomous driving, and sustainable energy, with a potential value that could reach an unprecedented $30 trillion, which is 20 to 30 times its current market value.

Tesla places a $16.5 billion chip order with Samsung; Musk: I will personally participate in improving production efficiency. Samsung Electronics and Tesla signed a $16.5 billion chip manufacturing agreement, with the contract period lasting until the end of 2033. Musk confirmed the details of the cooperation, stating that Samsung's Texas factory will exclusively produce Tesla's AI6 chips, and noted that "this is just the minimum amount." Analysts point out that this large order is a crucial step for Tesla's transformation from an automobile company to an AI and robotics company. On the other hand, it is of great significance to Samsung's foundry business, which is suffering from insufficient capacity utilization, and is expected to increase its foundry sales by 10% annually.

The "cruel truth" revealed in Microsoft CEO's open letter: The company is profitable, but still needs to lay off employees. In an internal open letter defending the layoff of 9,000 employees, Nadella emphasized that the company is "more successful than ever" yet still needs to cut positions. Nadella repeatedly mentioned "unlearning old knowledge" and "learning new skills," implying that some employees' skills have become outdated. Analysts say that profitable layoffs have become the new normal, and this memo is actually a "weather forecast" for the entire software industry, predicting that major changes in the industry under the impact of AI are imminent.

"Cryptocurrency cash loans" are reigniting in the crypto circle, with "20%-30% interest rates and 40% default rate on first loans." As the cryptocurrency market gradually recovers, high-risk unsecured lending businesses are emerging. For example, the lending institution Divine Research offers USDC stablecoin loans of less than $1,000, with a fixed interest rate between 20% and 30%. The default rate on first loans is about 40%, but the company "compensates for these losses" through high interest rates and can only recover "part" of the free tokens issued to users.

Berkshire's stock price has been "sluggish" since Buffett announced his retirement. Since Buffett announced at the annual meeting on May 3 that he would step down as CEO at the end of the year, Berkshire's stock price has fallen by more than 10%, lagging behind the S&P 500 index by more than 20 percentage points. The weak stock price is mainly due to concerns about the fading of the "Buffett premium" and the lack of transparency in leadership transition. Analysts point out that the current stock price's price-to-book ratio is less than 1.6 times, showing valuation attractiveness. Major acquisitions and the restart of repurchase plans may become catalysts for the stock price.

Industries/Concepts

1. Rail Transit Equipment: The bidding for advanced maintenance of EMUs is expected to start in August; considering that the railway operation mileage in the first half of the year was only 301 kilometers, according to the annual target of 2,600 kilometers of new lines put into operation, it is estimated that 2,300 kilometers of new lines will be put into operation in the second half of the year; the bidding volume of EMUs and locomotives in the first half of the year was small, and it is expected that the bidding volume in the second half of the year will increase significantly, with a year-on-year growth rate that may exceed expectations.

2. Steel: Similar to 2016, when there are macro incremental policy stimuli and a sound capacity exit mechanism, the implementation of the anti-involution policy may be smoother. In 2016, the increment brought by shantytown renovation was obvious. This round, under high-quality development and without "flood-like stimulus," the implementation of the anti-involution policy may be relatively steady. Taking a long-term view, short-term fluctuations cannot change the long-term improving trend.

3. Chemical Industry: Currently, the prices of most pesticides have hit bottom. With the advancement of the "rectifying involution" campaign, the industry is expected to enter a price recovery stage. Pay attention to companies in the bulk pesticide product sectors such as glyphosate and glufosinate-ammonium.

4. Aramid Paper: Aramid is a high-tech fiber with ultra-high strength, high temperature resistance, and wear resistance. The demand driven by new energy and military industries is expected to surge. At present, the high-end market is still monopolized by DuPont of the United States, and domestic substitution urgently needs to be accelerated.

Today's Key News Preview

He Lifeng, Member of the Political Bureau of the Communist Party of China Central Committee and Vice Premier of the State Council, will travel to Sweden from July 27 to 30 to hold economic and trade talks with the U.S. side.

U.S. June JOLTS Job Openings.

Procter & Gamble, Boeing, and Starbucks release earnings reports.

U.S. May S&P/CS 20-City Home Price Index.

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