Breakfast | Meta rose over 3%, leading the tech giants, while Nvidia's holding APLD surged nearly 30%

Market Overview The US ISM Services PMI and ADP employment data were weak, intensifying concerns about an economic slowdown or even recession in the country, leading to a surge in interest rate cut expectations. US stocks were mixed, with the Dow ending a four-day winning streak and the S&P closing flat. Large tech stocks led the Nasdaq, with Meta rising over 3%, leading the seven tech giants. The China concept stock index rose over 2%, outperforming the broader US market. With interest rate cut expectations soaring, US Treasury yields fell sharply across the board, with the 10-year Treasury yield dropping more than 10 basis points at one point. The dollar retraced yesterday's gains, returning to near two-year lows. Gold prices fluctuated higher. Saudi Arabia hopes OPEC+ will implement more large-scale oil production increases, with oil prices falling 2% at one point. During the Asian session, Chinese stocks and bonds rose together. The ChiNext index rose over 1%, government bonds climbed in the afternoon, coking coal and coke rebounded strongly, and Hong Kong stocks in innovative drugs surged again. Key News US May ADP "surprised"! Employment increased by only 37,000, the lowest since March 2023; after the data was released, Trump called out to Powell: Rates must be lowered now! US May ISM Services PMI contracted for the first time in nearly a year, with demand plummeting and prices remaining high. Ignoring tariff threats, Eurozone May PMI unexpectedly increased, but demand in Germany and France continued to be sluggish. Musk intensified his offensive, urging the American public to take action to "veto" Trump's tax cut proposal. The Congressional Budget Office (CBO) projects that Trump's spending plan will increase the federal government's budget deficit by $2.4 trillion over the next decade. The US Secretary of Commerce is expected to set tariff standards for aircraft parts this month, with Boeing's decline narrowing. Taking a tougher stance, India challenges the US over auto tariffs. The Federal Reserve's Beige Book: US economic activity has slightly declined in recent weeks, labor demand has weakened, and inflation expectations are stronger. Putin and Trump spoke for over an hour, focusing on the attack on Russian airports and the Iranian nuclear issue. Saudi Arabia seeks to gain market share, hoping OPEC+ will implement more large-scale oil production increases, with US oil down 1.5%. A new breakthrough in cloud computing power competition: Record-breaking NVIDIA GB200 participated in MLPerf testing, with performance improving more than twice. Why are luxury goods not selling? Purchasing power has declined by over 30% in the past decade, the middle class is being squeezed out! Market Closing Report European and American stock markets: The Dow fell 0.22%, the S&P 500 rose 0.01%, and the Nasdaq rose 0.32%. The European STOXX 600 index closed up 0.47%. A-shares: The Shanghai Composite Index rose 0.42%, the Shenzhen Component Index rose 0.87%, and the ChiNext Index rose 1.11% Bond Market: The yield on the 10-year U.S. Treasury bond fell by 9.86 basis points to 4.3552%. The yield on the 2-year U.S. Treasury bond dropped by 8.46 basis points to 3.8665%. Commodities: WTI July crude oil futures closed down 0.88% at $62.85 per barrel. Brent August crude oil futures fell 1.17% to $64.86 per barrel. COMEX gold futures rose 0.64% to $3,398.80 per ounce. News Details Global Highlights U.S. May ADP "surprises"! Employment increased by only 37,000, the lowest since March 2023. This figure is 5 standard deviations away from the expected 114,000, marking the largest miss since August 2022. Following the data release, Trump urged Powell: "Rates must be lowered now!" U.S. May ISM Services PMI contracts for the first time in nearly a year, with demand plummeting and prices high. The U.S. May ISM Services PMI index was 49.9, significantly below the expected 52, with the previous value in April at 51.6. The new orders index dropped by 5.9 points to 46.4, the largest decline since June 2024. The prices paid index surged to 68.7, the highest since November 2022. After the ISM Services PMI was released, U.S. stocks and the dollar fell, while U.S. Treasuries, gold, and safe-haven currencies rose. Ignoring tariff threats, Eurozone May PMI unexpectedly grows, but demand in Germany and France remains sluggish. The Eurozone composite PMI final value was 50.2, exceeding the initial and revised contraction level of 49.5, indicating that the European economy is more resilient than initially estimated. However, service sector activity slightly declined, with the services PMI hitting a 6-month low; manufacturing output maintained the same moderate growth momentum as the previous month. Musk intensifies efforts, urging Americans to take action and "veto" Trump's tax cut proposal. Musk called on Americans to contact lawmakers to veto the proposal. "Call your senator, call your representative. It is wrong to bankrupt America!" He suggested drafting a new spending bill to avoid a significant increase in the deficit, and also to prevent raising the debt ceiling by $5 trillion He also retweeted others' posts and commented that the United States is rapidly descending into debt slavery. On the same day, Trump urged Capitol Hill to abolish the debt ceiling system. The U.S. Congressional Budget Office (CBO) predicts that Trump's spending plan will increase the federal government's budget deficit by $2.4 trillion over the next decade. The comment stated that this prediction does not take into account the potential boost to the economy. U.S. Secretary of Commerce expects to set tariff standards for aircraft parts within this month, Boeing's decline narrows. Secretary of Commerce Gina Raimondo stated that she expects to complete the analysis of aircraft parts tariffs and determine the relevant tariff standards before the end of this month. Boeing's stock price, which had previously dropped more than 1%, fell to less than 0.1%. With a tougher stance, India challenges the U.S. on auto tariffs. India informed the WTO on Tuesday that the 25% tariffs imposed by the U.S. on imported passenger cars, light trucks, and certain auto parts constitute "safeguard measures" (i.e., trade restrictions) and affect its exporters. India has sought to engage in "consultations" with Washington regarding the tariff issue. Federal Reserve Beige Book: Recent weeks have seen a slight decline in U.S. economic activity, weakened labor demand, and stronger inflation expectations. The Beige Book released by the Federal Reserve shows that U.S. economic activity has slightly declined in recent weeks since the last report, indicating that tariffs and high uncertainty are having a ripple effect on the economy. There are widespread reports that contacts expect future costs and prices to rise at a faster pace. The term "tariff" appeared 122 times in this Beige Book, compared to 107 times in the previous one; the words "uncertainty" and its variants appeared 80 times. Putin and Trump spoke for over an hour, focusing on the attack on Russian airports and the Iranian nuclear issue. Trump revealed on social media that he had a conversation with Putin lasting about 1 hour and 15 minutes that day. He stated that they discussed the attacks by Ukraine on Russian airports and various recent attacks, with Putin "very firmly" stating that he would respond to the attacks on Russian airports. Additionally, they talked about the Iranian nuclear issue. Trump stated that Iran must "make a decision quickly" regarding nuclear weapons. He believes that he and Putin agree on the issue of Iran not having nuclear weapons. Trump also mentioned that Putin indicated he would participate in discussions between the U.S. and Iran, "perhaps to help reach a quick resolution." Saudi Arabia seeks to gain market share, hoping OPEC+ will implement more massive oil production increases, U.S. oil falls 1.5% Saudi Arabia's strategic direction has undergone a significant shift, as it hopes OPEC+ will continue to accelerate oil supply increases in the coming months to regain lost market share. Saudi Arabia wants OPEC+ to increase crude oil production by at least 411,000 barrels per day in August, and possibly in September, to take advantage of the demand peak in the Northern Hemisphere summer. Media reports indicate that a faction led by Russia advocates for pausing production increases to assess their impact, but ultimately Saudi Arabia's position prevailed. New breakthrough in cloud computing competition: Record-breaking NVIDIA GB200 participates in MLPerf testing, performance more than doubled. In the latest MLPerf Inference v5.0 test measuring inference throughput, CoreWeave, NVIDIA, and IBM used 2,496 GB200 Blackwell chips to form the largest NVIDIA GB200 NVL72 cluster in MLPerf benchmark testing. In the largest and most complex Llama 3.1 405B base model training within the benchmark suite, the cluster completed the entire process in just 27.3 minutes, achieving more than double the training performance compared to similar-sized cluster test submissions. Why are luxury goods not selling? Purchasing power has declined over 30% in the past decade, the middle class is being squeezed out! Morgan Stanley stated that the affordability of iconic luxury handbags has significantly worsened by 10%-33% over the past decade, with luxury prices rising far beyond the increase in disposable income in the U.S., leading to middle-income consumers being "priced out" by major luxury brands. However, most brands still need middle to upper-middle-class consumers to achieve growth, as relying solely on high-net-worth individuals cannot sustain the industry's mid-to-high single-digit growth rate. Domestic Macro Interest rate cuts and resuming bond purchases? China Securities Journal front page: Central Bank's precise regulation, liquidity expected to be reasonably ample around mid-year. An article on the front page of China Securities Journal states that, if necessary, the People's Bank of China does not rule out the possibility of further measures such as interest rate cuts to release long-term liquidity and ensure that liquidity remains at a reasonably ample level around mid-year and into the second half of the year. On the other hand, the People's Bank of China is expected to timely resume government bond trading operations. Domestic Companies What did Xiaomi's Investor Day say? Full-year profit guidance, AIoT revenue targets, automotive exports, self-developed automotive chips. Xiaomi expects its full-year revenue to grow by more than 30% year-on-year, with net profit expected to achieve over 40% year-on-year growth. The AIoT business is expected to see full-year revenue growth of over 30% year-on-year, aiming for a threefold increase in AIoT revenue within three years. Xiaomi stated that its smart electric vehicle business is expected to become profitable starting in the third quarter of 2025, and the company plans to begin selling smart electric vehicles in overseas markets from 2027 In terms of technological self-sufficiency and control, Xiaomi stated that it will soon begin producing automotive semiconductor products. Qiming Venture Partners Founder: China's Innovative Drugs' "DeepSeek Moment". Gary Rieschel, founding managing partner of Qiming Venture Partners, stated that ten years ago, China lagged the United States by 20 years in the development of innovative drugs. Today, it is only two to three years behind. This is an astonishing time compression in just a decade. China's biotechnology ecosystem is becoming increasingly complete, and the "DeepSeek moment" may occur when Canfite BioPharma's dual-specific antibody, AK112, is launched, showing efficacy twice that of Keytruda. Overseas Macro Detailed Explanation of the Hidden "Capital Tax" in Trump's "Big Beautiful" Plan. According to Bank of America analysis, Clause 899 may raise the statutory tax rate on U.S.-sourced income from interest, dividends, rents, and royalties by up to 20 percentage points, expected to increase tax revenue by $12 billion annually, but the cost may be rising yields, which could offset some of the revenue gains. A comprehensive rise in the yield curve by 20 basis points would increase interest costs by about $10 billion annually. Allianz CIO: Once Clause 899 is Fully Implemented, U.S. Stocks Will Plunge 10%, and the Dollar Will Drop 5%. Allianz's CIO believes that this clause essentially constitutes a form of "capital control," and once implemented, the outflow of U.S. capital will accelerate further, leading to a "major panic moment" in the market. The implementation effects could "completely destroy what Trump is trying to achieve in his policy agenda." Will a 5% Yield on 10-Year U.S. Treasuries Sink U.S. Stocks? UBS pointed out that "yields are never an island," and the process of reaching 5% is more important than the result. If driven by economic growth expectations, the S&P 500 index could rise to 6200 points; however, if caused by rising term premiums, the stock market will face significant pressure. The Bank of Canada Maintains Interest Rates as Expected, Future Rate Cuts Possible, Need to Further Observe the Impact of Trump's Tariffs. On Wednesday, the Bank of Canada maintained its interest rate at 2.75% for the second consecutive time. The Governor of the Bank of Canada indicated that if the economy continues to weaken and inflation remains moderate, future rate cuts cannot be ruled out. The current decision to hold steady is to wait for more signals regarding Trump's trade conflicts, as U.S. trade policy has become the biggest headwind facing the Canadian economy. At the same time, considering that potential inflationary pressures may be more severe than expected, the central bank has chosen to act cautiously Japanese bonds won't collapse, but Japan may face a brief "triple kill" of stocks, bonds, and currency this summer. Citigroup states that Japan is unlikely to experience a debt crisis like that during former UK Prime Minister Liz Truss's tenure, but the yen may fall to 150 against the dollar in the next 2-3 months. The real "kill" risk for the Japanese market is closely linked to the U.S., such as extreme situations where U.S. stocks plummet while the dollar surges. Political situation stabilizes, Korean stocks surge close to a bull market! Lee Jae-myung has set a KOSPI target of 5000 points to eliminate the "Korean discount". The KOSPI index in South Korea rose 2.5% on Wednesday, rebounding over 20% from its April low, nearing a bull market, with shares of holding companies like Hanwha Group soaring 18%. The won strengthened against the dollar, rising 0.5%. The market bets that Lee Jae-myung will push for shareholder return reform legislation, fulfilling his campaign promise to "end the Korean discount and push the KOSPI to 5000 points." Lee Jae-myung's election sparks concerns over fiscal expansion, South Korean bond market faces sell-off. Following Lee Jae-myung's election as President of South Korea, the market expects him to initiate large-scale fiscal expansion. Analysts predict that this year's planned issuance of 207.1 trillion won will be expanded, with issuance potentially reaching 230 trillion won by 2025 and 246 trillion won next year, while the 10-year yield may rise to 3.0% in the second half of the year. Iran's gold prices surge 80% in a year, central bank hoarding gold, public stockpiling gold, risk aversion sentiment rising. Under the shadow of U.S. sanctions, Iranians are rushing into the gold market for self-protection, with local gold prices soaring 80% in a year, far exceeding the global gold price increase of 45%. As of March this year, Iran imported a record 100 tons of gold worth $8 billion, with analysts suggesting that the actual import volume may be double this figure. Overseas Companies Stablecoin giant Circle raises IPO pricing to $31 per share, raising $1.1 billion. UBS details the prospects of AI infrastructure boom: Nvidia holds trillion-dollar revenue opportunities, data center revenue expected to double? UBS analyst Timothy Arcuri stated that Nvidia holds "tens of gigawatts" of AI infrastructure projects, conservatively estimated to be worth over $1 trillion. If this prediction holds true, Nvidia's data center revenue could reach $400 billion annually within 2-3 years, nearly double current market expectations Tesla's European Sales Decline for Five Consecutive Months, Germany Plummets 36.2% Year-on-Year, Norway Market Shines. In May, Tesla's sales in major European markets fell for the fifth consecutive month, with only 1,210 cars sold in Germany, a year-on-year drop of 36.2%; sales in the UK fell by over 45%, pushing it out of the top four in sales. Although sales in Norway surged by 213%, the negative impact of political factors related to Musk is also beginning to show. After Years of Doubt, Quantitative Giant AQR Succumbs to Machines, Adopts AI for Investment Decisions. AQR, once a long-time advocate of "human control," has now fully shifted to "machine-led," using AI and machine learning technology for trading decisions. AQR is now not only dynamically adjusting factor weights using machine learning algorithms but also allowing algorithms to identify market patterns and place bets, even if the principles behind these patterns are not yet fully explained. From Traditional PE to an $800 Billion Full-Industry Chain Asset Management Giant—The Rise of Apollo. Through its merger with Athene, Apollo has disrupted the traditional asset management model: the company is not just a third-party asset manager but a capital investor, being one of the largest investors in its own products. Apollo is building an asset management company that resembles a merchant, emphasizing principal investors rather than agents. The company believes this model will ultimately prevail. Today's News Preview China's May Caixin Services and Composite PMI. U.S. initial jobless claims from last week. U.S. April trade balance. Eurozone April PPI. European Central Bank to announce interest rate decision, President Lagarde to hold a monetary policy press conference. Philadelphia Fed President Harker to speak. Japan's Ministry of Finance to conduct a 30-year government bond auction. U.S.-Germany summit. Broadcom and Lululemon to announce earnings.