Breakfast | The Federal Reserve lowered interest rates by 25 basis points as expected, with two more rate cuts anticipated within the year, leading to market fluctuations and divergence

Market Overview The Federal Reserve lowered interest rates by 25 basis points as expected, acknowledging a weakening labor market and mentioning rising inflation; the dot plot indicates two more rate cuts expected this year and one next year; Powell stated that the call for a 50 basis point cut at this meeting was not high. The signals from the Federal Reserve are mixed, leading to fluctuations in major assets. After the announcement, the Nasdaq's decline narrowed, briefly dropping 1% before recovering most of its losses. Small-cap stocks surged during the session, then turned down, ultimately closing slightly higher. The Dow Jones closed up, led by financial stocks, while tech stocks dragged the Nasdaq and S&P 500 down. The China concept stock index surged 2.85%, with Baidu rising 11.3%. U.S. Treasury yields quickly fell after the Federal Reserve's statement, then rebounded, with the 10-year Treasury yield up 6.3 basis points and the 2-year up 5.62 basis points. The dollar briefly fell 0.4%, then rebounded strongly, rising over 0.8% from the daily low. Gold reached a new high during the session but then fell sharply, declining over 1.6% from its peak. In the Asian session, the Hang Seng Index hit a nearly four-year high, Alibaba's market value returned above 3 trillion, Baidu surged 15%, and the ChiNext Index rose nearly 2%, with "Ning Wang" and SMIC both hitting new highs. Key News The Federal Reserve lowered interest rates by 25 basis points as expected, emphasizing the downside risks to employment, believing inflation has risen, expecting two more rate cuts this year and one next year. Milan cast the only dissenting vote, advocating for a 50 basis point cut. Powell: This is a risk management-type rate cut, the call for a 50 basis point cut is not high, and the downside to employment has become a substantial risk. “New Federal Reserve News Agency”: Concerns over the slowdown in the labor market have outweighed concerns about inflation, providing justification for the Federal Reserve's shift to modest rate cuts. U.S. Treasury Secretary reportedly shares a “stain” similar to Federal Reserve Governor Cook: having similar mortgage loan disclosures. The U.S. SEC has introduced a significant new policy: setting limits on class action lawsuits, aimed at “making U.S. IPOs great again.” The Bank of Canada lowered interest rates by 25 basis points as expected, providing almost no guidance for future rate cuts, stating it will act cautiously amid risks. Lee Ka-chao: Exploring shortening the stock settlement cycle to T+1, implementing a stablecoin issuer system, and building a regional gold reserve hub. Expert interpretation of the policy report: Hong Kong is fully committed to developing into an international innovation and technology center. Morgan Stanley: Four major catalysts in AI are reshaping the internet landscape for next year, with Amazon, Meta, and Google being the most favored among the giants. In Wall Street's view of “Chinese AI”: Morgan Stanley believes “Tencent is the best for 2C,” while Goldman Sachs sees “Alibaba as the best for 2B.” Goldman Sachs: The narrative around Chinese AI infrastructure is reigniting, with a surge in enterprise-level large model token consumption, and Alibaba is a core beneficiary. Huatai Securities: AI is reshaping the long-term narrative forBaidu** Robot stocks have surged repeatedly, Morgan Stanley: The intensive dynamics of Tesla's Optimus are the main driving force. FigureAI will announce three major pieces of news. Market Summary U.S. and European Stock Markets: The S&P 500 fell 0.10%, closing at 6600.35 points. The Dow Jones rose 0.57%, closing at 46018.32 points. The Nasdaq fell 0.33%, closing at 22261.326 points. The European STOXX 600 index closed down 0.03%, at 550.63 points. A-shares: The Shanghai Composite Index closed at 3876.34 points, up 0.37%; the Shenzhen Component Index closed at 13215.46 points, up 1.16%; the ChiNext Index closed at 3147.35 points, up 1.95%. Bond Market: The yield on the U.S. 10-year benchmark Treasury bond rose by 6.11 basis points, reaching a daily high of 4.0891%. The yield on the 2-year U.S. Treasury bond rose by 4.99 basis points, closing at 3.5531%. Commodities: COMEX gold futures fell 0.84%, closing at $3693.90 per ounce. WTI crude oil fell 0.75%, closing at $63.99 per barrel. Brent crude oil fell 0.97%, closing at $68.11 per barrel. News Details Global Highlights The Federal Reserve took its first action this year, cutting rates by 25 basis points as expected, emphasizing downside risks to employment, and predicting two more cuts this year. The Federal Reserve's September statement reflects some changes in the economic outlook compared to the July meeting: Acknowledging a slowdown in job growth, mentioning a slight rise in the unemployment rate but still maintaining low levels, removing the statement that "the labor market remains robust," and judging that downside risks to employment have increased; believing that inflation levels have risen and remain slightly high. The newly appointed member handpicked by Trump cast the only dissenting vote, advocating for a 50 basis point cut. The median forecast for interest rates indicates that the Federal Reserve expects to cut rates once next year. The dot plot shows that nine members expect two more cuts this year, but the number did not exceed half. The Federal Reserve raised its GDP growth expectations for this year and the next two years, and raised its PCE inflation expectations for the next two years. The "New Federal Reserve News Agency" stated that concerns about the slowdown in the job market outweighed concerns about inflation, providing justification for the Federal Reserve's shift to a modest rate cut Powell: The call for a 50 basis point rate cut is not high, and the decline in employment has become a substantial risk. This is a risk management-type rate cut, and a 50 basis point cut has not received widespread support; the extremely rare economic situation has led to significant divergence in Federal Reserve interest rate forecasts; the major revision of employment data is mainly due to low survey response rates; AI may impact entry-level jobs, especially for college graduates; the process of tariffs passing through to inflation is slower and smaller than expected, with tariffs contributing 0.3-0.4 percentage points to core PCE inflation; reiterated the Federal Reserve's firm commitment to maintaining independence; did not directly respond to Bessen's criticism, promised internal review, suggesting possible further layoffs. U.S. Treasury Secretary exposed for having the same "blemish" as Fed Governor Cook: Similar mortgage disclosures. Both Bessen and Cook had reported two different properties as their primary residences, but Cook's loans came from two different banks and were executed at different times, while both of Bessen's loans came from Bank of America and were co-signed by a lawyer on the same day, making it unlikely that the lenders were deceived. The co-signing lawyer stated that Bank of America was fully aware of the situation. Mortgage experts believe there are no signs of wrongdoing in Bessen's actions. This case illustrates that inconsistencies in mortgage documents do not necessarily constitute evidence of fraud. **U.S. SEC's major new policy:Setting limits on class action lawsuits, aiming to "make U.S. IPOs great again". The U.S. Securities and Exchange Commission (SEC) overturned a decades-old policy, allowing public companies to prohibit shareholders from initiating class action lawsuits, providing companies with a powerful new tool to limit shareholder litigation. SEC Chairman Paul Atkins stated that this move is intended to reduce the compliance burden on businesses. However,this policy shift immediately raised concerns in the market about investor protection. Bank of Canada cuts rates by 25 basis points as expected, providing almost no guidance for future rate cuts, stating it will act cautiously amid risks. The Bank of Canada cut its benchmark overnight rate by 0.25 percentage points to 2.5% on Wednesday, marking its first rate cut since March. The statement provided almost no guidance for future rate cuts and removed the phrase "may need further rate cuts" mentioned in the July meeting, with officials indicating that future monetary easing will be approached cautiously. Overnight swap traders continue to fully price in the possibility of another rate cut in this cycle, estimating the probability of a rate cut in October to be about fifty-fifty. Lee Ka-chao: Exploring shortening the stock settlement cycle to T+1, implementing a stablecoin issuer system, and building a regional gold reserve hub. Lee Ka-chao stated that he will assist mainland technology companies in financing in Hong Kong and explore shortening the stock settlement cycle to T+1 Assist Chinese concept stocks in returning to Hong Kong as the preferred location; promote the inclusion of Hong Kong stock RMB trading counters in the "Stock Connect" southbound trading. Promote the Hong Kong Airport Authority and financial institutions to expand gold storage in Hong Kong, aiming to exceed 2,000 tons in three years and build a regional gold reserve hub. Policy Address Expert Interpretation: Hong Kong is fully committed to developing into an international innovation and technology center. According to Xinhua News Agency, the policy address mentions that the integrated development of education, technology, and talent will help Hong Kong establish a rich talent pool, knowledge reserves, and technological innovation capabilities, enhancing Hong Kong's competitiveness. The policy address elaborates on various measures for Hong Kong to build an international innovation and technology center, including improving the strategic layout of innovation and technology construction, accelerating the development of new industrialization, supporting beneficial scientific research, promoting the construction of a low-altitude economic ecosystem, advancing aerospace technology development, and supporting the space economy. Morgan Stanley: Four Catalysts of AI Reshape Next Year's Internet Landscape, Most Optimistic About Amazon, Meta, and Google Among Giants. Morgan Stanley believes that four key generative AI catalysts—model advancements, agent-based experiences, capital expenditures, and custom chips—are reshaping the internet industry landscape. These technological advancements will help Google, Meta, and Amazon stand out among large tech stocks. Wall Street's View on "Chinese AI": Morgan Stanley Says "Tencent is Best for 2C", Goldman Sachs Says "Alibaba is Best for 2B". Morgan Stanley believes that Tencent has become the best practitioner of 2C AI applications, with its cloud business focusing on two strategic directions: digitalization and globalization. With a full suite of application products and a strong WeChat ecosystem, Tencent performs outstandingly in the 2C AI application field and maintains a "Buy" rating with a target price of HKD 700; Goldman Sachs believes that Alibaba, with its leading model capabilities, 47% share of the Chinese public cloud market, and diversified chip supply, is in a favorable position and has room for international expansion. Goldman Sachs: The Narrative of China's AI Infrastructure is Revived, Corporate-Level Large Model Token Consumption Soars, Alibaba is the Core Beneficiary. According to Frost & Sullivan data, the daily Token consumption of China's corporate-level large models reached 10.2 trillion in the first half of 2025, an increase of 363% compared to the second half of 2024. Goldman Sachs believes that Alibaba, with its leading model capabilities, 47% share of the Chinese public cloud market, and diversified chip supply, is in a favorable position and has room for international expansion. Goldman Sachs raised Alibaba's target price from USD 163 to USD 179, maintaining a "Buy" rating Huatai Securities: AI Reshapes Baidu's Long-term Narrative. Huatai Securities believes that Baidu, as one of the few internet companies in China with full-stack AI capabilities, has several business assets that are significantly undervalued. As AI large model capabilities penetrate, the value of Baidu's AI advertising monetization, autonomous driving, Kunlun chips, and AI tool applications (such as Wenku and Wangpan) is gradually becoming apparent. In light of this, Huatai Securities has raised Baidu's target price for Hong Kong stocks to HKD 236, which is 80% higher than the current stock price. Apple's iPhone Sales in China Plummet, Can the 17 Series Reverse the Decline? In the first eight weeks of the third quarter this year (covering July and August), Apple's sales in the Chinese smartphone market fell by 6% year-on-year. The company reversed a two-year decline in sales in the Chinese market in the second quarter, but the latest data shows that Apple still needs to work hard to catch up with competitors, currently ranking sixth with only a 12% market share. Robots Surge Again, Morgan Stanley: Tesla's Optimus Dynamic is the Main Driver. On Wednesday, the A-share market's robotics sector continued its strong performance, once again triggering a surge in stock prices. Morgan Stanley's research report pointed out that Tesla's announcement of new incentive plans and mass production roadmaps has driven up the stock prices of related industry chain companies. At the same time, FigureAI has announced three major pieces of news since September 16, adding more imagination space to the market. Domestic Macro Wang Yi Meets with South Korean Foreign Minister Park Jin. Wang Yi stated that China and South Korea should adhere to the original intention of establishing diplomatic relations, firmly maintain a friendly neighborly direction, and uphold the goal of mutual benefit and win-win cooperation, becoming genuine strategic partners. Park Jin expressed that the South Korean side values the momentum of improving bilateral relations and is willing to implement the important consensus reached by the leaders of both countries, using the opportunity of hosting the Gyeongju APEC Leaders' Informal Meeting to further enhance high-level exchanges and deepen cooperation in economic, cultural, and other fields, and accelerate the negotiations for the China-South Korea and China-Japan-South Korea Free Trade Agreements. Ministry of Finance: In the first eight months, national general public budget revenue increased by 0.3% year-on-year, and expenditure increased by 3.1% year-on-year, with transaction stamp duty revenue soaring by 81.7%. The year-on-year growth rate of tax revenue turned from negative to positive, with individual income tax increasing by 8.9%, property tax increasing by 11.5%, export tax rebates increasing by 9%, and land value-added tax decreasing by 18.3% year-on-year. In terms of general public budget expenditure, social security and employment expenditure increased by 10%, and education expenditure increased by 5.6%. Bank of America September Asia Fund Manager Survey: Sentiment Towards China Warms, Increasing Exposure, but 70% Still Believe It is a "Structural Market" The survey shows that market sentiment towards China has significantly improved. The proportion of fund managers expecting economic weakness has plummeted from 59% in April to 9%, with growth expectations reaching a six-month high. Investor actions have become more proactive, with the proportion of those "fully invested" rising sharply to 13%. However, optimism is tempered with caution: 70% of respondents still believe that the Chinese market is a "structural market," with an increased willingness to "reduce positions on rallies," and overall allocation remains underweight. HuaChuang Zhang Yu: Five Key Judgments. Zhang Yu made five key judgments about the market for the next six months to a year: all leading indicators of the Chinese economy are trending upwards; the most accommodative phase of monetary policy has ended; preconditions for supply-demand balance have emerged; stock-bond allocation will shift from inferior to superior, with no double bull market; the main logic for the trend appreciation of the RMB has not yet been clearly triggered. Under the macro environment and policy support, the risk appetite for the stock market will continue to increase. Domestic Companies Huawei Releases Ten Key Technology Trends, Total Computing Power to Increase by 100,000 Times in the Next 10 Years! According to Shanghai Securities News, Huawei released the Smart World 2035 series report, with core predictions including: AGI will become the most transformative driving force; AI agents will evolve from execution tools to decision-making partners; human-machine collaborative programming will become mainstream; interaction methods will evolve towards multimodal; total computing power will increase by 100,000 times; data will become the "new fuel" for AI development; the number of connected objects in communication networks will expand from 9 billion people to 900 billion intelligent agents; the proportion of new energy power generation will exceed 50%. After Field Investigation of CATL, Morgan Stanley's Conclusion: Core Competitiveness is Too Strong, Capacity Will Reach 1TWh Next Year, Huge Energy Storage Potential. Morgan Stanley believes that CATL's independently developed manufacturing lines have over 25,000 component units, producing 2.2 million battery cells daily, with over 6,800 quality control points, processing 340,000 data points per second, and building high barriers with molecular-level material science. In terms of capacity, the current utilization rate exceeds 90%, and a new capacity of 250GWh is under construction, aiming to reach 1TWh next year. The energy storage business can bring a 14 percentage point IRR premium in the global market, indicating huge potential. Chinese Scientists Successfully Develop the First Prototype Hydrogen Negative Ion Battery. Recently, a team from the Dalian Institute of Chemical Physics, Chinese Academy of Sciences, developed a new type of core-shell structure hydrogen negative ion electrolyte and successfully constructed the first prototype hydrogen negative ion battery, with this achievement published in the international academic journal "Nature" on September 17, Beijing time. JP Morgan: JD's Takeout Breakthrough Battle, Seeking Market Share and Profitability! JP Morgan stated that JD's management emphasized that the core goal of the takeout business is to achieve synergy with traditional e-commerce, enhance user engagement, and promote cross-selling For the takeaway business, although the company may incur losses in the short term, the long-term profit path relies on three revenue pillars: fulfillment revenue will offset rider costs, commission and advertising revenue will be sufficient to cover subsidies and other operating expenses, and management predicts commission revenue will be generated next year. Overseas Macro Canceling the mandatory disclosure of quarterly reports for US stocks? Trump may really succeed. Trump is pushing to abolish the mandatory disclosure of quarterly reports for US stocks, switching to a semi-annual reporting system. Although there are differences among investors, the likelihood of success for this proposal is much higher than during Trump's first term due to the close cooperation of the new SEC chairman with the White House and a more favorable congressional environment. Analysts predict that the US market may eventually follow Europe and require semi-annual reports, but many companies may voluntarily maintain quarterly reports. Goldman Sachs Chief Macro Researcher: "Liquidity narrative" drives everything, the decline of the dollar is reminiscent of the "1970s," the risk is a repeat of 1979. Goldman Sachs warns that foreign central bank gold holdings have surpassed US Treasuries for the first time in 30 years, reflecting an erosion of trust in US debt. The current market is replaying the 1970s pattern: the dollar continues to depreciate, trust in government debt is weakening, and the liquidity narrative dominates, similar to the pre-collapse scenario of the Bretton Woods system. This week's dovish stance from the Federal Reserve will extend the economic cycle, but loose liquidity coexists with systemic distrust. The real risk lies in the stability of long-term interest rates; if the long bond market breaks, it will expose financial vulnerabilities. A year ago, he proposed "saving European competitiveness," and a year later, Draghi's "frustrated" summary: Europe has done nothing, too complacent. Former European Central Bank President Draghi proposed 383 recommendations to save European competitiveness a year ago, but only 11.2% have been implemented. He criticized Europe for "doing nothing," threatening competitiveness and sovereignty, and lambasted Europe for being too "complacent," packaging slow execution as respect for the rule of law, which is merely an excuse for inertia. European Commission President von der Leyen admitted a lack of "urgency," and the single market is far from perfect. Gold, has it peaked in the short term? Dongxing Securities believes that while the logic of a long-term bull market for gold still holds, there may be a risk of a short-term pullback. Major concerns include: gold is at overbought levels, volatility may increase; the fund flow of gold ETFs has not formed a consistent trend; spot squeezes are limited; Comex speculative net long positions in gold have declined; and market sentiment in China is not "booming" enough. Someone is placing a "big bet" in the options market: oil prices will fall below $50 before Christmas. Data shows that a put option trade equivalent to 10 million barrels of Brent crude oil has been executed. This trader is betting that Brent crude futures prices will fall below $50/barrel before the option expiration on December 23, which is nearly 25% lower than the current price of about $68 If crude oil futures successfully reach $49, the initial investment of approximately $350,000 could surge in value to $10 million. Star fund manager interpretation: How hedge funds succeed and how investment philosophy is established. Hedge fund veteran Adrian Meli claims that the secret to hedge fund success lies in a vast "Alpha pool" with sparse competition—meaning many opportunities but few smart capital. The core of his personal "contrarian" investment philosophy is to combat market short-sightedness with extreme long-termism and to eliminate performance pressure on researchers through a unique "no bonus" incentive mechanism, allowing for patient hunting of truly scarce high-quality assets that have been mispriced by the market. Overseas Companies Starting from an extremely brilliant Harvard paper: The Real and Brutal Impact of AI on Employment. The paper points out that after the explosion of AI, the number of entry-level jobs in AI-adopting companies has seen a cliff-like decline. AI is indeed taking entry-level jobs, not through layoffs but by ceasing to hire. The industries most severely affected are wholesale and retail, where hiring has decreased by nearly 40% each quarter. Next stop in the AI revolution: Anthropic and OpenAI invest heavily to create "virtual employees". Anthropic plans to invest $1 billion next year to build a large-scale AI training "gym." OpenAI believes that the entire economy may transform into a massive "reinforcement learning machine," with AI continuously evolving through collaboration and feedback from humans, fundamentally reshaping productivity and work models. NVIDIA co-invests, "American Yu Tree" Figure's Series C financing exceeds $1 billion, valuation has risen to $39 billion. Robotics startup Figure has secured over $1 billion in its latest funding round, with a post-money valuation reaching $39 billion, a 14-fold increase in less than a year. This round was led by Parkway Venture Capital, with participation from tech giants and investment institutions including NVIDIA. This financing round reflects the massive capital being attracted to the integration of artificial intelligence and robotics, with enthusiasm rivaling that of large models. Today's News Preview China's August Swift RMB share in global payments. U.S. President Trump meets with British Prime Minister Starmer. Bank of England announces interest rate decision. U.S. July long-term capital net inflow. U.S. initial jobless claims for last week. Huawei All-Connect Conference 2025. Cambricon will hold a 2025 semi-annual performance briefing. Meta releases its first consumer-grade smart glasses.