The minutes of the June FOMC meeting released by the Federal Reserve showed that almost all officials believe that there will be multiple rate hikes this year, but at a slower pace. They emphasized that high inflation is one of the key considerations for the monetary policy outlook, and maintained the expectation of a mild economic recession in 2023, but with increased confidence in a soft landing for the economy.
After the U.S. stock market closed, New York Fed President Williams, one of the top officials at the Federal Reserve, reiterated that the task of combating inflation is not yet complete and that the path of rate hikes is not over. However, inflation expectations have been well anchored, and there are signs that housing inflation is improving.
The market is also waiting for key U.S. labor market data to be released on Thursday and Friday, including JOLTS job openings, ADP private sector employment, and non-farm payrolls for June. These data will not only provide clues about the economic conditions but also guide the direction of the Fed's interest rate policy.
Futures traders are still betting that there is a close to 90% probability of a 25 basis point rate hike by the Fed in July, and a close to 20% probability of another rate hike in September. However, they do not believe that there is a possibility of two more 25 basis point rate hikes before the end of the year, and the probability of a rate cut before the end of January 2024 is close to zero.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/20ae4a86-4135-40ef-8d40-f5d4e8322b06.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="Image" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/20ae4a86-4135-40ef-8d40-f5d4e8322b06.png"/>
U.S. factory orders increased by 0.3% month-on-month in May, falling short of the expected 0.8%. The previous value was 0.4%. Factory orders excluding transportation fell by 0.5% month-on-month, doubling the previous decline. However, the final value of durable goods orders in May increased by 1.8% month-on-month, higher than the expected and initial value of 1.7%. The final value of non-defense capital goods orders excluding aircraft, which measures business capital investment, remained unchanged at 0.7% compared to the initial value.
The HCOB Eurozone Composite Purchasing Managers' Index (PMI) compiled by S&amp;P Global fell to 49.9 in June, falling below the 50 threshold for the first time since December last year, indicating a contraction in business activity. Eurozone bond yields responded by declining.
The market still expects the benchmark interest rate of the European Central Bank to rise to around 4% by the end of the year, currently at 3.5%. Hawkish officials, such as the President of the German Bundesbank, reiterated the need for further rate hikes, while the Governor of the Bank of Italy supported keeping rates unchanged for a period of time rather than raising them.
<h2>U.S. stocks fall together, Nasdaq turns positive in early trading, most star tech stocks rise, and Chinese concept stocks see a significant narrowing of losses</h2>
On Wednesday, July 5th, U.S. stocks and the U.S. bond market resumed trading after the holiday break. The three major indices all opened lower, with the Dow Jones Industrial Average falling more than 190 points at the opening, the S&amp;P 500 and the Nasdaq falling 0.4% at the deepest point, and the Russell small-cap index performing the worst with a decline of about 1%.
The Nasdaq briefly turned positive 45 minutes after the opening, and popular tech stocks such as Tesla, Nvidia, Microsoft, Apple, and Google, which led the market in the first half of the year, rebounded after the collective opening decline. After the release of the Fed minutes, the Dow Jones fell by more than 100 points again in the final trading session.
In the end, U.S. stocks fell across the board, with the S&amp;P and Dow ending their three-day winning streak, and the Nasdaq ending its two-day winning streak. The broader market and the Nasdaq fell from their nearly 15-month highs since early April last year, and the Dow missed its highest level in seven months. The Russell small-cap index ended its six-day winning streak and fell from its four-month high.
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The S&amp;P 500 index fell 8.77 points, or 0.20%, to close at 4446.82. The Dow Jones Industrial Average dropped 129.83 points, or 0.38%, to 34288.64. The Nasdaq Composite Index declined 25.12 points, or 0.18%, to 13791.65. The Nasdaq 100 was down 0.03%, while the Russell 2000 small-cap index fell 1.3%.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/732f188c-8273-4373-a47b-a8fca3b649e1.jpeg?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="Image" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/732f188c-8273-4373-a47b-a8fca3b649e1.jpeg"/> The Nasdaq initially turned higher, but U.S. stocks fell across the board in the late session after the release of the FOMC minutes, with the Dow Jones dropping more than 100 points.
Most of the 11 sectors in the S&amp;P 500 closed lower, with the materials sector down 2.5%, and the industrial, information technology/technology, and energy sectors down no more than 0.6%. Defensive utilities and telecommunications services sectors both rose more than 1%.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/4a80dacf-e0ca-49dc-ba3e-608d230dfdf4.jpeg?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="Image" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/4a80dacf-e0ca-49dc-ba3e-608d230dfdf4.jpeg"/> Defensive sectors outperformed cyclical stocks.
Tech giants rose across the board, with only Apple down 0.6%, but still maintaining a market value of over $3 trillion. &#34;Metaverse&#34; company Meta rose nearly 3%, while Netflix rose 1%, both reaching their highest levels in 17 months. Amazon and Microsoft both saw slight gains, and Google Class A shares rose 1.5% to a two-week high. Tesla opened lower but ended the day with a gain of about 1%, marking its sixth consecutive day of gains and reaching a nine-month high.
Chip stocks fell across the board. The Philadelphia Semiconductor Index dropped 2.2%, falling below 3700 points and ending a three-day rally from a two-week high. AMD reversed its gains to fall 1.6%, while Intel fell more than 3%. &#34;AI darling&#34; Nvidia fell 0.2% but remained at a two-week high, with a market value of $1 trillion.
Most AI concept stocks experienced a pullback, but C3.ai rose more than 7%, marking a six-day rally to a two-week high and a cumulative increase of 25% during this period, with a total gain of over 250% this year. SoundHound.ai fell 7.5% to a one-week low after reaching a one-year high last week. BigBear.ai fell 4.6%.
In other news, Nvidia is considering outsourcing part of its AI GPU orders to Samsung, Tesla has lowered the prices of Model 3 and Y in Japan, Meta released a Twitter competitor called Threads on Thursday, Goldman Sachs upgraded Netflix from &#34;sell&#34; to &#34;neutral,&#34; citing better-than-expected crackdown on account password sharing and recovery in content creation momentum, with a target price of $400, still down more than 9% from Monday's close.
The late-session decline in popular Chinese concept stocks narrowed significantly. After a 2% rally on Monday, ETFs KWEB and CQQQ fell by about 1%, and the Nasdaq Golden Dragon China Index (HXC) fell 1.7% before closing down 0.6%, falling from a two-week high. Among the Nasdaq 100 constituents, JD.com turned higher after falling 0.8%, while Pinduoduo rose 0.8% and Baidu fell 1%.
In other individual stocks, Alibaba fell 1.5% before rebounding by 0.2%, Tencent ADR dropped 1.3%, and Bilibili declined by 3%. Xiaopeng Motors initially dropped nearly 2% but then rose by nearly 6%, NIO dropped over 2% before turning around to rise by nearly 2%, and Li Auto fell by 1.5%.
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In terms of news, Li Auto announced that it has become the first new energy vehicle company to achieve 400,000 deliveries. Xiaopeng Motors, which has been rising for seven consecutive days to reach a new high in nearly ten months, expects a significant increase in delivery volume in the second half of the year with the launch of the G6 model. It is estimated that the sales volume in the third and fourth quarters will reach 15,000 and 20,000 vehicles, respectively.
Among other automobile stocks, General Motors rose by over 1%, reaching the highest level in four months after rising for seven consecutive days. The second-quarter automobile delivery volume increased by nearly 19% compared to the same period last year, and all four major brands saw double-digit year-on-year growth rates. Rivian, the &#34;Tesla rival&#34; and American electric pickup truck manufacturer, rose by 7.6% before closing with a gain of over 4%, reaching a new high in nearly five months. Its second-quarter deliveries and production far exceeded expectations, causing a more than 17% surge on Monday.
Bank stocks retreated from a two-week high after collectively rising by 2% on Monday. The industry benchmark, the KBW Bank Index (BKX) of the Philadelphia Stock Exchange, dropped by nearly 1%. The SPDR S&amp;P Regional Banking ETF (KRE) declined by 1.3%, reaching the lowest level since October 2020 on May 4. The KBW Nasdaq Regional Banking Index (KRX) fell by 1.5%, reaching the lowest level since November 2020 on May 11.
Among the &#34;Big Four&#34; banks in the United States, JPMorgan Chase and Bank of America fell by nearly 1%, while Citigroup and Wells Fargo turned around and rose. The decline in regional banks narrowed, with PacWest Bancorp falling by 3% before closing with a decline of 0.1%, Western Alliance Bancorp falling by 2.7% before declining by 0.8%, KeyCorp falling by 3% before declining by 0.5%, and Zions Bancorporation falling by 2.5% before declining by 0.6%.
Other stocks with significant changes include:
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According to reports, the Australian Securities and Investments Commission (ASIC) conducted a search of Binance's Australian office. The cryptocurrency sector initially declined, with Coinbase falling by nearly 5% and Bit Digital briefly dropping by over 6%. However, Riot Platform fell by over 5% before rebounding by nearly 2%. Piper Sandler predicts that Coinbase's trading volume and monthly active users in the third quarter will reach the lowest level in over two years.
Moderna, the American vaccine manufacturer, confirmed that it has signed a memorandum of understanding and a land cooperation agreement for investment in China. The mRNA drugs developed and produced in China will only be available to Chinese patients. The stock price rose by 6% before closing with a gain of 1.5%, reaching a two-week high.
Wolfspeed, an American wide-bandgap semiconductor manufacturer, rose by nearly 23% before closing with a gain of over 11%, achieving the largest intraday increase since mid-August last year and reaching the highest level in over three months at the close. Japanese company Renesas Electronics invested $2 billion and signed a 10-year silicon carbide wafer supply agreement with Wolfspeed.
European stocks fell, with the UK FTSE 100 index performing the worst, dropping more than 1%. The pan-European Stoxx 600 index closed at a one-week low, down 0.73%, with insurance and utility stocks leading the decline. The German and Italian stock indices fell by 0.6%, while the French stock index fell by 0.8%.
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The yield on 2-year US Treasury bonds rose, with the 10-year yield rising by nearly 10 basis points to a four-month high.
Before the release of the Federal Reserve meeting minutes, short-term US Treasury bond yields fell. The 2-year yield, which is more sensitive to monetary policy, initially dropped by nearly 6 basis points to 4.88%, then narrowed to less than 1 basis point and rebounded to 4.93%; the 10-year bond yield stopped falling and turned higher at the beginning of US stock trading, rising by 8 basis points to 3.93%, reaching a four-month high since early March.
After the release of the minutes, US bond yields rebounded in a V-shape, with the 2-year yield rising to 4.95% intraday, an increase of nearly 1 basis point, approaching the four-month high set on Monday. The 10-year yield initially declined slightly, then the increase widened again, rising by nearly 10 basis points to 3.95%.
The yield on 2-year US Treasury bonds rose at the end of the day, and the 10-year yield rose by nearly 10 basis points, reaching a four-month high.
European bond yields rose at the end of the day. The yield on 10-year German bonds, the benchmark for the eurozone, fell by 5 basis points before turning up by more than 2 basis points, hovering around 2.48%. The 2-year yield approached the highest level since March 2008.
The yield on 10-year UK bonds rose by about 8 basis points, and the 2-year yield rose by 6 basis points. Traders increased bets on a rate hike by the Bank of England, believing there is a 50% chance of a rate hike to 6.5%. JPMorgan expects the Bank of England to have to raise rates to 7%, triggering an economic hard landing.
Crude oil prices rose more than 3% during the session, breaking through $72 per barrel, while Brent crude oil rose nearly 1%, reaching a two-week high.
Oil prices rebounded as the market worried about the impact of a global economic slowdown and further interest rate hikes by central banks in Europe and the United States on demand, while also being boosted by supply cuts from major oil exporting countries such as Saudi Arabia and Russia.
WTI August crude oil futures closed up $2.00, or 2.87%, at $71.79 per barrel. Brent September futures closed up $0.40, or 0.52%, at $76.65 per barrel.
WTI crude oil rose by a maximum of $2.38 or 3.4%, not only returning above the psychological level of $70 per barrel, but also briefly breaking through $72 per barrel. International Brent crude oil rose by a maximum of 0.9%, approaching $77 per barrel, both reaching a two-week high. Earlier, it had fallen by nearly $1 or 1.2%.
Oil prices stop falling and turn higher, with US oil rising more than 3% and breaking through $72.
Morgan Stanley has lowered its forecast for Brent crude oil prices, expecting them to reach $70 per barrel by the end of the year. The CEO of Saudi Aramco blames low oil prices on concerns about economic recession but expresses &#34;optimism&#34; about future demand led by China.
The European benchmark TTF Dutch natural gas futures fell by about 4% at the close, hovering near the low for the month, while ICE UK natural gas fell more than 3%. US natural gas futures for August fell nearly 2%, essentially erasing the gains since the end of June.
<h2>The US dollar rebounds in a V shape after the release of the Fed minutes, and the yen and offshore yuan approach eight-month lows again</h2>
Before the release of the Fed FOMC minutes, the US dollar index DXY, which measures against six major currencies, rose by 0.3%, hovering near the daily high and stabilizing above the 103 level, approaching a recovery of the month's decline. After the release of the minutes, the US dollar index briefly fell from the daily high, and then the gains expanded again to around 103.40.
The euro against the US dollar fell to a three-week low, briefly touching 1.09 during the day, while the pound against the US dollar fell slightly but held above 1.27, recovering more than half of the week's decline. The Australian dollar against the US dollar stopped rising after four consecutive days of gains.
The yen against the US dollar fell and approached the 145 level that prompted the Japanese government to intervene in the foreign exchange market last autumn, not far from an eight-month low. The offshore yuan fell below 7.26 yuan, a drop of more than 340 points from the previous day's closing, marking its first decline in four days and approaching an eight-month low.
Mainstream cryptocurrencies are generally falling. The largest cryptocurrency leader, Bitcoin, fell more than 1% and lost the $31,000 mark, falling for two consecutive days from the highest level since early May last year. The second-largest cryptocurrency, Ethereum, fell 2% and approached $1,910, continuing to move away from the two-month high.
<h2>Spot gold further away from $1,920, base metals fall but London nickel rises more than 3%, wheat sees historically large gains</h2>
The rise in the US dollar and US bond yields puts pressure on gold prices. Before the release of the Fed FOMC minutes, spot gold fell 0.3% and lost the $1,920 level, hovering near the daily low. COMEX August gold futures closed down 0.12% at $1,927.1 per ounce.
After the release of the minutes, spot gold's decline expanded to over 0.5%, trading at $1,915, giving back nearly half of the gains since June 30. Earlier in the day, it briefly rose above $1,930 to a two-week high before turning lower.
Analysis suggests that the demand for safe-haven assets driven by geopolitical tensions will keep gold prices from straying too far from the $1850 mark by the end of the year.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/5084ad4b-809c-46a9-b1ac-9274f4744de0.jpeg?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="Image" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/5084ad4b-809c-46a9-b1ac-9274f4744de0.jpeg"/> Spot gold further retreats from the $1920 level
Most London industrial metals closed lower, but nickel rose nearly $700 or over 3%, breaking through the $21,000 mark to a two-week high, while tin rose over 310 dollars or over 1%, reaching a three-month high.
In addition, copper in London fell 0.5%, declining for the second consecutive day from a one-week high; aluminum fell over 1%, approaching the more than nine-month low set last week; zinc in London fell over 2% and dropped below $2400 to a one-week low; lead in London fell over 1%, erasing the gains made earlier this month.
Some analysts believe that the stable U.S. dollar and weak global economic data have dampened the demand outlook for the industry, leading to a decline in most base metal prices. However, the low inventory levels in global exchange warehouses have supported copper prices. ANZ Bank stated that the decline in factory activity in the United States and Europe, along with the lack of improvement in market sentiment, indicates that the manufacturing sector is struggling to regain its footing after the recent energy crisis in Europe.
Chicago corn futures hit a new low for the year, as larger-than-expected planting areas in the United States and improved crop conditions imply ample future supply. CBOT wheat futures rose 5.8%, marking the largest increase in history, due to concerns over supply from the United States and Russia, as dry weather has weakened the growth of spring wheat crops to their lowest level since 2017.

After the release of the Fed's June minutes, the US stock market briefly declined to near the day's low. The US dollar and US bond yields experienced a V-shaped rebound after the decline, reaching a new daily high. Spot gold extended its decline and moved further away from $1920. In addition to Apple and NVIDIA, other star tech stocks saw a general rise. Meta reached its highest level in 17 months, while Tesla continued its six-day rally to a nine-month high. Chip stocks and AI stocks experienced a pullback, while XPENG-W initially dropped nearly 2% but then rebounded by nearly 6%. The 10-year US Treasury yield rose by nearly 10 basis points to a four-month high, and the yen and offshore renminbi approached their eight-month lows again. Crude oil rose over 3% to a two-week high during the session, while non-ferrous metals fell but London nickel rose by over 3%. US wheat saw its largest increase in history.

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After the release of the FOMC minutes, US stocks fell across the board, with the NASDAQ Composite Index briefly turning higher. The decline in Chinese concept stocks narrowed significantly.