Market focus on the release of US June CPI consumer inflation on Wednesday, with core inflation expected to increase by 5% YoY, far exceeding the Federal Reserve's target of 2%. On Thursday, the US June PPI producer price index will be released, marking the beginning of the second-quarter earnings season for banks such as JPMorgan Chase and Citigroup.
Several Federal Reserve officials spoke, supporting the mainstream view of continuing rate hikes but also suggesting that interest rates are nearing their peak in the cycle:
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Loretta Mester, President of the Federal Reserve Bank of Cleveland and a voting member in 2024, supports further rate hikes, stating that the current level is not restrictive enough. She had advocated for rate hikes in June.
Mary Daly, President of the Federal Reserve Bank of San Francisco and also a voting member next year, stated that inflation remains too high and it seems that two more rate hikes are needed. Insufficient rate hikes pose a greater risk than excessive rate hikes.
Randal Quarles, Vice Chairman for Supervision at the Federal Reserve and a permanent voting member of the FOMC, also mentioned the need for &#34;a little more&#34; rate hikes to combat inflation, but stated that interest rates are already close to a restrictive level.
Raphael Bostic, President of the Federal Reserve Bank of Atlanta and a voting member next year, stated that if inflation expectations cannot stabilize, the Federal Reserve may need to take more rate hike actions. However, he believes that inflation can return to the 2% target without further rate hikes.
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The New York Fed's June consumer survey shows that the one-year inflation rate expectation has dropped from 4.1% to 3.8%, the lowest in over two years, while the three-year inflation rate expectation remains stable at 3%. According to Manheim, an automotive auction company, the main driver of inflation during the pandemic, the prices of used cars in the United States fell by 10.3% YoY in June, the second largest decline in history, and decreased by 4.2% MoM, indicating a continued decline in inflation.
Bank of England Governor Andrew Bailey stated that although wages and prices are still rising too quickly, nominal inflation will significantly decline within the year, and the full impact of monetary tightening has not yet fully manifested in the economy. Some analysts believe that this indicates a growing caution among policymakers regarding further increases in borrowing costs, and investors have already priced in the possibility of a 50 basis point rate hike in August.
<h2>US stocks opened lower but rebounded during the day, with a brief decline midday and a late rebound, and Chinese concept stocks rose more than 1%, leading the market for the whole day.</h2>
On Monday, July 10th, the market still firmly expected a 25 basis point rate hike by the Federal Reserve in July. US stocks opened slightly lower but quickly rebounded. The S&amp;P 500 index rose by a maximum of 0.3% and broke through the 4400-point mark, while the Dow Jones Industrial Average rose by more than 220 points. The Russell 2000 index rose by more than 1%, leading the major indices. After 45 minutes of trading, the Nasdaq Golden Dragon China Index also reversed its decline and rose by more than 1%.
At midday, the Dow's gains were cut in half, and the S&amp;P and Nasdaq turned negative. The Nasdaq, which is dominated by technology stocks, performed the worst among the major indices, with a decline of 0.6%. However, in the late trading session, US stocks rebounded, ending the day with collective gains and approaching the day's high, ending a three-day losing streak. The S&amp;P and Nasdaq moved away from their lowest levels since June 29th, while the Dow moved away from its recent two-week low. The Russell 2000 index rose for the second consecutive day, nearly recovering the losses of the past week.
Last week, the S&amp;P 500 index and the Nasdaq both fell by about 1%, while the Dow Jones Industrial Average fell nearly 2%. The stronger-than-expected wage growth in US non-farm payrolls in June has raised concerns about further interest rate hikes by the Federal Reserve. Citigroup upgraded its rating on European stocks to &#34;buy&#34; and downgraded its rating on US stocks to &#34;neutral,&#34; predicting that the S&amp;P will fall 9% to 4000 points. Morgan Stanley issued a profit warning for US companies in the second half of the year.
Tech giants experienced a general decline, but Netflix rose 0.8%, and &#34;metaverse&#34; company Meta rebounded over 1% in the final trading session, both approaching their 17-month highs. Apple fell 1% and Microsoft fell 1.6%, both hitting two-week lows. Amazon, which kicked off its two-day Prime Day shopping event for members on Tuesday, fell 2% to a three-week low. Google Class A shares fell 2.5% to a two-month low, while Tesla fell 1.8% to a monthly low, both declining for three consecutive days.
Chip stocks showed mixed performance. The Philadelphia Semiconductor Index rose over 2%, reclaiming the 3600-point level and recovering more than half of last week's losses. AMD fell 3% before rebounding 0.4%, ending its three-day decline, while Nvidia fell 0.8% and hovered near its monthly low. Intel rose 2.8%, moving away from its one-month low. TSMC's US-listed shares fell 0.5%.
AI concept stocks saw both gains and losses. C3.ai fell over 4% before rebounding nearly 4%, while Palantir Technologies surged over 6%, both reaching three-week highs. SoundHound.ai rose nearly 4% in a two-day rebound from a three-week low. BigBear.ai fell 1%, approaching its lowest level in a month.
In terms of news, Meta launched its Threads software, which is similar to Twitter, and gained 100 million new registered users in just five days, breaking the record set by ChatGPT for the fastest growth, while Twitter's traffic plummeted rapidly. The hype around AI has sparked demand for chips, and TSMC's second-quarter revenue exceeded expectations. Goldman Sachs raised its target price for Nvidia, stating that generative AI is driving the company into a new era of growth.
Hot Chinese stocks significantly outperform the US market. ETF KWEB rose 0.3%, CQQQ nearly erased a 1% decline, and the Nasdaq Golden Dragon China Index (HXC) rose 1.2%, reaching its highest level in three weeks since June 16th, surpassing 6700 points. Among the Nasdaq 100 constituents, JD.com rose 0.5%, Pinduoduo and Baidu rose 0.2%. Among other individual stocks, Alibaba nearly erased a 1.6% gain, Tencent ADR fell more than 1%, and Bilibili slightly declined. NIO surged nearly 8%, while XPeng and Li Auto both mostly erased a 4% decline. Qinhua Data soared more than 12%, and China Merchants Capital issued a $3.4 billion acquisition offer.
Bank stocks rebounded for two days from a one-week low, approaching a three-week high. The industry benchmark KBW Bank Index (BKX) rose 0.2%, hitting its lowest level since October 2020 on May 4th. The KBW Nasdaq Regional Banking Index (KRX) rose 0.8%, reaching its lowest level since November 2020 on May 11th. The SPDR S&amp;P Regional Banking ETF (KRE) rose 0.8%, hitting its lowest level since October 2020 on May 4th.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/4adae9b1-8f3b-4afe-8c6f-bbd2c0b6b95e.jpeg?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/4adae9b1-8f3b-4afe-8c6f-bbd2c0b6b95e.jpeg"/> Despite the Federal Reserve sending a signal of stricter regulation for larger US banks, regional bank stock indices closed higher.
Among the &#34;Big Four&#34; US banks, Wells Fargo fell more than 1%, while JPMorgan Chase rose 0.6%. Regional banks showed mixed performance, with PacWest Bancorp rising 6% before turning down 1%, Western Alliance Bancorp and Zions Bancorporation rising by about 2%, and KeyCorp falling nearly 1%.
Vice Chairman Quarles, responsible for regulatory affairs at the Federal Reserve, stated that larger Wall Street banks will face higher capital requirements. Some analysts also believe that rising interest rates, losses in commercial real estate, and increased regulation will bring pressure to regional and mid-sized banks, triggering a wave of mergers. Regional banks in the United States will release their second-quarter reports this month, and warnings of declining revenue have already been issued by Zions Bancorporation and KeyCorp.
Other stocks with significant changes include:
<blockquote>
&#34;The Wolf of Wall Street&#34; Carl Icahn's Icahn Enterprises rose more than 20% to its highest level since May 18th, according to regulatory filings. Icahn decoupled his personal loans from the company's stock price in response to the short-selling reasons raised by Hindenburg Research in early May.
&#34;Tesla's rival&#34; Rivian Automotive rose more than 3%, marking a nine-day consecutive increase to a seven-month high since December 12th last year, and achieving the longest streak of consecutive gains since the company's US IPO.
&#34;Queen of the Bull Market&#34; Cathie Wood's Ark Investment Management has disclosed significant holdings in biotechnology company Quantum-SI and virtual and augmented reality wearable device company Vuzix. Quantum-SI rose more than 5% to its highest level in over two months, while Vuzix rose more than 3% and rebounded from a six-week low over the course of two days.
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European stocks rose across the board. The pan-European Stoxx 600 index initially fell but ended the day with a gain of 0.18%, marking its second consecutive increase after hitting a three-month low. Travel and leisure stocks led the gains, rising 1.3%, while mining stocks fell 0.6%. Last week, the major stock indexes experienced the deepest weekly decline in nearly four months.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/da53e01a-5def-4dc4-ab4e-d2952ced35bf.jpeg?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/da53e01a-5def-4dc4-ab4e-d2952ced35bf.jpeg"/>
<h2>Two-Year Treasury Yield Drops Sharply by 8 Basis Points to Monthly Low, European Bond Yields Rise Approaching Multi-Month Highs</h2>
US Treasury yields collectively declined, with some investors believing that US bonds were oversold last week. The yield on the two-year Treasury, which is more sensitive to monetary policy, fell by 8 basis points to 4.85%, reaching its lowest level of the month. The yield on the benchmark 10-year bond also dropped by 6 basis points and briefly fell below the 4% level, erasing nearly half of last Thursday's gains.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/0727b8af-e319-4c5b-b781-77429ebfd190.jpeg?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/0727b8af-e319-4c5b-b781-77429ebfd190.jpeg"/> The two-year Treasury yield continues to retreat from its high point before the March banking crisis.
Market traders' expectations of tightening by the European Central Bank have slightly increased. The yield on the 10-year German bond, the eurozone benchmark, rose by 1 basis point to 2.64% at the close, approaching the highest level since the start of the banking crisis on March 9th, which was 2.677%. The two-year yield rose by 4 basis points to 3.34%, reaching its highest level since October 2008, which was 3.393%. UK bond yields declined collectively.
Some analysts believe that the slight rebound in eurozone bond yields and their proximity to last week's highs is mainly due to increased concerns about the need for interest rates to remain high for a longer period of time, as evidenced by the more severe US non-farm payroll data released last Friday. It is clear that central banks in Europe and the United States have not yet finished raising interest rates.
<h2>Oil Prices Fall by Approximately 1%, US Stocks Initially Decline Significantly Narrowed, European Natural Gas Falls by Over 11% to a One-Month Low</h2>
Concerns about demand prospects and the interplay of factors such as OPEC+ major member countries deepening supply cuts in August led to a drop of approximately 1% in international oil prices. US stocks initially saw a significant narrowing of their decline to 0.2%.
WTI August crude oil futures fell by $0.87, or 1.18%, to $72.99 per barrel, ending a four-day consecutive increase. Brent September futures fell by $0.78, or 0.99%, to $77.69 per barrel. Oil prices rose more than 4% last week and have been on the rise for two consecutive weeks.
Oil prices fell by about 1%, with US oil falling below $73 and Brent oil falling below $78.
The TTF Dutch natural gas futures, the European benchmark, fell more than 11% at the close, breaking through the psychological level of 30 euros/megawatt-hour for the first time since June 13, and the winter futures discount for January 2024 expanded to its deepest level this year. ICE UK natural gas fell more than 12%. Analysts believe that European natural gas prices have been declining for several weeks, with last week seeing the largest weekly decline since May, due to insufficient demand and ample inventory.
The US dollar index fell below 102 to a three-week intraday low, and the offshore renminbi approached a monthly high of 7.22.
The DXY, which measures the US dollar against six major currencies, fell 0.3% and broke below the 102 level, reaching a three-week intraday low since June 22. Hedge funds collectively turned bearish on the US dollar after betting on the end of the rate hike cycle, four months later.
Analysts said that the US dollar index fell nearly 1% last Friday, as continued wage and inflation pressures strengthened market expectations of a rate hike by the Federal Reserve in July, but also enhanced investors' belief that the rate hike cycle of the Federal Reserve is nearing its end, even though they no longer expect a rate cut in 2023.
The euro rose against the US dollar during US stock trading hours and approached 1.10, reaching a two-week intraday high. The British pound also reversed its decline and rose back above 1.28, approaching the 15-month high set last Friday. The yen, which rose more than 1% last Friday, rose another 0.5% and broke through 142 to a three-week high. The offshore renminbi approached a high of 7.22, rising more than 110 points from the previous day's closing price, hovering at a monthly high.
Mainstream cryptocurrencies showed mixed movements, but the changes were generally small. Bitcoin, the largest cryptocurrency by market capitalization, rose slightly and returned above $30,000, hovering at a one-week high, while the second-largest cryptocurrency, Ethereum, approached $1,870.
Gold attempted to rise during US stock trading hours and approached $1,930, supported by the decline in the US dollar and US bond yields, but the expectation of a rate hike by the Federal Reserve limited its gains. COMEX August gold futures closed down 0.08% at $1,931.00 per ounce.
Palladium fell below $1,200 for the first time since December 2018, as the decline in the US dollar and US bond yields supported the gold price, but the expectation of a rate hike by the Federal Reserve limited its gains.
Futures for October fell by 0.07%, reaching $1950.10 per ounce.
Spot gold briefly approached $1910, down 0.7%, while US stocks rebounded during trading and attempted to reach $1930. Analysts suggest that if US inflation data remains strong this week, gold may fall below the $1900 mark and quickly drop to $1850.
Due to investors lowering their expectations of a quick end to the US Federal Reserve's interest rate hike cycle, gold has fallen more than 7% since reaching near-historic highs in early May. The technical outlook remains bearish, with only geopolitical conflicts capable of significantly driving up gold prices.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/7aa9bc20-b0d7-4f75-8b38-44bf0c0f2387.jpeg?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/7aa9bc20-b0d7-4f75-8b38-44bf0c0f2387.jpeg"/> Gold rebounded during US stock trading, attempting to reach $1930.
Meanwhile, palladium prices have fallen below the $1200 mark for the first time since December 2018, with a decline of over 30% so far this year. Against the backdrop of overall economic weakness, the rapid rise of electric vehicles may impact the demand for this metal used in automotive catalytic converters.
Data from the US Commodity Futures Trading Commission (CFTC) shows that as of the week ending July 4th, bearish sentiment for NYMEX palladium reached a historic high, while speculators significantly increased their net long positions in COMEX gold. Net long positions in silver and copper fell to at least a three-week low.
The decline of the US dollar led to most London industrial metals closing higher. London copper rebounded slightly at the end of the day, as concerns over supply from Chile and Peru, the world's top two copper-producing countries, limited the downward trend. London nickel rose 1% and surpassed $21,000, while tin fell 1.4%.

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.DJI

Market awaits US inflation data and banking industry financial reports. Several Federal Reserve officials spoke in support of continuing rate hikes, but also hinted that interest rates are nearing their peak for the cycle. US stocks fell in unison during midday trading, but rebounded to reach daily highs by the end of the session. The Dow Jones Industrial Average rose over 200 points, while technology stocks experienced a general decline. The Nasdaq Golden Dragon China Index reached a three-week high, with NIO Inc. USD OV rising nearly 8% and Qinhuai Data rising over 12%. The two-year US Treasury yield fell sharply by 8 basis points to a monthly low, and the US dollar index dropped below 102 to a three-week low. Offshore renminbi approached a monthly high of 7.22 yuan. Oil prices fell by about 1%, European natural gas dropped over 11%, and palladium fell below $1,200 for the first time since December 2018.

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US stocks halted their three-day decline, with Chinese concept stocks rising more than 1% to lead the way, while the US dollar and US bond yields both fell.