The U.S. military launched another airstrike on Iran, with Donald Trump claiming the temporary ceasefire has ended and threatening to blockade Iranian ports. Fed minutes showed heightened inflation concerns, with a few officials seeing a case for raising rates in June. The People's Bank of China's quarterly statement for the first time mentioned the challenge of "structural divergence." China is expected to report a slowdown in CPI on Thursday.

Overnight Highlights

– The S&P 500 closed lower while the Nasdaq bucked the trend and rose, driven by intense capital flows amid the intertwined effects of the U.S.-Iran deal collapse and a massive Apple order. Inflation concerns triggered by the deal collapse intensified selling pressure from allocation portfolios, driving U.S. Treasury yields higher across the board, with the long end hitting a seven-week intraday high. Fed minutes warned of inflation and geopolitical shocks causing wide swings in the forex market, dragging the dollar down after an initial surge. New threats of strikes against Iran sparked fears of a Strait of Hormuz supply disruption, driving international oil prices to surge and both hit multi-week highs. Soaring oil prices exacerbated inflation worries, pressuring both spot and futures gold lower.

International News

– The U.S. military launched airstrikes on Iran for a second consecutive day after Donald Trump claimed the temporary U.S.-Iran ceasefire had ended, with Trump threatening to blockade Iranian ports and take over its oil export hub, Kharg Island. Iranian state media: If the U.S. attacks, Iran will blockade the Strait of Hormuz and retaliate in kind.

– The June Fed meeting minutes showed policymakers' concerns about inflation have further intensified, with a few officials seeing a case for raising rates last month.

– The head of Germany's central bank said the Middle East situation is concerning and did not rule out the possibility of another ECB rate hike.

– Russia banned diesel exports to avoid domestic shortages after Ukrainian drone attacks on refineries.

– Despite Japanese government fiscal spending plans causing volatility in the country's bond and currency markets, Moody's believes Japan's credit rating remains quite stable, with risks very balanced.

– The IMF largely kept its global economic growth forecast for this year unchanged, saying the AI boom helps offset the negative impact of the Middle East conflict, but economic risks remain tilted to the downside.

– South Korean memory chip giant SK Hynix (SKHY.US) reportedly received over seven times subscription for its U.S. IPO, with pricing set for Thursday.

– Apple (AAPL.US) plans to spend over $30 billion to implement its chip supply agreement with Broadcom (AVGO.US), which will use the funds to expand its Colorado factory to produce at least 15 billion chips.

– Bank of America reportedly provided a $520 million credit line to OpenAI in recent weeks, hoping to secure a role in the company's IPO.

– SpaceXAI released a new AI model, Grok 4.5, built in collaboration with AI programming startup Cursor, designed to better handle financial, legal, and programming tasks.

Greater China News

– China will release June inflation data on Thursday, with industrial producer prices expected to accelerate and consumer price growth likely to slow.

– The PBOC quarterly meeting statement reiterated the continuation of a moderately loose monetary policy, noting the overall stable and improving economic performance, but added the phrase "structural divergence" to economic challenges and said the external environment is more complex and volatile.

– Chinese President Xi Jinping said more forceful measures should be taken to effectively solve problems in technological development.

– According to The Information, the Chinese government plans to allow domestic leading AI companies like Alibaba and DeepSeek to purchase a limited number of NVIDIA H200 chips.

– Data from the Passenger Car Association showed China's June passenger car retail sales fell 23.2% year-on-year, with new energy vehicle sales down 9.4%.

– China reportedly issued more gasoline, diesel, and jet fuel export permits to refiners in July, further relaxing export restrictions imposed during the Iran war.

– ZhiPu (02513.HK) $KNOWLEDGE ATLAS(02513.HK) reportedly plans to place 19.8 million H shares at HK$1,588-1,698 each, a discount of up to 13% to Wednesday's close, raising a total of $4 billion.

– Apple supplier Luxshare Precision (02475.HK) $LUXSHARE ICT(02475.HK) and leading Chinese electronic component manufacturer Sannhuan Group will list on the Hong Kong Stock Exchange on Thursday.

Commodities & Forex

– The Bloomberg Dollar Index held steady, while the yen underperformed.

– Oil prices surged as the U.S. struck Iran for a second day. Gold prices fell as Middle East tensions escalated after Trump said the U.S.-Iran ceasefire had ended.

Earnings & Economic Data Focus

– U.S. Initial Jobless Claims for week ending July 4 (thousands) (Prev: 215, Forecast: 218)

– U.S. Existing Home Sales Annualized for June (thousands) (Prev: 4.17 million, Forecast: 4.20 million)

Source: Golden Horse Capital Management (Hong Kong) Limited

Author: Terry Chow

Proofreader: Gloria Guo