Breakfast | Three major US stock indices fell back, oil rebounded sharply, and Tesla closed down nearly 4%

Market Overview

Trump raises concerns over escalating Middle East conflicts, leading to a decline in the three major U.S. stock indices. Tesla fell nearly 4%, leading the decline among the seven tech giants; a U.S. Senate bill proposed gradually eliminating solar tax incentives, causing solar stocks to plummet, with Sunrun down 40%; Verve Therapeutics, a gene-editing company agreed to be acquired by Eli Lilly at a 130% premium, saw its stock rise 81.5%. The China concept index fell nearly 2%, while the Chinese concept stock Brain Regen Technology (RGC) rose 30%.

After the release of U.S. retail sales data, U.S. Treasury yields hit a daily low. Following Trump's warning to Iran, the dollar index rose, erasing losses since the Israeli attacks; Bitcoin briefly fell over $5,000, dropping below the $104,000 mark.

Trump's warning to Iran spurred a major rebound in crude oil, which rose 5% at one point, reaching a nearly five-month high. Silver futures rose over 2% during the session, hitting a record high, while gold futures turned lower, continuing to fall from record closing highs.

During the Asian session, A-shares and Hong Kong stocks saw their declines widen in the afternoon, with the brain-computer interface concept active, the Hang Seng Index falling below 24,000 points, and innovative drugs plummeting, while new consumption stocks declined.

Key News

Trump stated that he has complete control over Iranian airspace, knows where Khamenei is but will not assassinate him at this time, warning that American patience is running out and calling for unconditional surrender from Iran. Reports emerged that he met with the national security team in the White House Situation Room, considering possible strikes on Iran, causing crude oil to rise 5% at one point.

The Israeli military claimed to have destroyed Iran's uranium enrichment facilities, with Israel's national security advisor stating that military operations will not end unless Iran's Fordow nuclear facility is destroyed; the International Atomic Energy Agency confirmed for the first time that the Israeli military directly damaged Iran's largest underground uranium enrichment plant; media reports suggest that Trump is increasingly inclined to use U.S. military assets to strike Iranian nuclear facilities, but if Iran makes significant concessions, diplomatic solutions cannot be ruled out.

"New Federal Reserve News Agency": If it weren't for tariffs, the Federal Reserve would cut interest rates this week.

U.S. retail sales in May fell 0.9% month-on-month, the largest decline in two years; the manufacturing outlook is becoming increasingly unclear, with U.S. industrial output declining for the second time in three months.

The U.S. tariff dispute has entered the Supreme Court for the first time, with two toy companies challenging Trump's tariffs.

The U.S. Senate voted to pass a stablecoin bill, with the House expected to vote in a few weeks.

The Bank of Japan kept interest rates unchanged and plans to slow down its balance sheet reduction starting next fiscal year; the Bank of Japan governor stated that reducing bond purchases too quickly could undermine market stability, and interest rates may rise if the economic outlook meets expectations.

The acceleration of "de-dollarization" has led to a record number of central banks planning to increase gold holdings. JP Morgan: If gold prices maintain current levels, the likelihood of the People's Bank of China pausing purchases in June is 70%. Citigroup warns that gold prices will fall below $3,000 after the third quarter

The 20 billion AI unicorn strikes back, MiniMax's first inference model rivals DeepSeeK, with computing costs of only $530,000.

Market Report

US and European Stock Markets: The Dow Jones fell 0.7%, the S&P 500 index fell 0.84%, and the Nasdaq fell 0.91%. The European STOXX 600 index fell 0.85%.

A-shares: The Shanghai Composite Index fell 0.04%, the Shenzhen Component Index fell 0.12%, and the ChiNext Index fell 0.36%.

Bond Market: By the end of the bond market, the yield on the benchmark 10-year U.S. Treasury was about 4.39%, down nearly 6 basis points during the day, while the yield on the 2-year U.S. Treasury was about 3.95%, down nearly 2 basis points during the day.

Commodities: WTI July crude oil futures rose 4.28%. Brent August crude oil futures rose 4.4%. COMEX August gold futures fell 0.3%. COMEX July silver futures rose 1.93%. London lead fell about 1.6%, London tin fell about 1.1%, and London aluminum rose nearly 1.5%.

News Details

Global Highlights

Trump warns that American patience is running out, calls for unconditional surrender from Iran, reportedly considering strikes on Iran, crude oil briefly rose 5%. Trump stated on Tuesday that the U.S. has complete control over Iranian airspace, and the U.S. knows exactly where Iranian Supreme Leader Khamenei is, and currently has no plans to assassinate him, but American patience is running out.

• On Monday, media reported that the White House was considering talks with Iran this week regarding nuclear issues and a ceasefire, with the provision of bunker-busting bombs to Israel as an important bargaining chip. Bunker-busting bombs are necessary to destroy Iran's Fordow underground uranium enrichment facility, which Israel does not possess. Trump denied on Tuesday that there were any peace talks with Iran, stating that he had not actively contacted Iran for "peace negotiations" and was "not in the mood." If Iran wants to negotiate, they know how to contact me.
• Media reported that Trump met with the National Security Team in the White House Situation Room to discuss countermeasures, weighing whether the U.S. should further intervene in the U.S.-Iran conflict, considering a range of options including strikes against Iran; Trump is increasingly inclined to use U.S. military assets to bomb Iranian nuclear facilities, but remains open to diplomatic solutions if Iran makes significant concessions.
• Report: The U.S. Secretary of Defense is heading to the White House Situation Room to meet with Trump and his National Security Team According to Global Network, U.S. Defense Secretary Lloyd Austin did not disclose the specific reasons for the meeting, but he stated that these actions are aimed at "ensuring the safety of our people." Meanwhile, the U.S. has redeployed naval ships and aircraft in the Middle East to respond to the further escalation of the conflict between Israel and Iran.
• The Israeli Defense Minister stated that Tehran will face "significant" airstrikes; the Chief of Staff of the Iranian Armed Forces claimed that punitive strikes against Israel will be launched soon.
• Yemeni Houthi officials stated that they will support Iran in its fight against Israel.
• The Israeli military claims to have destroyed Iran's uranium enrichment facilities, and the International Atomic Energy Agency (IAEA) has confirmed for the first time that Israel directly destroyed Iran's largest underground uranium enrichment facility. The IAEA Director General stated last Friday that the surface facilities of the Natanz uranium enrichment plant in Iran were destroyed in the attack, and centrifuges may have been damaged due to power outages in the underground cascade hall. On Tuesday, the IAEA stated that further analysis of satellite images revealed more signs indicating that the underground uranium enrichment workshop in Natanz was directly hit.
• The Israeli National Security Advisor stated that military operations will not end unless Iran's Fordow nuclear facility is destroyed.

Historically, has Iran ever truly blocked the Strait of Hormuz? Throughout history, Iran has indeed affected the Strait of Hormuz during wartime and has repeatedly threatened to block it, but it has never implemented a thorough, sustained, and comprehensive blockade of the strait in a true sense.

"New Federal Reserve News Agency": If it weren't for tariffs, the Federal Reserve would lower interest rates this week. Timiraos wrote, "The Federal Reserve does not want to make mistakes," and it must weigh two important factors: rising inflation expectations and a deteriorating labor market, determining which is more likely to occur and which carries a higher cost.

U.S. retail sales fell 0.9% month-on-month in May, the largest decline in two years, mainly dragged down by a decrease in automobile purchases. The growth rate for April was revised from positive 0.1% to negative 0.1%. The data indicates that the previous surge in purchases to avoid potential price increases due to tariffs has subsided.

Manufacturing outlook becomes increasingly unclear, U.S. industrial output declines for the second time in three months. Due to a decline in utility output and the manufacturing sector struggling to gain momentum amid weakening demand, U.S. industrial output fell 0.2% month-on-month in May, marking the second decline in three months and falling short of market expectations. Although a rebound in automobile assembly led to a slight increase of 0.1% in manufacturing, other manufacturing sectors have seen declines for two consecutive months, with machinery and metal products performing weakly The U.S. Tariff Dispute Enters the Supreme Court for the First Time, Two Toy Companies Challenge Trump's Tariffs. Two American family toy companies filed a direct application to the Supreme Court on Tuesday, challenging Trump's tariffs, claiming that he abused the International Emergency Economic Powers Act of 1977 to impose excessive taxes. They requested the Supreme Court to expedite the review, potentially making a final ruling by the end of the year. The application also asked the Supreme Court to take the unusual step of hearing the case directly before the federal appeals court has ruled. The plaintiffs stated that the tariffs have severely disrupted the supply chain, causing significant losses.

U.S. Senate Votes to Pass Stablecoin Bill. The Senate passed the stablecoin bill with a vote of 68 in favor and 30 against, approving the GENIUS Act. The bill will now be submitted to the House of Representatives, which will decide whether to push its own stablecoin bill or adopt the Senate's version. The House is expected to vote in the coming weeks.

Bank of Japan Maintains Interest Rates, Plans to Slow Down Balance Sheet Reduction Starting Next Fiscal Year. Bank of Japan Governor: Rapid Reduction of Bond Purchases May Disrupt Market Stability, Will Raise Rates if Economic Outlook Meets Expectations.

• The Bank of Japan plans to reduce its monthly bond purchases from the current 400 billion yen to 200 billion yen per quarter starting April 2026, which is comparable to the bond purchase levels before the implementation of ultra-loose monetary policy in 2013.
• Ueda Kazuo stated at the meeting that due to concerns about market volatility impacting the bond market, the pace of bond purchase reductions will be slowed, as a rapid reduction could undermine market stability.

De-dollarization Accelerates, Number of Central Banks Planning to Increase Gold Holdings Hits Record High. JP Morgan: If Gold Prices Remain at Current Levels, the Probability of the People's Bank of China Pausing Purchases in June is 70%. Citi Warns: Gold Prices Will Fall Below $3,000 After Q3.

• According to the World Gold Council, 43% of the surveyed central banks expect their gold reserves to increase in the next 12 months, a significant jump from 29% last year, marking a historical high in the eight-year survey; nearly three-quarters of respondents expect central bank dollar-denominated reserves to decline within five years
• JP Morgan believes that the People's Bank of China has slowed its gold purchases to 60,000 ounces in May, which is the same level as before the pause in purchases at the beginning of 2024. If gold prices remain at current levels, the likelihood of a pause in purchases in June has increased to about 70%. Coupled with expectations that the Sino-U.S. trade tensions may ease, JP Morgan believes that gold prices face a risk of correction in the short term.
• Citigroup believes that under the baseline scenario, as global growth confidence improves, Trump's trade policy shifts to a moderate stance, and the Federal Reserve's position moves from tightening to neutral, the appeal of gold as a safe-haven asset will diminish. It is expected that gold prices will gradually decline after reaching a high range of $3,100 to $3,500 in the third quarter, falling to the range of $2,500 to $2,700 by the second half of 2026.

The $20 billion AI unicorn strikes back, MiniMax's first inference model rivals DeepSeeK, with computing costs of only $530,000. AI startup MiniMax has released its first inference model M1, which was trained using 512 NVIDIA H800 GPUs for three weeks, with a rental cost of $537,400. In multiple benchmark tests, M1 outperformed DeepSeek's latest R1-0528 model, requiring only 25% of the computing resources that DeepSeek needed to generate 100K tokens.

Domestic Companies

Valuations have peaked, what will Chinese concept stocks compete for in the second half? UBS highlights: AI, profitability, new markets. UBS believes that the rise of Chinese concept stocks in the first half of the year was mainly driven by valuations rather than profit improvements, especially for stocks with AI concepts. Small and mid-cap stocks outperformed the broader market. Investors need to focus on AI monetization, overseas expansion, and profitability restructuring in the second half of the year. The commercialization process of artificial intelligence is accelerating, with three areas showing early visible monetization including cloud services, advertising, and AI agents. Under policy guidance, the commission rates of internet platforms are expected to converge and shift from commissions to advertising revenue.

Alibaba releases upgraded Qwen3, fully compatible with Apple's MLX architecture, preparing for the domestic Apple smart devices. This means that from Mac Pro, Mac Studio to Mac mini, MacBook, and even the smaller iPhone, Qwen3 can be easily deployed.

Morgan Stanley: China is the world's largest robot market, drones will account for 40%, and the industry scale will double in four years! Morgan Stanley analysts believe that China has established a complete supply chain system for robots from design to assembly, achieving large-scale localized production of key components. The scale of China's robot market is expected to grow to $108 billion by 2028, with a compound annual growth rate of 23% This growth is primarily driven by drones, mobile robots, and collaborative robots. Key components such as motors, batteries, sensors, and vision systems will become the most promising investment targets, with sensors and vision systems expected to achieve the fastest growth.

Goldman Sachs on China's Innovative Drug Boom: More Deals to Come, Focus on CXO Opportunities. Goldman Sachs stated that the surge in biotechnology licensing deals is driving sector revaluation, and this momentum is expected to continue with more deals on the horizon. CDMO/CRO may welcome second-stage investment opportunities, with companies having higher exposure to late-stage and commercial manufacturing demonstrating stronger profitability.

Overseas Macro

How Will the Most Sensitive "Capital Tax" Change? U.S. Senate Modifies Clause 899 of the "Big Beautiful" Bill: Delay and Lower Cap. The formal implementation date of Clause 899 will be postponed to 2027, with the tax rate cap for calendar year filers reduced from 20% in the House version to 15%, increasing by 5 percentage points each year.

JP Morgan's Team, the Most Accurate in This Round of Market, Speaks Again: Be Cautious with U.S. Stocks Tactically. As U.S. stocks rebound strongly and the S&P 500 confirms entry into a bull market, JP Morgan's market intelligence team suddenly issued a turning signal, warning that a market correction is imminent. They believe multiple risks are accumulating, including escalating geopolitical tensions, surging inflation pressures, investor profit-taking demands, and tight market positions.

BofA Fund Manager Survey: Trade War Concerns Ease, "Long Gold" Fades, Dollar Underweight at 20-Year Extremes. BofA's survey shows that investor sentiment has significantly improved, with cash allocation dropping to a three-month low. Trade war concerns have eased but remain the biggest tail risk, with investors' underweight in the dollar reaching 31%. BofA suggests three major contrarian trades: go long on the dollar, short on gold; go long on U.S. stocks, short on European stocks; go long on consumer stocks, short on bank stocks. AI remains the most favored theme in the Chinese market, followed by healthcare.

Lagarde Rarely Publishes an Article, Calling for Seizing the Euro's "Global Moment"! Lagarde stated that this transformative moment is an opportunity for Europe: it is a "global euro" moment, emphasizing that "Europe must consolidate three foundational pillars: geopolitical credibility, economic resilience, and a sound legal and institutional framework."

Russian Energy Official Declares: The World Needs to Increase Oil Production. The Russian Deputy Prime Minister stated that global demand for crude oil is increasing, and the "OPEC+" oil-producing country alliance is prepared to flexibly adjust production according to market changes Earlier on Tuesday, CCTV reported that Trump stated that the U.S. would postpone sanctions against Russia in hopes of reaching an agreement.

IEA's latest forecast: Oil supply will greatly exceed demand this year. The IEA stated that as long as there are no severe disruptions in Middle Eastern crude oil supply, the global oil market supply will remain ample through 2025, with global oil production expected to increase by 1.8 million barrels per day to 104.9 million barrels per day in 2025. The IEA also indicated that the oversupply situation may persist for the remainder of this decade.

Goldman Sachs: Oil price increase is due to "short-term geopolitical shocks," peaking at $90/barrel, falling to $59 in Q4. Goldman Sachs stated that if Iran's export infrastructure suffers potential damage, leading to a reduction of 1.75 million barrels per day in Iranian supply for six months, Brent crude prices could rise to slightly above $90/barrel in the summer, after which strong supply growth outside of U.S. shale oil will bring Brent crude prices back down to $59 in Q4 2025.

European Commission plans to completely ban imports of Russian oil and gas. According to CCTV news, the European Commission proposed a legislative proposal on the 17th to gradually stop importing Russian natural gas and oil by the end of 2027. This proposal is a further advancement of the energy roadmap passed by the European Commission last month. European Commission President Ursula von der Leyen stated that the proposal aims to eliminate the EU's dependence on Russian fossil fuels.

Overseas Companies

Report: Musk's xAI burns $1 billion a month, far exceeding revenue, latest debt financing not well received. According to media reports, Musk's artificial intelligence startup xAI is burning up to $1 billion a month. Currently, xAI is seeking to raise $9.3 billion through debt and equity, with plans to spend more than half of that amount within the next three months. Morgan Stanley is assisting in raising $5 billion in debt financing, but investor interest has been lukewarm; however, it is still expected to sell out completely and complete the transaction on time.

Hedge fund discusses why it liquidated Nvidia: "This stock made me the most money in my life, it has to be sold, you can't fall in love with a stock". Jonah Cheng, a hedge fund manager managing $100 million in assets, chose to liquidate all his holdings in Nvidia after the stock helped his fund earn 42% last year. Behind the liquidation are his multiple concerns, including delays in the GB200 rack, inventory risks, lack of upward revisions in earnings forecasts, and a slowdown in spending by cloud computing companies After Google, Meta's demand surges, will ASIC surpass NVIDIA GPUs next year? Nomura Securities stated that Meta plans to launch several high-spec AI ASIC chips between the end of 2025 and 2026, with a total quantity expected to reach 1 to 1.5 million units. With this boost, the total shipment of ASICs is expected to surpass NVIDIA GPUs at some point in 2026.

Today's News Preview

The 2025 Lujiazui Forum will be held in Shanghai.

Eurozone and UK May CPI.

US initial jobless claims for last week.

US May housing starts and building permits.

US EIA crude oil inventory changes for last week.

The Federal Reserve will announce its interest rate decision, and Federal Reserve Chairman Jerome Powell will hold a press conference.

NVIDIA CEO Jensen Huang will deliver a keynote speech.

US April long-term capital net inflow.