Breakfast | The Federal Reserve still expects to cut interest rates twice this year, and Powell stated that inflationary pressures have risen significantly; U.S. media reports that Trump has approved an attack on Iran but has not yet given the final order

Market Overview

Powell expects inflationary pressures to rise significantly, offsetting the optimism brought by Trump's statement that Iran has proactively proposed negotiations during intraday trading of U.S. stocks. After Powell's press conference, U.S. stocks briefly turned negative across the board, ultimately closing mixed.

U.S. tech stocks led the gains. The U.S. plans to relax capital regulations on banks' trading of U.S. Treasury bonds, with bank stocks leading the rally. Circle, the first stablecoin stock, surged over 34% after the U.S. Senate passed a stablecoin bill overnight.

Following the Federal Reserve's decision, U.S. Treasury yields briefly hit a daily low, but after hawkish comments from Powell, yields only slightly declined. Gold fell over 1% from its intraday high. Platinum reached its highest level in eleven years. Oil experienced wide fluctuations, and Trump stated he does not wish for the U.S. to be involved in the Middle East situation, leading to a decline in oil prices.

During the Asian session, A-shares fluctuated and closed higher, with the semiconductor industry chain surging in the afternoon. Hong Kong stocks fell over 1%, with the new consumption trio showing divergence; Pop Mart rose over 1%, while Mixue Group fell over 2%.

Key News

Pan Gongsheng made a significant statement, involving the transformation of the monetary policy framework, and for the first time mentioned stablecoins, announcing the establishment of an interbank market trading report database, a digital RMB international operation center, and a personal credit agency among eight major financial policies.

Wu Qing: Establish a growth tier for the Sci-Tech Innovation Board to support high-quality unprofitable innovative companies to go public, piloting a pre-review mechanism for IPOs.

Li Yunzhe: Support foreign institutions in participating in more financial business pilots, exploring greater financial openness.

Foreign Minister Wang Yi stated that Israel's actions violate international law and international relations norms.

Trump stated that Iran wants to negotiate, without proposing U.S. reinforcements for Israel. Media reports that Trump has approved attacks on Iran but has not yet given the final order. The third U.S. aircraft carrier will be deployed near Israel, and the U.S. Secretary of Defense stated that all plans are in place, including scenarios following an attack on Iran. Khamenei: Iran will not surrender, and any U.S. strike will lead to irreparable consequences.

The Federal Reserve continues to hold steady, stating that uncertainty has decreased but remains high, still expecting two rate cuts this year, hinting at increased stagflation risks; Powell: Inflationary pressures are expected to rise significantly in the coming months due to tariffs, and the labor market has not called for rate cuts.

Trump again called Powell stupid: A rate cut of 2.5 percentage points would be great; can I appoint myself to the Federal Reserve?

Amid market turmoil in April, foreign investors' holdings of U.S. Treasuries approached historical highs. China's holdings of U.S. Treasuries decreased by $8.2 billion in April. Canada's holdings of U.S. Treasuries saw a significant decline of $57.8 billion in April.

The price war among AI giants intensifies: OpenAI has started discounting the enterprise version of ChatGPT, putting Microsoft in a passive position.

U.S. regulators plan to relax capital rules, reducing capital buffers by 1.5% to promote Treasury trading

Trump severely impacts the U.S. electric vehicle industry, 14 million in sales lost, potentially ranking last globally by 2040.

Market Report

U.S. and European Stock Markets: The S&P 500 index closed down 0.03% at 5980.87 points. The Dow Jones Industrial Average closed down 0.10% at 42171.66 points. The Nasdaq closed up 0.13% at 19546.27 points. The European STOXX 600 index closed down 0.36% at 540.33 points.

A-shares: The Shanghai Composite Index reported 3388.81 points, up 0.04%; the Shenzhen Component Index reported 10175.59 points, up 0.24%; the ChiNext Index reported 2054.73 points, up 0.23%.

Bond Market: The yield on the U.S. 10-year benchmark Treasury bond remained roughly flat at 4.3909%, trading within a range of 4.4087%-4.3377% during the day, showing an overall V-shaped trend. The yield on the 2-year U.S. Treasury bond fell by 1.04 basis points to 3.9414%.

Commodities: COMEX gold futures fell 0.67% to $3383.90 per ounce. WTI crude oil closed down 0.85% at $74.50. Brent crude oil closed down 0.87% at $76.52.

News Details

Global Highlights

Pan Gongsheng makes a significant statement! Involving the transformation of the monetary policy framework, first mentioning stablecoins.

• Pan Gongsheng stated that over the past year, the People's Bank of China has maintained a supportive monetary policy stance, implementing multiple monetary policy measures from the perspectives of quantity, price, and structure, effectively supporting the continuous recovery of the economy and the stability of the financial market.
• Pan Gongsheng announced the establishment of an interbank market trading report database, a digital renminbi international operation center, and a personal credit reporting agency, among 8 major financial policies.

Wu Qing: Establishing a growth tier for the Sci-Tech Innovation Board to support high-quality unprofitable innovative companies to go public, piloting an IPO pre-review mechanism. Wu Qing announced the establishment of a growth tier for the Sci-Tech Innovation Board, restarting the application of the fifth set of listing standards for unprofitable companies; the ChiNext officially adopted the third set of standards to support high-quality unprofitable innovative companies to go public. At the same time, the first batch of data center REITs was approved nationwide, accelerating the launch of Sci-Tech bonds ETF, and researching renminbi foreign exchange futures. He also pointed out the need to cultivate and expand patient capital and long-term capital more vigorously, promoting social security and insurance funds to participate in private equity investment

• CSRC: All unprofitable technology companies included in the Sci-Tech Innovation Growth Tier, pilot pre-review mechanism for IPOs for quality tech companies. Regarding the conditions for entering and exiting the tier, all unprofitable technology companies are included in the Sci-Tech Innovation Growth Tier, with new and old exit conditions implemented. Newly registered unprofitable technology companies that meet one of the following conditions will be removed from the Sci-Tech Innovation Growth Tier: (1) Net profit is positive for the last two years and cumulative net profit is not less than 50 million yuan; or (2) Net profit is positive for the last year and operating income is not less than 100 million yuan.

Li Yunzhe: Support foreign institutions to participate in more financial business pilots, explore greater financial openness. Li Yunzhe stated that restrictive measures in the banking and insurance sectors have been basically lifted. The next step will be to vigorously replicate and promote the experiences and practices of expanding institutional openness in free trade zones and ports, support foreign institutions to participate in more financial business pilots, benchmark against relevant rules in international high-standard economic and trade agreements in the financial sector, and explore broader and greater openness.

Foreign Minister Wang Yi stated that Israel's actions violate international law and international relations norms. The conflict has also interrupted the hard-won indirect negotiations on the Iranian nuclear issue, rendering Oman's mediation efforts futile. China has consistently advocated for the peaceful resolution of all disputes and opposes the use or threat of force. We have promptly expressed our opposition to Israel's military actions.

Trump claims Iran wants to negotiate, did not propose U.S. reinforcements for Israel, media reports Trump has approved attacks on Iran but has not yet given the final order.

• Trump is still considering whether to launch a military strike on Iranian nuclear facilities, saying it could happen or it might not, and has issued an "ultimatum" to Iran. Iran even suggested negotiating at the White House, but now it may be too late; the situation is very different from a week ago, and the next week is crucial; he stated he speaks with Netanyahu daily, during which he did not hint at providing more U.S. aid.
• After Khamenei stated that Iran would never yield, Trump said, "Good luck to him," still implying that a diplomatic solution is "never too late."
• During Trump's speech, crude oil, which had risen more than 1% during the session, turned lower and hit a new daily low, dropping more than 2%.
• Trump later stated he does not wish to be involved in the Middle East situation and has not decided whether the U.S. will intervene militarily; the U.S. is not seeking a ceasefire but rather demands "Iran has no nuclear weapons"; "there is still a possibility of reaching an agreement." Media reports indicate Trump has not given the final order to strike Iran, observing whether Iran will abandon its nuclear program.

The third U.S. aircraft carrier will be deployed near Israel, U.S. Defense Secretary says all plans are in place, including scenarios after attacking Iran CCTV cited U.S. officials and other sources stating that the U.S. aircraft carrier strike group "Ford" is expected to be deployed to the European theater next week, likely sailing into the eastern Mediterranean near Israel. Iran has experienced widespread internet outages. Iranian authorities have temporarily restricted internet access, claiming that the Israeli side is using communication networks for military purposes. Previously, Iran stated that Israel launched cyberattacks against Iranian banks and the Iranian national television station. The U.S. Secretary of Defense stated that Iran has the opportunity to reach an agreement and should do so, and Trump's words are significant.

If the U.S. military intervenes, Iran is ready to retaliate: launching missiles at U.S. military bases + laying mines in the Strait of Hormuz. Khamenei: Iran will not surrender, any attack from the U.S. will lead to irreparable consequences.

• As the U.S. may militarily intervene in the Israel-Iran conflict, Iran's retaliatory actions are quietly escalating—missiles are already prepared to target U.S. military bases, and mines are being laid in the Strait of Hormuz to trap U.S. warships. Currently, the Israeli military has confirmed that missiles have been launched from Iran towards Israel. U.S. military commanders have placed troops at military bases throughout the Middle East on high alert, involving over 40,000 stationed personnel.

The Federal Reserve continues to hold steady, stating that uncertainty has decreased but remains high, still expecting two rate cuts this year, indicating increased stagflation risks; Powell: Inflation pressures are expected to rise significantly in the coming months due to tariffs, the job market does not call for rate cuts.

• The Federal Reserve has lowered its GDP growth expectations for this year and next, forecasting a 1.4% GDP growth this year, while raising unemployment rate expectations and PCE inflation expectations for this year to 3.0%. The "New Federal Reserve News Agency" stated that the Federal Reserve is open to rate cuts in the second half of the year, but restarting rate cuts requires seeing weakness in the labor market or strong indications that price increases due to tariffs are relatively moderate; the dot plot interest rate forecast highlights internal divisions within the Federal Reserve.
• Powell stated at a press conference that the current economic situation in the U.S. is stable, but adjustments to trade and fiscal policies remain uncertain, and increased tariffs may push up prices in the U.S. The impact of tariffs on inflation may be more persistent, and a certain degree of inflation pressure is expected to rise in the coming months. He also mentioned that currently, the overall impact of tariffs, how long they will last, and when they will fully manifest are all very uncertain. He expressed satisfaction with the job market situation.

Trump again calls Powell stupid: A 2.5 percentage point rate cut would be great, can I appoint myself to the Federal Reserve?

• Trump stated that the Federal Reserve's key lending rate should be lowered by at least two percentage points, and a reduction of 2.5 percentage points would be great. He also said, "We have a person who refuses to cut interest rates; he is not a smart person, and I don't even think he is that political. I think he just hates me. I have cursed him with every bad word I could think of to get him to lower interest rates. Can I appoint myself to the Federal Reserve? I would do a much better job than these people."

As the market was turbulent in April, foreign investors' holdings of U.S. Treasuries approached a historical high. Japan's holdings of U.S. Treasuries increased by $3.7 billion in April, marking the fourth consecutive month of increases. China's holdings of U.S. Treasuries decreased by $8.2 billion to $757 billion. The Cayman Islands (considered a popular registration location for hedge funds and other leveraged investors) saw a decrease of $7 billion in U.S. Treasury holdings in April. Canada's holdings of U.S. Treasuries dropped significantly by $57.8 billion to $368.4 billion.

AI giants' price war intensifies: OpenAI begins discounting ChatGPT Enterprise, Microsoft finds itself in a passive position. OpenAI has started offering discounts of up to 20% on ChatGPT Enterprise subscriptions to corporate clients, provided they sign multi-year contracts and make additional purchases of its advanced AI products or API calls. This move directly impacts partner Microsoft’s sales business. OpenAI's actions may exacerbate the already tense cooperative relationship between the two.

U.S. regulators plan to relax capital rules, capital buffers to be reduced by 1.5%, promoting Treasury trading. The three major U.S. banking regulators are planning to reduce the enhanced supplementary leverage ratio (eSLR) by up to 1.5 percentage points to encourage banks to increase their holdings of Treasuries, thereby boosting market liquidity. However, some experts question the actual effectiveness of this policy and worry that it may exacerbate systemic risks rather than effectively address issues in the Treasury market.

Trump severely impacts the U.S. electric vehicle industry, losing 14 million in sales, potentially ranking last globally by 2040. Bloomberg New Energy Finance (BNEF) released a report on Wednesday indicating that Trump's overturning of current policies supporting electric vehicles could cause the U.S. electric vehicle development to lag behind China and Europe for a long time, making it difficult to reach the global average penetration rate even by 2040. BNEF has lowered its forecast for U.S. electric vehicle sales for the first time, cutting the forecast for battery-powered vehicle sales before 2030 by 14 million units.

Domestic Macro

Li Qiang: Adhere to innovation-driven development, focus on expanding effective demand, and promote sustained economic improvement. Li Qiang pointed out that the high-end, intelligent, and green development of the construction machinery industry is an inevitable trend To benchmark against international advanced levels, actively utilize technologies such as artificial intelligence and clean energy to promote industrial transformation and upgrading. It is necessary to aggregate industry resources and build a collaborative innovation platform for large, medium, and small enterprises to promote complementary advantages and mutual empowerment among enterprises.

Central Financial Committee: Accelerate the construction of the Shanghai Science and Technology Innovation Financial Reform Pilot Zone, study support for the establishment of export supervision warehouses for the Shanghai Gold Exchange International Board. The Central Financial Committee issued the "Opinions on Supporting the Acceleration of the Construction of Shanghai International Financial Center," with main measures including:

First, deepen the construction of financial markets. Second, enhance the capabilities of financial institutions. Third, improve financial infrastructure. Fourth, expand high-level bilateral financial openness. Fifth, improve the quality and efficiency of services to the real economy. Sixth, effectively maintain financial security under open conditions.

Howard Marks: "Very optimistic" about the Chinese market. Marks interprets the advantages of the Chinese economy using the "1234" framework, where "1 goal" refers to the high-quality growth model transformation that China is promoting, relying on "2 engines"—green transformation and digital transformation, along with "3 coordinated strategies," namely the coordination of monetary policy, fiscal policy, and structural reform policy, and "4" refers to the "four fundamental advantages."

Domestic Companies

Goldman Sachs: China's AI/AR glasses explosion is imminent, will replicate the explosive growth path of TWS headphones, with sales expected to reach 7 million units by 2030!

• Goldman Sachs stated that as price thresholds rapidly decline, it will pave the way for large-scale adoption, with the average price of AI/AR glasses expected to decrease from $306 in 2025 to $192 in 2030. Additionally, the continuous improvement of AI functions is becoming a key factor for product differentiation, with Rokid glasses integrating multiple large models such as Tongyi Qianwen, while Meta's products are equipped with self-developed AI models.

Overseas Macro

G7 Summit "no agreement," tariff risks enter "countdown". With only three weeks left until the global tariff deadline on July 9, Trump displayed a tough stance at this summit, seen as the "last negotiation opportunity"—not only failing to reach any new trade agreements but further strengthening reliance on tariffs. This has put allies in a dilemma: either accept the U.S.'s high demands or face punitive tariffs.

How U.S. Treasuries are issued is very important for U.S. stocks. Historical data shows that whenever the net issuance of medium to long-term bonds approaches or exceeds 100% of the fiscal deficit, U.S. stocks inevitably stagnate or decline; when the proportion exceeds 85% and total issuance slows down, the performance of the S&P 500 in the following 1-12 months is significantly below average Currently, this ratio is close to 100%, and the growth rate of total debt issuance is also slowing down, raising market speculation about the Ministry of Finance repeating the "short-term debt rescue" of 2023.

Japan's exports fell for the first time in eight months in May, shrinking by 1.7%! Japan's exports to the U.S. in May saw a year-on-year decline of 11.1%. More concerning is that the automotive industry, a pillar of Japan's exports, experienced a global export drop of 6.9% in May, with exports to the U.S. plummeting by 24.7%. Estimates from a Japanese research institute indicate that if all threatened tariff measures are fully implemented, Japan's exports to the U.S. could decline by 20-30%.

Bank of Korea Governor: Not opposed to stablecoins based on the won, but concerned about foreign exchange. Bank of Korea Governor Lee Chang-yong issued a warning on Wednesday that issuing won-based stablecoins could make it easier for them to be exchanged for dollar stablecoins, which in turn could increase demand for dollar stablecoins, making foreign exchange management more difficult.

Will the Strait of Hormuz be closed? Morgan Stanley discusses three possibilities. Morgan Stanley believes that although Iran threatens to block the Strait of Hormuz, a complete closure of the strait remains a low-probability event. In the baseline scenario, military conflict will not necessarily interrupt oil flows. A scenario of reduced Iranian exports is seen as a more likely development. Unlike the 10% reduction in global effective capacity caused by disruptions in the Red Sea shipping routes, the strategic importance of the Strait of Hormuz mainly lies in energy transportation. The tanker shipping sector will significantly benefit from the reduction in capacity of the "dark fleet," while container shipping will be relatively less affected.

Overseas Companies

Sam Altman's latest interview: AI will discover new sciences, future AI companions will be everywhere, humanoid robots will stroll the streets. OpenAI's Sam Altman, in a candid conversation with his brother, painted a picture of a future world driven by AI technology. He predicts that in 5-10 years, AI will discover new sciences, AI companions will be ubiquitous, and humanoid robots will walk the streets, marking a true moment of "the future is here." Regarding Meta's billion-dollar talent poaching efforts, Altman expressed no concerns, citing significant cultural differences.

Silicon Valley giants collectively demand that U.S. states "not regulate AI for ten years"! Amazon, Google, Microsoft, and Meta are pushing through lobbying groups for the U.S. Senate to pass an unprecedented proposal: to prohibit states from regulating AI models for the next decade. Opponents argue that this proposal is "a grab by tech oligarchs to concentrate more wealth and power." Marvell shares latest AI progress: Custom computing fully explodes, target market revised to $94 billion. Marvell has revised its expectations for the potential market size (TAM) of data centers in 2028 from last year's $75 billion to $94 billion, with the custom XPU market reaching $40 billion, a CAGR of 47%, and the supporting components for XPU reaching $15 billion, with a staggering CAGR of 90%, nearly doubling each year.

Today's News Preview

China's May Swift RMB share in global payments.

The 2025 Lujiazui Forum will be held in Shanghai.

The Bank of England will announce its interest rate decision.

European Central Bank President Lagarde will speak.

The U.S. financial markets will be closed for the June holiday.