Breakfast | Trump's latest tariff plan triggers sell-off in US stocks and bonds, Tesla plummets

Market Overview

Trump's latest tariff plan triggers a sell-off in US stocks and bonds, with the S&P and Nasdaq down nearly 1%.

Tesla dropped over 8% at one point due to Musk's new political party. CoreWeave fell over 3%, and Core Scientific dropped over 17%. CoreWeave will acquire Core Scientific through an all-stock transaction. The China concept stock index rose about 0.6%, outperforming the US stock market.

The yield on 10-year US Treasuries rose nearly 7 basis points. The dollar rose 0.6%, rebounding to a two-week high. Emerging market currencies recorded their largest decline since April.

Spot gold experienced a V-shaped reversal, initially dropping over 1% before recovering, ending the session flat. Oil prices fell before rising, with US oil increasing 4.2% from its daily low.

During the Asian session, stocks and bonds fell together, with the ChiNext index down over 1%. Power stocks surged against the trend, with the Hang Seng Index turning positive, up 0.25%. Beverage stocks soared, while commodities and government bonds broadly declined.

Key News

The People's Bank of China increased its gold holdings by 70,000 ounces in June, marking eight consecutive months of increases, with the pace recovering.

Trump's first wave of tax letters: 14 countries including Japan and South Korea face tariffs ranging from 25% to 40%, effective August 1, the EU may be close to an agreement.

Tesla saw a sharp decline of 7.6% amid continuous sales drops, as Musk's "American Party" gets embroiled in political turmoil. Musk: "Besant is a puppet of Soros; he can't even do math."

Expanding the AI computing power landscape, CoreWeave splurged $9 billion to acquire Core Scientific, enhancing AI infrastructure.

Equity compensation accounted for 119% of revenue: OpenAI is paying a high price to retain talent. Zuckerberg continues to poach talent, with Apple's executive responsible for AI models set to move to Meta.

Goldman Sachs has brought forward its expectations for the Federal Reserve to cut interest rates by three months: possibly in September, with a terminal rate of 3%-3.25%.

Market Closing Report

US and European Stock Markets: The S&P 500 fell 0.79%, closing at 6229.98 points. The Dow Jones dropped 0.94%, closing at 44406.36 points. The Nasdaq declined 0.92%, closing at 20412.52 points. The European STOXX 600 index rose 0.44%, closing at 543.50 points.

A-shares: The Shanghai Composite Index rose 0.02%, closing at 3473.13 points. The Shenzhen Component Index fell 0.7%, closing at 10435.51 points. The ChiNext Index dropped 1.21%, closing at 2130.19 points.

Bond Market: The yield on the benchmark 10-year US Treasury rose by 0.77 basis points, closing at 4.3794%. The yield on the two-year US Treasury rose by 1.46 basis points, closing at 3.8946%.

Commodities: WTI August crude oil futures rose 1.39%, closing at $67.93 per barrel. Brent September crude oil futures rose 1.87%, closing at $69.58 per barrel. COMEX gold futures rose 0.09%, closing at $3346 per ounce

News Details

Global Highlights

China's central bank increased its gold holdings by 70,000 ounces in June, marking eight consecutive months of increases, with a recovery in pace. The State Administration of Foreign Exchange stated that factors such as exchange rate conversion and asset price changes contributed to the rise in foreign exchange reserves. As of the end of June 2025, China's foreign exchange reserves stood at USD 33,174 billion, an increase of USD 32.2 billion from the end of May, representing a growth rate of 0.98%.

Trump's first wave of tax letters: 25% to 40% tariffs on 14 countries including Japan and South Korea, effective August 1, EU nearing agreement. Media reports indicate that the EU will not receive a letter from the U.S. regarding increased tariffs; the EU seeks to finalize a preliminary trade agreement with the U.S. to lock in tariffs on the EU at 10% after August 1, allowing for further negotiations towards a permanent agreement.

• The U.S. will impose a 25% tariff on products from Japan and South Korea starting August 1, threatening further increases if retaliatory measures are taken. Trump wrote to Japan and South Korea stating that the new tariffs will be independent of various industry tariffs, and higher tariffs will be imposed on goods rerouted through third countries; companies that establish factories or produce products in the U.S. will be exempt from the new tariffs; if Japan and South Korea raise tariffs on the U.S., an equivalent increase will be added to the 25%. The three major U.S. stock indices saw expanded declines, with the yen and won dropping over 1% during trading.

• The White House stated that Trump has postponed the deadline for reciprocal tariffs to August 1 and reportedly will not send a tariff letter to the EU. Media reports indicate that the EU seeks to reach a preliminary agreement to set U.S. tariffs on the EU at 10% after August 1, with exemptions for key exports to the U.S. such as aircraft and alcoholic beverages.

• Trump announced a maximum 40% tariff on products imported from 12 countries including South Africa. Starting August 1, the U.S. will impose a 25% tariff on products imported from Kazakhstan, Malaysia, and Tunisia, and will impose tariffs of 30% on South Africa and Bosnia and Herzegovina, 32% on Indonesia, 35% on Bangladesh and Serbia, 36% on Thailand and Cambodia, and 40% on Laos and Myanmar Tesla once plunged 7.6% as sales continued to decline, Musk's "American Party" is once again involved in political turmoil. Over the weekend, Musk announced the establishment of a new political party, which contradicts his previous commitment to devote more time to Tesla, exacerbating investors' concerns about his core automotive business. Analysts believe Musk's return to politics will distract the company's focus. As Tesla's delivery volumes decline, investors are growing weary of Musk's "distractions."

• Musk: Bessent is a puppet of Soros, he can't even do math. The day before, Bessent stated in an interview, "The principles of DOGE are very popular, but if you look at the polls, you'll find that Elon is not popular." He believes Musk's corporate board is not very enthusiastic about the Tesla CEO announcing his new "American Party."

Expanding AI computing power, CoreWeave spends $9 billion to acquire Core Scientific, doubling down on AI infrastructure. CoreWeave aims to expand its data center capabilities to support AI and high-performance computing (HPC) workloads. The acquisition comes at a 66% premium and is expected to be completed by the fourth quarter of 2025, pending regulatory approval. After the acquisition, CoreWeave will gain 1.3 gigawatts of power resources. On Monday morning, CoreWeave's stock price fell by 6%, while Core Scientific's stock price dropped by 24%, but Core Scientific's stock has risen 110% since the acquisition news broke in June 2024.

Equity compensation accounts for 119% of revenue: OpenAI pays a high price to retain talent. Media reports indicate that OpenAI informed investors that last year, the company's equity incentive spending soared more than fivefold to $4.4 billion, accounting for 119% of revenue during the same period. It is expected to drop to 45% this year and below 10% by the end of 2030. However, this prediction was made before Meta's recent large-scale poaching, and OpenAI executives have hinted at possibly increasing equity incentives.

Zuckerberg continues to poach talent, an executive responsible for AI models at Apple will jump to Meta. To attract Pang Ruoming, Meta offered an annual salary of tens of millions of dollars.

Goldman Sachs brings forward expectations for Fed rate cuts: possibly in September, terminal rate 3%-3.25%. This is three months earlier than its previous forecast Goldman Sachs adjusted its interest rate cut forecast due to: preliminary signs indicating that the impact of this year's tariff policy is slightly lower than expected, while other inflation-relief factors are stronger than anticipated. Additionally, senior officials at the Federal Reserve may agree with Goldman Sachs economists that the impact of tariffs on price levels will be a one-time effect.

Domestic Macro

The key forces driving the Shanghai Composite Index to break through critical levels: anti-involution and AI. China Merchants Securities believes that in the medium to long term, "anti-involution" may drive listed companies to continuously reduce capital expenditures, eliminate excess capacity, and marginally improve the economic supply-demand relationship, thereby steadily enhancing corporate profitability and intrinsic returns. "High-quality" stocks are expected to become the primary driving force behind the index breakthrough. Meanwhile, the infrastructure construction around AI and the investment opportunities arising from its applications may become the second core driving force pushing A-shares upward.

The first batch of metals arrives at Hong Kong warehouses, soon to be included in the LME global warehousing network. These metals will be available for fulfilling LME contract delivery obligations starting July 15.

Domestic Companies/Industries

"Takeout Triangle Battle": Meituan, Alibaba, and JD.com all decline, while tea brands like Cha Bai Dao, Gu Ming, and Mi Xue see significant gains. Over the weekend, a cup of "free" milk tea nearly paralyzed the national takeout system, leaving staff questioning their life choices.

New quantitative trading regulations to be implemented on Monday, with billion-dollar private equity firms explaining changes in program trading. According to Daily Economic News, Xu Shunan, founder and investment director of Inno Asset, believes that the turnover rate of alpha strategies among large institutions is generally not high enough to meet the new regulations, only high-frequency alpha strategies with an annual turnover of over 200 times or a basket of stocks' futures arbitrage strategies will be somewhat affected. A top quantitative private equity professional in Shanghai stated that improper behaviors attempting to exploit regulatory loopholes, such as "deceptive trading," will be cracked down on, and as "pseudo-quantitative" and other disruptive program trading behaviors are cleaned up, quantitative investment operations will become more standardized.

Overseas Macro

The battle for pricing power in U.S. stocks, retail investors have won**. In the first half of 2025, U.S. retail investors injected as much as $155.3 billion into individual stocks and ETFs, setting a record for the highest amount during the same period in history, with daily trading volume surging 45% compared to last year, also a historic high. In terms of individual stocks, technology stocks like Nvidia, Tesla, and Palantir are the most favored, with retail investors' bottom-fishing tendencies remaining strong.

Is the dollar still irreplaceable? Goldman Sachs: Asset diversification pressure may trigger a price storm Goldman Sachs traders stated that despite the weak performance of the dollar in the first half of the year and the Federal Reserve's expectation of three rate cuts in the next six months, the global lack of sufficiently strong alternative assets will lead to significant impacts on market prices from the diversification of dollar assets. The limited supply of optional assets such as the Swiss franc, precious metals, and Bitcoin may result in severe market fluctuations if investors significantly diversify their dollar assets.

Inflation begins to erode income, Japan's real wages in May saw the largest decline in two years. After adjusting for inflation, Japan's real wages in May fell by 2.9% year-on-year, marking the largest decline in 20 months. The strong growth in nominal wages was originally seen as a key factor supporting the Bank of Japan's interest rate hikes, but the decline in real wages may make the central bank more cautious in future policy decisions. Market analysts believe this divergence trend may affect the pace of Japan's economic recovery.

Japan's ultra-long-term government bond yields soar, market on high alert for tariff deadlines and Senate elections. Morgan Stanley warns of two major short-term risk events for Japan. The first is the July 9 deadline for reciprocal tariffs; if US-Japan trade negotiations break down, it will trigger a risk-averse mode, pushing up the yen. In the subsequent July 20 Senate elections, if the ruling party in Japan loses, the market will expect more aggressive fiscal stimulus, which may push up Japan's ultra-long-term government bond yields.

OPEC launches a new round of supply shocks, global oil market may face a "supply surplus tide". OPEC+ announced an increase in production of 548,000 barrels per day for August in just 10 minutes during an online video conference, exceeding market expectations and marking a significant policy shift from production cuts to regaining market share. This move will exacerbate the risk of global crude oil supply surplus, with Goldman Sachs predicting that oil prices will further drop to $60. Analysts point out that low oil prices help meet Trump's call to reduce fuel costs but put profit pressure on US shale oil companies and OPEC member countries.

Overseas Companies

Apple appeals against €500 million fine from the EU: the penalty far exceeds legal requirements. Apple claims that the EU's €500 million fine is "unprecedented and illegal." Apple believes that the European Commission's decision constitutes improper interference in its business operations and imposes unfavorable commercial terms on both developers and users.

Amazon "battles" Walmart, US retail industry also engages in price wars! In a bid for consumer loyalty, Amazon and Walmart are engaged in an intense omnichannel price war, with both parties synchronizing their largest annual online promotional events to start on July 8. Amazon has extended the event to four days for the first time, while Walmart has upgraded it to six days and unprecedentedly integrated 4,600 physical stores to participate Walmart is challenging the "e-commerce giant" Amazon with a 20% annual growth rate in its e-commerce business.

Weak sales of AI chips may lead to a 39% decline in Samsung Electronics' operating profit in the second quarter. Analysts expect Samsung Electronics to achieve an operating profit of 6.3 trillion won (approximately USD 4.62 billion) from April to June this year, which would be the company's lowest earnings in six quarters, primarily due to delays in supplying advanced memory chips to NVIDIA.

Figure CEO: Humanoid robots are the key physical form of AGI, entering the engineering validation phase, and will deploy 100,000 units within four years. Brett Adcock stated that the latest design of Figure's robots has reduced costs by about 90%, and its humanoid robots will achieve large-scale deployment within the next four years, with a new factory capable of producing 100,000 robots annually. He predicts that in our lifetime, humanoid robots will surpass human performance in most jobs, making all work a choice.

Today's News Preview

The Reserve Bank of Australia will announce its interest rate decision.

Amazon Prime Day.

The EIA will release its monthly Short-Term Energy Outlook report.