Breakfast | U.S. Treasury Secretary says Federal Reserve policy needs to be re-evaluated

Market Overview

Investors are awaiting earnings reports from companies such as Google and Tesla this week, while the impact of tariffs on the market continues. Although the Nasdaq and S&P 500 indices reached new highs during the day on Monday, the closing gains significantly retreated from the day's highs.

Google rose 2.7%, leading the seven tech giants. Steel stock Cleveland-Cliffs surged nearly 13%, with record steel shipments in the second quarter.

U.S. Treasury yields fell across the board, with the 10-year yield dropping over 3 basis points. The dollar fell 0.6%, nearing last week's lows. The yen strengthened, rising over 1% compared to last Friday's close.

With the dollar weakening, precious metals rose broadly. Gold increased nearly 1.5%, briefly returning to $3,400. Silver rose over 2%, approaching the new high set last Monday.

During the Asian session, AH shares rose together, with the Shanghai Composite Index hitting a new high for the year and the Hang Seng Index reaching a three-year high. Major infrastructure stocks surged collectively, while the Hong Kong stock market experienced a "fat finger" incident, government bonds fell, and commodities rose broadly.

Key News

U.S. Treasury Secretary Janet Yellen: The Federal Reserve's policy needs to be re-evaluated, and trade negotiations will prioritize quality over deadlines.

The prospects for a U.S.-EU trade agreement are bleak, with the EU considering a "nuclear option" for countermeasures. U.S. Secretary of Commerce: August 1 is the final deadline, and Europe is preparing to "fight back."

U.S. Congressman Luna sent a letter to the Department of Justice, claiming Powell committed perjury twice and proposed criminal charges.

The U.S. Congressional Budget Office: The "Big Beautiful" tax law will increase government deficits by $3.4 trillion over ten years.

Facing a precarious political career, Shinzo Abe is attempting to extend his life through U.S.-Japan trade negotiations.

Jensen Huang: A close look at Huawei's smartphones reveals the technological marvels inside; China's pace of innovation is unstoppable, and its supply chain is a world miracle!

GPT-5 may be released within two weeks, GPT-6 may have already begun training, with Ultraman leaking information about a million GPUs. IMO angrily criticized OpenAI for self-proclaiming profits, stating, "None of the 91 judges participated in the scoring." Google Gemini's advanced version received IMO 2025 official certification gold medal: pure natural language end-to-end reasoning. Alibaba launched the Qwen3 upgraded version, which outperforms leading closed-source models like Kimi-K2.

Trump Media holds a cumulative $2 billion in Bitcoin and related assets, with cryptocurrency becoming a major source of wealth.

Under the impact of tariffs, NXP's Q2 automotive chip sales were weak, and Q3 revenue is expected to decline further, dropping over 5% in after-hours trading.

Market Closing Report

U.S. and European stock markets: The S&P 500 index closed up 0.14%, at 6,305.60 points. The Dow Jones fell 0.04%, at 44,323.07 points. The Nasdaq rose 0.38%, at 20,974.18 points The European STOXX 600 index closed down 0.08%, at 546.58 points.

A-shares: The Shanghai Composite Index reported 3559.79 points, up 0.72%; the Shenzhen Component Index reported 11007.49 points, up 0.86%; the ChiNext Index reported 2296.88 points, up 0.87%.

Bond market: The yield on the US 10-year Treasury bond fell by 4.57 basis points, at 4.3698%. The yield on the 2-year US Treasury bond fell by 1.89 basis points, at 3.8502%.

Commodities: COMEX gold futures rose by 1.57%, at USD 3411.20 per ounce. WTI August crude oil futures closed down 0.21%, at USD 67.20 per barrel. Brent September crude oil futures closed down 0.10%, at USD 69.21 per barrel.

News Details

Global Highlights

US Treasury Secretary Yellen: Federal Reserve policy needs to be re-evaluated, trade negotiations will prioritize quality over deadlines. Yellen criticized the Federal Reserve's "panic propaganda" regarding tariffs, pointing out that tariffs have had almost no inflationary effect to date, emphasizing the need to review whether the Federal Reserve has successfully fulfilled its responsibilities, while clearly stating that the Trump administration places more emphasis on the quality of trade agreements rather than timelines.

The outlook for the US-EU trade agreement is bleak, the EU considers a "nuclear option" for countermeasures. Reports indicate that the US has proposed stricter trade conditions, including raising tariffs to 15% or higher, maintaining the current 25% auto tariff, and possibly imposing a 100% tariff on pharmaceuticals. In response to the US's tough demands, Germany's stance has shifted, the EU is becoming increasingly hardline internally, and is considering using "anti-coercion tools" and other retaliatory measures.

• Is this really not going to be TACO? US Commerce Secretary: August 1 is the final deadline, Europe is ready to "fight back." US Commerce Secretary Raimondo stated on Sunday that August 1 is a "hard" deadline, and if the EU cannot reach a new trade agreement by then, it will face tariffs of at least 30%.

US Congressman Luna sent a letter to the Department of Justice, claiming Powell committed perjury twice and proposed criminal charges. According to reports, Florida Republican Congressman Anna Paulina Luna sent a letter to the US Department of Justice, claiming that Federal Reserve Chairman Powell committed perjury twice and proposed criminal charges against him. Luna wrote on X last week that she believes Trump will soon fire Powell; however, this controversy quickly subsided, and the firing has not yet occurred. Later on Monday, the White House press secretary stated that Trump has no plans to fire Powell; however, Powell needs to cut interest rates

• Report: The Trump administration will inspect the Federal Reserve's renovation project this week. Reports indicate that White House Deputy Chief of Staff James Blair revealed that the Trump administration plans to inspect the Federal Reserve's $2.5 billion renovation project this week. Powell has informed the government that the renovation "design plan has changed," while the Federal Reserve responded that the changes are minor and do not require further review.

The Congressional Budget Office: The "Big Beautiful" tax law will increase government deficits by $3.4 trillion over ten years. The Congressional Budget Office (CBO) also estimates that the provisions of the "Big Beautiful" bill will result in 10 million Americans losing health insurance by 2034. The White House press secretary stated that the estimated deficit disclosed by the CBO is not a concern. Previously, the CBO estimated that the bill would increase the U.S. deficit by $3.3 trillion over the next ten years.

Political career in jeopardy, Shinzo Abe attempts to "extend life" through U.S.-Japan trade negotiations. Facing pressure to resign, Shinzo Abe is trying to buy time through key trade negotiations with the Trump administration, especially regarding auto tariffs. Historical precedents show that prime ministers who lose the Senate majority typically resign within two months. The market has begun discussing potential successors, with younger figures like Shinjiro Koizumi being highly anticipated.

• Dramatic changes in Japanese politics, why are the yen and Japanese stock futures rising? Analysts believe that investors had previously prepared for a greater defeat of the ruling coalition or even Shinzo Abe's resignation, and with the unwinding of such positions and the easing of political risk events, this has contributed to the initial rebound of the yen. Future price trends will mainly depend on three factors: whether the Liberal Democratic Party maintains or loses its majority in the coalition, whether Shinzo Abe continues as prime minister, and the outcome of the LDP leadership election if Shinzo Abe resigns.
• The shockwave from the ruling coalition's defeat: uncertainty leads to heightened bearish sentiment on the yen, changing interest rate hike prospects, and potentially jeopardizing trade negotiations? Although safe-haven buying once boosted the yen, several investment bank strategists are pessimistic about the yen's outlook, with HSBC warning that the yen could fall to 152. Coinciding with the critical deadline for U.S.-Japan trade negotiations on August 1, political weakness may undermine Japan's negotiating power. The market fears that if Shinzo Abe resigns, it could trigger a chain reaction of foreign capital sell-offs, leading to greater turmoil for Japanese assets.

Jensen Huang: A close look at Huawei phones reveals the technological miracles inside; China's innovation pace is unstoppable, and its supply chain is a world miracle! Jensen Huang praised the scale, complexity, and technological content of China's supply chain as a "world miracle," noting that it not only builds a strong supply chain but also empowers the globe. He emphasized that Huawei is an "extraordinary" tech giant, and a close look at Huawei phones reveals the "technological miracles" within. At the same time, the pace of innovation in China is unstoppable, with companies like DeepSeek proving local AI capabilities.

GPT-5 may be released within two weeks, and GPT-6 may have already begun training, with Ultraman leaking information about millions of GPUs. Recent leaks suggest that GPT-5 will be released in the next two weeks; it may be a system composed of multiple models, including a "router" that can automatically route prompts to the most suitable model. Meanwhile, GPT-6 has already begun training, and Ultraman expressed confidence in the models for the next 1-2 years, predicting that AI will evolve into an "AI scientist" capable of discovering new knowledge IMO angrily criticizes OpenAI for self-proclaiming gold medal: "None of the 91 judges participated in the scoring," netizens say: endless hype. OpenAI claimed that its new model won the IMO gold medal in less than 24 hours, but the plot took a big turn! OpenAI is not one of the AI companies that collaborated with IMO to test the model, and none of the 91 official IMO judges participated in evaluating their answers. This means that OpenAI's "gold medal" result is entirely self-proclaimed and has not been officially certified.

Google Gemini Advanced Edition receives official gold medal certification from IMO 2025: pure natural language end-to-end reasoning. Google DeepMind has just released a significant blog post announcing that its advanced version of Gemini, equipped with "Deep Think" capabilities, officially achieved gold medal standards in the 2025 International Mathematical Olympiad (IMO) by solving 5 out of 6 problems with a total score of 35 points!

Alibaba launches upgraded Qwen3, outperforming leading closed-source models like Kimi-K2. The new Qwen3 model shows significant improvements in general capabilities, including instruction following, logical reasoning, text understanding, mathematics, science, programming, and tool usage. It performed excellently in numerous evaluations such as GQPA (Knowledge), AIME25 (Mathematics), LiveCodeBench (Programming), Arena-Hard (Human Preference Alignment), and BFCL (Agent Capability), surpassing top open-source models like Kimi-K2 and DeepSeek-V3, as well as leading closed-source models like Claude-Opus4-Non-thinking.

The $500 billion AI plan promoted by the White House is at a standstill: the "Stargate" plan has seen no progress in six months. The White House's "Stargate" AI plan promised to invest $500 billion to build AI infrastructure in the U.S., but six months later, there has been little substantial progress, with not even one data center established. The leading parties, SoftBank and OpenAI, have disagreements over key terms such as site selection, and the initial goal has been reduced to building only a small data center in Ohio by the end of the year.

Trump Media accumulates $2 billion in Bitcoin and related assets, with cryptocurrency becoming a major source of wealth. Trump Media Technology Group announced that it has accumulated approximately $2 billion in Bitcoin and related assets, accounting for two-thirds of the company's liquid assets, marking a key step in Trump's cryptocurrency strategy. The company's stock price rose after the announcement, with Trump's personal stake in the company valued at nearly $2.3 billion.

Under tariff impacts, NXP's Q2 automotive chip sales are weak, and Q3 revenue is expected to decline further, dropping over 5% in after-hours trading. In the second quarter, NXP's revenue and profit both saw a year-on-year decline slightly exceeding expectations; automotive revenue remained roughly flat compared to a year ago, halting a five-quarter decline. The Q3 revenue guidance indicates a potential decline of up to 6%, with the midpoint of the guidance range down 3%. Analysts believe that in addition to addressing the oversupply of chips needed for electric vehicles and manufacturing, NXP also faces weak demand in the automotive and industrial sectors

Domestic Macro

China's July LPR quotation is out, with both the one-year and five-year LPR remaining unchanged. The one-year and five-year LPR are maintained at 3% and 3.5%, respectively. Analysts believe that there is still considerable room for the implementation of financial policies. If policy interest rates and deposit rates continue to decline, and the cost of bank funds continues to decrease, there is still a possibility for LPR to decline.

Central Huijin bought 150 billion yuan in April. At the beginning of April, Central Huijin first clarified its positioning as a "stabilization fund," significantly increasing its holdings in ETFs, purchasing approximately 150 billion yuan in just four ETFs: the CSI 300 ETF and the Huaxia SSE 50 ETF. Central Huijin also bought growth-style ETFs, spending about 10 billion yuan in the second quarter of this year to increase its holdings in the Huaxia CSI 1000 ETF.

Bull market signal? The barbell strategy is being questioned for the first time. Guotou's Lin Rongxiong believes that while the extreme barbell strategy represented by banks and micro-accounts still has some absolute return space, its excess performance will decline. The ChiNext is likely to continue to outperform in the third quarter. Dongcai's Chen Guo also believes that the mid-term reports show an increasing number of positive profit signals, and the underlying logic of the barbell strategy is being weakened, with marginal changes in large and small-cap styles.

Domestic Companies/Industries

The automotive industry is "anti-involution," and the two major "automotive strong provinces," Guangdong and Anhui, will do this! Guangdong will guide new energy vehicle companies to compete in an orderly manner, shifting from a "price war" to a "value war." Secondly, it will urge new energy vehicle manufacturers to fulfill their 60-day payment commitment, and thirdly, it will support the Guangdong Automotive Industry Association in playing the role of a third-party industry organization. Anhui will actively guide vehicle manufacturers to implement the meeting's spirit, strengthen product quality management, fulfill payment commitments, and deepen technological innovation.

JD.com has invested in three smart companies at once. Media reports that Qianxun Intelligent has completed a 600 million yuan Pre-A+ round of financing, led by JD.com; LimX Dynamics has completed a new round of financing, strategically led by JD.com, and will deepen cooperation with JD.com in retail, logistics, and services; Zhongqing Robotics has completed two rounds of financing, with the A1 round led by JD.com.

Overseas Macro

Trump shares AI video of Obama being handcuffed, U.S. intelligence chief reveals his role in the "Russia Gate" conspiracy. Recently, Trump posted an AI-generated video on social media showing Obama being arrested and imprisoned, accompanied by the words "No one is above the law." U.S. National Intelligence Director Avril Haines previously disclosed that the Obama administration attempted to fabricate intelligence to overturn Trump's election victory in 2016, accusing him of orchestrating a "treasonous conspiracy."

Why are investors indifferent to strong earnings reports from U.S. stocks? With U.S. stock valuations at current high levels, all positive news has already been factored into stock prices, and any failure to meet expectations will face severe penalties. Currently, corporate outlook guidance is becoming increasingly important, and the biggest issue facing S&P 500 earnings is "who will bear the tariff bill." Goldman Sachs: The weaker the dollar, the better the earnings reports of Mag 7. Goldman Sachs stated that for every 10% decline in the dollar, it is expected to drive approximately 2-3% growth in earnings per share for the S&P 500 index. Among them, the overseas revenue share of Mag 7 averages nearly 50%, far exceeding the median level of the index, and is expected to gain excess benefits from the weakening dollar.

Bank of America Hartnett: Wall Street will "surrender" before the Federal Reserve, and the "Great Beautiful Plan" can only rely on "Great Bubbles." Hartnett expects that in the coming weeks, Wall Street will position itself ahead of the Federal Reserve's "surrender," stimulating nominal GDP growth by inflating asset prices, thereby diluting debt to fund the massive fiscal expenditure of the "Great Beautiful Plan." Once Powell is dismissed, the market expects the Federal Reserve to cut interest rates without a recession, further inflating the bubble.

Is the U.S. stock market like "a balloon floating over Wall Street that can be popped with just one needle"? Bulls are also preparing for turbulence. Currently, the expected price-to-earnings ratio of the S&P 500 index is 22 times, close to the highest valuation level since the pandemic. Analysts believe that the uncertainty of Trump's tariff policy is like a potential needle threatening this "perfect pricing" balloon, and any negative deviation in economic data or corporate guidance could trigger a pullback.

Wall Street recommends the "Hedge Powell Trade": Buy 2-year, sell 10-year U.S. Treasuries! Investors believe that if Trump successfully replaces the chair, the new appointee may be more inclined to cut interest rates to cater to White House pressure, thereby lowering the yields on short-term U.S. Treasuries like the 2-year. At the same time, the weakening of the Federal Reserve's independence may trigger inflation concerns, pushing up yields on long-term U.S. Treasuries like the 10-year, exacerbating the steepening of the yield curve. Some analysts also believe that the breakeven inflation rate is a more effective hedging tool.

Bank of America Merrill Lynch: The disruptive impact of stablecoins on traditional bank deposits and payment systems will become "clearly visible" in the next 2-3 years. Bank of America Merrill Lynch expects moderate growth in stablecoins over the next year, estimated at $25 billion to $75 billion; in the next 2-3 years, the disruptive impact of stablecoins on bank deposits and payment systems will become more apparent. Although major U.S. banks are actively positioning themselves, there are still doubts about the actual use cases of stablecoins in the domestic payment field, with a general belief that cross-border payments are currently the most viable application scenario.

Important restrictions on day trading for retail investors in U.S. stocks may be relaxed: Regulatory proposal lowers the threshold from $25,000 to $2,000. The Financial Industry Regulatory Authority (Finra) is planning to amend the "Pattern Day Trading Rule." This rule currently restricts investors with margin accounts below $25,000 from using borrowed funds to make four or more trades within five trading days. This threshold is expected to be reduced to just $2,000.

Iran's Foreign Minister: Iran has not halted its uranium enrichment program. Iranian Foreign Minister Abbas Araghchi stated that Iran cannot abandon its uranium enrichment program, which is very precious to Iran and involves national pride

Overseas Companies

Microsoft server software faces global cyberattack, with over 10,000 enterprises at risk. Microsoft's core product SharePoint has been subjected to a large-scale attack by hackers. Security researchers indicate that there may be a widespread risk of data breaches globally. This attack primarily targets on-premises SharePoint servers, rather than users of Microsoft's hosted services. Security firms point out that over 10,000 enterprises worldwide may be affected, with intrusion cases reported in multiple countries and regions including North America, South America, the European Union, South Africa, and Australia, involving various industries such as government, energy, education, and telecommunications. Microsoft has urgently released the first round of patches, but the vulnerabilities have not been fully resolved.

Morgan Stanley's latest estimate: By 2028, AI capital expenditures will drive tech giants to increase debt by $1 trillion. Morgan Stanley predicts that global data center construction will require approximately $2.9 trillion in investment by 2028, with only $1.4 trillion covered by the cash flow of large-scale cloud service providers, leaving a financing gap of up to $1.5 trillion. Morgan Stanley believes that the credit market will be a key force in filling this gap, especially private credit, which is expected to provide about $800 billion in funding. On a macro level, AI-related investments are expected to contribute 40 basis points to the growth of the U.S. real GDP in 2025-2026.

The first foldable iPhone will be unveiled next year, with no innovation at all, this is Apple's current situation. This time, Apple is a follower rather than an innovator. Analysts point out that Apple's first foldable iPhone will adopt a design similar to the Samsung Galaxy Z Fold and use screens supplied by Samsung, lacking disruptive innovation. Nevertheless, Apple may still quickly capture market share due to its brand appeal and the strong demand for foldable screens in the Chinese market.

Jane Street has been allowed to resume trading in the Indian market after paying a hefty $564 million margin. Reports indicate that Jane Street was permitted to resume stock trading in the Indian market after depositing $564 million, having previously been banned from trading by the Securities and Exchange Board of India due to alleged manipulation. Indian securities regulators will continue to investigate Jane Street's trading in derivatives, spot, and futures markets.

Sun Yuchen plans to go to space on a Blue Origin rocket owned by Jeff Bezos. Blue Origin states that Sun Yuchen won the first seat on its "New Shepard" rocket through a $28 million bid in 2021. Sun Yuchen claims to be the "youngest Chinese commercial astronaut," emphasizing that his $28 million bid funds have been donated to the Blue Origin Foundation to support 19 space-related charitable organizations, inspiring the next generation to engage in STEM fields.

Today's News Preview

The State Council Information Office will hold a press conference on the foreign exchange revenue and expenditure data for the first half of 2025.

Federal Reserve Chairman Jerome Powell will deliver a welcome speech at a regulatory meeting. Federal Reserve Governor Bowman speaks.

European Central Bank President Lagarde speaks.

Bank of England Governor Bailey delivers a speech on the Bank of England's semi-annual Financial Stability Report.

SAP and Coca-Cola release financial reports.

Risk Warning and Disclaimer

The market has risks, and investment requires caution. This article does not constitute personal investment advice and does not take into account the specific investment goals, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are suitable for their specific circumstances. Investment based on this is at one's own risk