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Market Overview
On Friday, U.S. core PCE inflation rose 2.6% in May to hit a more than three-year low, and U.S. consumers' short-term inflation outlook eased, briefly pushing down the dollar and U.S. Treasury yields and raising market bets on interest rate cuts.
U.S. stocks fell on the closing day of June, with the S&P Nasdaq closing down with the Dow after hitting a new intraday high, which may be related to Goldman Sachs and JPMorgan Chase shorting U.S. stocks. Amazon, Google and Microsoft fell from new highs, and chip stocks mostly rose, but Nvidia rose 3% and then fell 0.4%, and the AI boom drove the Nasdaq up 18% and the S&P up 14.5% in the first half of the year.
Markets are pricing in the chances of Trump winning the U.S. presidential election, with Treasury yields rebounding sharply from daily lows of double digits on Friday.
Ahead of the parliamentary election, French stocks fell 2% for the week to a five-month low, with base bond yields jumping 74 basis points in the first half of the year. In early Asian trading on Monday, the French far-right was not expected to gain as much as the market feared, and the euro extended gains.
The U.S. dollar rose for four consecutive weeks and rose more than 3% in the first half of the year, the yen once fell below 161 to a 38-year low and fell 12% in the first half of the year, and the offshore yuan hovered at a seven-month trough of 7.30 yuan.
Oil prices rose for three consecutive weeks and were close to the highest since the end of April, with U.S. oil rising more than 6% in June and Brent oil rising more than 12% in the first half of the year. Gold fell for the first time in four months, but rose nearly 14% in the first half of the year, and silver rose nearly 26% this year. In June, nickel fell 12%, aluminum and copper fell nearly 5%, tin rose more than 29% in the first half of the year, and copper rose more than 12%.
In the Chinese market, A-shares ended the first half of the year, with the ChiNext closing down more than 1%, brokerages falling sharply, and Oriental Fortune falling 7%.
News
China's official manufacturing PMI in June was 49.5, unchanged from the previous month, and the price index retreated. According to the analysis, the June PMI highlighted the need for policy increases.
More than 20 cities have made it clear that "buying a house and sending a household registration", and some experts said that "the follow-up policy is likely to be the settlement policy in first-tier cities". The second-hand transaction in Shanghai in June is indeed about to set a record. Shenzhen reproduces the "10 billion god plate".
Wall Street has recently "taken turns shorting" U.S. stocks.
Preliminary results of the first round of voting in the French National Assembly election show that the far-right National Alliance is ahead. According to the analysis, the ECB may be forced to buy bonds.
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The market closes
U.S. stocks: The Dow fell 0.12%, the S&P 500 fell 0.41%, and the Nasdaq fell 0.71%.
European stocks: The European STOXX 600 index closed down 0.23%, down 1.30% in June, and up 6.77% in the first half of the year. Germany's DAX 30 index closed up 0.14%. France's CAC 40 index closed down 0.68%. Britain's FTSE 100 index closed down 0.19%.
A-shares: The Shanghai Composite Index rose 0.73%, the Shenzhen Component Index fell 0.01%, and the ChiNext Index fell 1.16%.
Bond market: The yield on the benchmark 10-year Treasury note rose 9.59 basis points to 4.3823%, down 11.82 basis points in June and up 50.32 basis points in the first half of the year. The two-year Treasury yield rose 2.07 basis points to a new daily high of 4.7327%, down 12.75 basis points in June and up 48.28 basis points in the first half of the year.
Commodities: WTI crude oil futures for August delivery closed down $0.20, or 0.24%, at $81.54 a barrel, up nearly 6.27% in June and nearly 13.74% in the first half of the year. Brent crude oil futures for August closed up $0.02, or 0.02%, at $86.41 per barrel, up more than 6.53% in June and more than 13.44% in the first half of the year. In June, London nickel fell by about 12%, London aluminum fell by more than 4.9%, and in the first half of the year, London tin rose by more than 29%, London copper rose by more than 12%, and London zinc rose by more than 10%. Spot gold fell 0.03% to $2,326.75 an ounce, down about 0.10% in June, and rose 12.78% in the first half of 2024.
Highlights
Global blockbuster
China's official manufacturing PMI in June was 49.5, unchanged from the previous month, and the price index retreated. In June, the prosperity of the domestic manufacturing industry was the same as that of the previous month, the prosperity of the service industry fell slightly, and the production and operation activities of enterprises generally maintained expansion, but the pace of expansion slowed down.
- Shenwan Hongyuan believes that the June PMI highlights the necessity of policy increases. Weak domestic demand for commodities remains the key to suppressing economic prosperity. Looking forward to the follow-up, policy increase is still the most important macro main line in the second half of the year, especially the need to dredge the economic transmission, it is expected that the focus is still on the "energy saving" main line of industrial policy to promote investment and consumption, as well as fiscal expansion to stabilize infrastructure, and at the same time to stabilize the supply-side liquidity of real estate enterprises with quasi-fiscal tools, and promote the completion rate of off-plan housing from a low level.
- Hongta Securities believes that from the perspective of production and demand, the decline in production is greater than that on the demand side, which promotes the convergence of production and demand ratio. However, the new orders index continued to be in the sluggish range and fell slightly from the previous month, reflecting that the demand in the manufacturing market is still slightly insufficient.
More than 20 cities have made it clear that "buying a house and sending a household registration", and some experts said that "the follow-up policy is likely to be the settlement policy in first-tier cities". According to the monitoring data of the China Index Research Institute, up to now, more than 20 cities have introduced policies for buying houses and settling down; The combination of housing policy with population and talent policy is forming a trend.
- The second-hand transaction in Shanghai in June is indeed about to set a record. It is estimated that the number of second-hand residential online signatures may reach 24,000 units, which is a role in the market in the past three years.
- Shenzhen reproduces the "10 billion god plate". Shenzhen Bay luxury house Zhonghai Shenwan Jiuxu opened, opening three hours after opening, with sales of 10.02 billion yuan. This is the first time in a year that Shenzhen has reproduced the "opening of tens of billions of dollars", which also reflects the good recovery of Shenzhen's property market after the implementation of the "5.28 New Deal".
- CRIC research: the performance of the top 100 real estate companies in June increased by 36.3% month-on-month and decreased by 16.7% year-on-year. In terms of cumulative performance, the sales volume of the top 100 real estate companies in the first half of the year was 1,851.83 billion yuan, a year-on-year decrease of 39.5%, and the decline rate narrowed by 4.7 percentage points.
Wall Street has recently "taken turns shorting" U.S. stocks.
- Head of Hedge Funds, Goldman Sachs: It's time to reduce exposure to U.S. stocks. Due to factors such as the continued expansion of the U.S. fiscal deficit and excessive market concentration, the risk of a correction in U.S. stocks is rising. Goldman Sachs flow experts warn: bulls began to reduce their positions after July 4.
- JPMorgan strategists warn that the S&P 500 could plunge 23% by the end of the year. Headwinds are accumulating, including a slowdown in the U.S. economy and downward revisions to corporate earnings, leaving U.S. stock valuations "disconnected" from the business cycle.
- BCA Research's chief global strategist lowered the S&P's annual target to 3,750, citing weak consumption due to a slowdown in the labor market as the biggest bearish for U.S. stocks.
Preliminary results of the first round of voting in the French National Assembly election show that the far-right National Alliance is ahead.
- Preliminary vote counts show that in the first round of voting, the far-right National Alliance won 33% of the votes, leading the vote. The Left Alliance "New Popular Front" received 28.5% of the votes, ranking second; The ruling Ba'ath Party and the centrist coalition came in third with 22 percent of the vote. The National Assembly elections will elect 577 members of the National Assembly for a five-year term. The election adopts a two-round voting system, in which the candidates receive more than half of the votes in the first round of voting, they are directly elected; If no candidate receives a majority of the votes, the candidate who receives the support of not less than 12.5% of the registered voters in the constituency proceeds to the second round of voting, where the candidate with the highest number of votes is elected. The second round of voting is scheduled for July 7.
- According to the analysis, the continued lead of France's far-left and right-wing parties in the first round of voting could lead to a larger wave of bond sell-offs, exacerbating the divergence of interest rate differentials within the eurozone, and the European Central Bank may be forced to buy bonds to maintain the integrity of the euro.
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Domestic macro
Xi Jinping will attend the 24th Meeting of the Council of Heads of State of the Shanghai Cooperation Organization and pay state visits to Kazakhstan and Tajikistan. From July 2 to 6, President Xi Jinping will attend the 24th Meeting of the Council of Heads of State of the Shanghai Cooperation Organization (SCO) in Astana, and pay a state visit to the two countries at the invitation of President of the Republic of Kazakhstan Kassym-Jomart Tokayev and President of the Republic of Tajikistan Rahmon.
The German Chancellor made an "unusual proposal" for the Sino-EU tariff dispute: imposing equally high tariffs. According to the Global Times, German Chancellor Olaf Scholz suggested that the EU and China impose equally high tariffs on car imports. The tax rate currently under discussion is 15 per cent.
Domestic companies
The 2024 fund half-way performance list was released, and forty percent of A-share active equity funds achieved positive returns. In the first half of the year, the "half-way champion" of public A-share funds rose by more than 30% (Manulife Prosperity Pilot), the top 10 active equity funds earned more than 26%, and the top 20 all exceeded 21%.
Moutai Group: The basic demand side of Moutai has not changed, and it has the confidence, strength and ability to go through this cycle. According to the WeChat official account of "Kweichow Moutai", Wang Li, deputy secretary of the Party committee and general manager of Moutai Group, led a team to Shanghai, Zhejiang, Jiangsu, Beijing and other cities to carry out market research, and on June 28 and 30, in Nanjing and Beijing, the three provinces and regions of Jiangsu, Shanghai and Anhui and the seven provinces and regions of Beijing, Tianjin, Hebei, Mongolia and Heiji and Liaoning organized a market work meeting. The meeting pointed out that the basic attributes of Moutai have not changed, and the basic demand side has not changed. In the past few decades, the liquor industry has undergone several rounds of adjustments, and each time Moutai has smoothly passed through the cycle with strong determination and strength, and has achieved better development. Compared with the past, although the current situation is more complex, the current Moutai has stronger core competitiveness, better market channel ecology and more resilience in risk prevention, and has the confidence, strength and ability to go through this cycle.
Argentina will have four new lithium projects put into operation in the short term, with an annual production capacity soaring by 79%, with the participation of Zijin and Ganfeng, and lithium prices may worsen. Four new lithium projects in Argentina will come on stream in the coming weeks to months, which will almost double Argentina's lithium production capacity. Although the new capacity will not be fully operational immediately, the certainty of future supply increases will obviously further increase the downward pressure on lithium prices.
Overseas macro
The first debate was "a disaster in performance", the Democratic Party "substitution" was full of noise, and Biden vowed to "stay the course".
- Some Democrats have begun to talk about potential candidates to replace Biden's race, with Vice President Kamala Harris, California Gov. Gavin Newsom and Michigan Gov. Gretchen Whitmer among others.
- Minsheng Macro pointed out that the follow-up attention of the U.S. election, in addition to the sentencing results of Trump's "hush money case" on July 11, the Democratic National Convention will be held from August 19 to 22, and there may be the possibility of replacing the Democratic candidate; And the second presidential debate on September 10 will be the last chance for the Democrats to fight back absolutely.
- According to the analysis, Trump will be the biggest black swan of new energy. When it comes to how to deal with the climate crisis, Trump and Biden have completely opposite views. Biden has warned that if Trump wins the US presidential election, all his work on tackling the climate crisis over the past four years will be in vain.
The core PCE price index in the United States in May was 2.6% year-on-year, the lowest in three years. The core PCE price index rose 0.1% month-on-month in May, the lowest since December 2023. However, the data was mixed, with supercore PCE prices remaining high, rising for the 49th consecutive month, and revenue and expenditure accelerating year-on-year. After the release of the data, the U.S. dollar index fell about 14 points in the short term, U.S. stock futures did not fluctuate much in the short term, and the U.S. 10-year Treasury yield fell in the short term.
U.S. stocks closed the first half of the year: rose 14% in the first half of the year, of which 60% came from the five major technology stocks, and Nvidia contributed more than 30%. In the first half of the year, nearly 60% of the rise in US stocks was contributed by just five tech giants - Nvidia, Microsoft, Amazon, Meta and Apple, of which Nvidia alone contributed as much as 31%. In the second quarter, Nvidia, Apple and Microsoft contributed more than 90% of the broader market gains.
The focus of the U.S. stock market: the "annual rebalancing of the Russell index" has been completed. After the restructuring, the total weighting of the top 10 companies in the Russell 1000 index will reach 34.3%, the highest level in 40 years. This figure is almost 20 percentage points higher than in 1984, when the index was founded. Microsoft will regain its place as the largest company in the index by market capitalization, taking Apple's place. Nvidia overtook Amazon to jump to third place.
The Fed's former "top three": The Fed will eventually cut interest rates, but later than the market expects, focusing on two key indicators. Dudley believes that the U.S. economic growth will gradually slow down, the interest rate level will remain high for a longer time, and the neutral interest rate level may rise to 3.6%, and the follow-up will mainly focus on the unemployment rate and core services inflation, two key indicators.
Overseas companies
Warren Buffett's will exposed: nearly $130 billion in assets are still "given to children". Buffett's wealth of more than $100 billion will be managed by a new foundation run by his children, and the Gates Foundation will not receive Buffett's legacy.
The "AI cloud upstart" has raised a lot of money, Nvidia GPU ammunition continues, and CoreWeave is followed by Lambda. Nvidia-backed computing power leasing company Lambda Labs is on track to close $800 million in new funding rounds, and computing power leasing startups are using their flexibility and cost advantages to stand out from cloud giants like Amazon AWS, Google Cloud and Microsoft Azure.
SK hynix plans to invest 103 trillion won by 2028 in the field of AI and chips.
Industry/Concept
1. Gene editing| According to China Securities Daily, the "gene scissors" CRISPR technology has completely changed the face of medicine, agriculture and biotechnology. Recently, a team from the School of Life and Environmental Sciences at the University of Sydney in Australia has successfully developed a gene editing tool SeekRNA, which is more accurate and flexible than CRISPR. The tool utilizes programmable RNA strands to directly identify insertion sites in gene sequences, simplifying the editing process and reducing errors.
Comments: According to media reports, gene therapy has grown into a large market of nearly $10 billion per year and continues to grow, in addition to rare disease treatment, the development and application of gene editing technology is also marching into broader fields, such as drug development and gene therapy for cancer, Alzheimer's disease, cardiovascular diseases, etc. In addition, precision medicine has become a national strategy, which has brought a strong catalytic effect to the development of gene editing technology in mainland China.
2. Power battery recycling According to the China Securities News, the Ministry of Industry and Information Technology recently held a symposium on the whole industry chain of comprehensive utilization of waste power batteries for new energy vehicles in Beijing. The participants involved key metal raw material production, power battery production, automobile production, scrapped motor vehicle recycling and dismantling, and waste power battery comprehensive utilization enterprises, and planned to accelerate the promotion and improvement of the long-term mechanism for the comprehensive utilization of waste power batteries.
Comments: According to the "Notice on the Promotion and Application of Financial Support Policies for New Energy Vehicles from 2016 to 2020" issued by the Ministry of Finance and other four departments, by 2024, China will usher in the first batch of power batteries "out of insurance", and the number of lithium battery retirements will increase significantly. It is expected that by 2030, the scale of the lithium battery recycling market is expected to exceed 100 billion yuan, with an average annual growth rate of 26%, and the recycling volume of waste lithium batteries will exceed 1 million tons, which is equivalent to about 5 times that of 2022.
3. Banks| According to the Shanghai Securities News, the official website of the central bank announced on June 28 that the monetary policy committee of the central bank recently held a regular meeting for the second quarter of 2024. The meeting continued the tone of the regular meeting in the first quarter, pointing out that while the economic operation continued to pick up and improve, it stressed that "it is still facing challenges such as insufficient effective demand and weak social expectations", and then mentioned that "it is necessary to increase the implementation of the monetary policy that has been introduced" to keep the scale of social financing and money supply in line with the expected targets of economic growth and price levels. The market believes that there is still room for interest rate cuts and RRR cuts within the year. Overseas, the US May PCE released over the weekend showed that inflation decelerated across the board, and the Fed's favorite core inflation measure hit a record low in more than three years, providing strong support for the Fed's interest rate cut expectations in September this year. This also creates space for the introduction of domestic monetary policies such as RRR and interest rate cuts, and easing policies are expected to be positive for bank stocks.
Comments: Media reports pointed out that in the process of market volatility and bottoming, the high-dividend strategy continues to prevail. As of June 26, 19 A-share listed banks have distributed cash dividends for 2023, with a total dividend amount of 139.893 billion yuan, of which 8 banks have a dividend ratio of more than 30%. In terms of the situation of major state-owned banks, China Construction Bank, Industrial and Commercial Bank of China, Bank of Communications, Bank of China, and Postal Savings Bank will all hold shareholders' meetings before June 30 to review plans related to profit distribution. According to the previous announcement, the total dividend amount of the six major state-owned banks in 2023 will exceed 410 billion yuan for the first time, hitting a record high. Under the advocacy of the new "National Nine Articles", more small and medium-sized banks may follow suit and promote the implementation of medium-term dividends. Interim dividends are also conducive to investors holding dividend-oriented bank stocks more steadily and for a long time, supporting the continuous rise of stock prices. In addition, with the continuous development of real estate policies, whether it is the recovery of sales to drive the demand for mortgage loans, or the improvement of banks' risk expectations, it is expected to open up the valuation repair space of the banking sector.
4. Scroll screen| According to the Shanghai Securities Daily, the latest list published by the U.S. Trademark and Patent Office shows that Apple recently obtained a landmark patent for screen stretching, which is expected to bring a revolutionary display experience to smartphones, tablets, laptops, smart watches, and possible future Vision Pro and other devices. At the heart of this patent is a special OLED screen technology that combines the design concept of a rigid pixel island with a flexible screen. Apple describes in detail in the patent document how the screen is constructed: the stretchable part of the screen is made up of sealed rigid pixel islands that are connected to each other by flexible screens, allowing the screen to stretch and expand.
Comments: Industry analysts point out that the commercial application of this technology will greatly promote the development of smart devices, especially in the field of wearables and mobile devices.
5. Smart wearable| According to the Shanghai Securities Daily, Samsung officially announced that the 2024 Galaxy Unpacked conference will be held in Paris at 21 o'clock on July 10, Beijing time, and the poster reflects the shape of the Eiffel Tower. There is little to no suspense about the new products that Samsung will bring at the launch: the Galaxy Z Fold 6, Z Flip 6, Watch 7 smartwatch, Galaxy Tab S10 tablet, and Galaxy Ring smart ring.
Comments: Media reports pointed out that Samsung had already announced that the Galaxy Ring would be unveiled at its press conference earlier this year, and Samsung is expected to officially unveil the new wearable device at the upcoming Galaxy Unpacked event. As a new member of Samsung's family of wearables, Galaxy Ring will focus on health tracking features, including heart rate monitoring, sleep analysis, respiratory rate tracking, and more, to help users better understand their health. Among the many wearable smart device categories, the track of smart rings is still in the early stage, and after consumer electronics leaders such as Samsung and Apple have entered the game, the smart ring industry is expected to usher in rapid growth, and 2024 is expected to usher in the first year of volume.
Today's news preview
China's Caixin manufacturing PMI (June).
Eurozone, U.S. manufacturing PMI final in June.
German CPI for June.
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