Financial Daily: U.S. May CPI posts its largest increase in over three years; Nasdaq drops nearly 2%, U.S. Treasury yields rise with heightened volatility, and global markets see rising risk-off sentiment

- Key Focus

– U.S.-Iran tensions escalate; Iran says it will fully close the Strait of Hormuz

– U.S. CPI rose 4.2% year-over-year in May, marking the largest increase in over three years

– Oracle’s stock fell more than 7% in after-hours trading following its earnings release, due to higher-than-expected expenses and financing plans

Content compiled by 'Harbor Family Office,' a subsidiary of Henry Jia Group. It does not constitute any investment or trading advice. Stay tuned.

- Stock Market

[U.S. Markets] Escalating U.S.-Iran tensions triggered a drop of over 1.5% across all three major U.S. equity indices

On Wednesday, U.S.-Iran tensions escalated further as Iran announced it would fully close the Strait of Hormuz, causing oil prices to surge sharply. Significant capital fled AI and semiconductor sectors, dragging all three major U.S. equity indices lower. Each index declined by more than 1.6%, with the Nasdaq falling nearly 2%, as market panic continued to intensify.

At the close, the S&P 500 fell 1.62% to 7,266.99 points; the Nasdaq Composite dropped 1.98% to 25,169.501 points; the Dow Jones Industrial Average declined 1.87% to 49,918.78 points. The VIX fear gauge rose 11.83% to 22.22 points. The Philadelphia Semiconductor Index tumbled 3.57% to 12,206.462 points.

The Magnificent Seven U.S. tech stocks index fell 2.17%. Among them, only Apple gained 0.35%, while Tesla dropped 3.80%, NVIDIA fell 3.73%, Amazon declined 2.53%, Meta and Google each lost more than 2%, and Microsoft slid 1.50%. The Nasdaq Golden Dragon China Index edged down 0.28% to 6,280.80 points. Among notable Chinese ADRs, XPeng and Alibaba each fell over 3%, Baidu dropped 2.8%, and Tencent rose more than 2.5%. On an individual basis, Taiwan Semiconductor declined 4.44%, and Circle fell 2.70%.

[European Markets] Major European indices closed slightly lower overall

On Wednesday, major European indices closed modestly lower overall. At the close, the pan-European STOXX 600 index slipped 0.08% to 618.17 points, while the Euro STOXX 50 declined 0.66% to 6,009.95 points.

Germany's DAX 30 dropped 0.97% to 24,195.31 points; France's CAC 40 fell 0.51% to 8,161.83 points; the UK's FTSE 100 rose 0.27% to 10,254.81 points; and Italy's FTSE MIB declined 0.46% to 50,029.17 points.

[Asian Markets] Asian equities broadly declined on Wednesday, with South Korea's benchmark index plunging again

Asian stocks broadly declined, with South Korea's benchmark index plunging again after rebounding in the previous session, triggering a circuit breaker. At the close, the Nikkei 225 fell 1.89% to 64,179.27 points; the KOSPI dropped 4.52% to 7,730.82 points. The FTSE Straits Times Index in Singapore declined 1.28% to 4,958.85 points; Thailand’s SET Index fell 1.30% to 1,563.59 points.

[Hong Kong Market] All three major Hong Kong stock indices closed lower, with the Hang Seng Tech Index falling nearly 1%.

On Wednesday, all three major Hong Kong stock indices closed lower, with the Hang Seng Tech Index down nearly 1%. At the close, the Hang Seng Index fell 0.64% to 24,407.96 points; the Hang Seng Tech Index declined 0.94% to 4,724.79 points; and the Hang Seng China Enterprises Index dropped 0.07% to 8,318.73 points. In sector performance, NetEase rallied on the announcement of its highly innovative new game title, lifting the broader gaming sector—Dreamscape Networks and 7Road surged more than 5.7%, while NetEase rose 3.79%. AI-related stocks tumbled sharply amid negative market sentiment: DeepBlue AI plunged over 17%, Feisu Innovation fell 13.92%, and Zhipu AI and GigaDevice both dropped over 7%. Gold stocks declined alongside falling gold prices, which came under pressure due to rising U.S. inflation expectations this year and near-zero expectations for Federal Reserve rate cuts.

[A-Share Market] All three major A-share indices declined, with the Shenzhen Component Index and ChiNext Index each falling over 2%.

All three major A-share indices declined, with the Shenzhen Component Index and ChiNext Index each dropping over 2%, and the Shanghai Composite Index falling below the 4,000-point mark again. At the close, the Shanghai Composite Index fell 0.42% to 3,993.23 points; the Shenzhen Component Index dropped 2.06% to 14,954.10 points; and the ChiNext Index declined 2.70% to 3,854.79 points. By sector, semiconductor materials stocks surged across the board—CSSC Specialty Gases rose 16.42%, OLI Materials gained 13.35%, and Zhongjing Technology, Kangqiang Electronics, among others, hit their daily trading limits. Multiple institutions believe the global semiconductor market will continue to expand. Optical communication stocks collectively declined, with JINSHI Technology hitting its daily limit down, and Tongding Interconnect and Yongding Shares each falling over 8%. With the World Cup about to kick off, beer stocks strengthened—Huiquan Beer reached its daily trading limit, while Yanjing Brewery and Zhujiang Beer rose over 6%. The broader financial sector rallied collectively, with banking, brokerage, and insurance subsectors all advancing.

- Bonds

[U.S. Treasuries] U.S. Treasury yields moved higher with volatility, with the 10-year yield rising by 2.39 basis points.

U.S. Treasury yields moved higher with volatility. At the New York close, the 10-year U.S. Treasury yield rose 2.39 basis points to 4.5403%, while the 2-year yield increased 0.85 basis points to 4.1266%.

[Non-US Bond Market] Yields on government bonds in major European countries generally rose

Government bond yields in major European countries generally rose. Germany’s 10-year yield climbed 3.4 basis points to 3.076%, and its 2-year yield rose 5 basis points to 2.718%. The UK’s 10-year yield increased 2.8 basis points to 4.931%. France’s 10-year yield rose 4.1 basis points, Italy’s 10-year yield gained 4.9 basis points, and Spain’s 10-year yield also rose 4.1 basis points.

[China Bond Market] Treasury futures declined across the board again on Wednesday.

Treasury futures posted their third consecutive session of broad declines, with steeper losses compared to the prior two sessions. At the close, the front-month 30-year Treasury futures contract fell 0.36%, the 10-year contract dropped 0.17%, the 5-year contract declined 0.13%, and the 2-year contract slipped 0.05%.

– Foreign exchange

[USD] The U.S. dollar was largely stable, with the ICE U.S. Dollar Index at 99.928.

On Wednesday, the U.S. dollar remained broadly unchanged from the previous trading session. At the New York close, the ICE U.S. Dollar Index rose 0.02% to 99.928, while the Bloomberg Dollar Spot Index fell 0.04% to 1,210.20.

The dollar strengthened against most major currencies. The dollar rose 0.10% against the Japanese yen to ¥160.51; the euro was little changed against the dollar; the British pound fell 0.02% against the dollar; the dollar gained 0.18% against the Swiss franc; and the Australian dollar declined 0.30% against the greenback.

[CNY] The offshore renminbi traded at 6.7822 per U.S. dollar.

At the New York close, the U.S. dollar rose 36 pips against the offshore renminbi from the previous session’s close, trading at 6.7822. The onshore renminbi weakened 4 pips against the dollar from the previous late-night session’s close, trading at 6.7738.

[Digital Assets] Cryptocurrency markets were mixed, with Ethereum down more than 2%.

Cryptocurrency markets were mixed on Wednesday. Bitcoin fluctuated around $61,000 before ending slightly higher, while Ethereum dropped over 2% to below $1,650.

– Products

[Energy] Oil prices strengthened, with U.S. crude futures rising 2.07%.

Oil prices surged sharply following escalating Middle East tensions and Iran’s announcement of closing the Strait of Hormuz, though they later pared some gains. At the New York close, U.S. crude futures settled up 2.07% at $90.03 per barrel, while Brent crude futures rose about 1.8% to settle at $93.10 per barrel.

[Precious Metals] Precious and base metal prices declined sharply.

Precious Metals:Gold prices declined sharply, with spot gold down about 4.4% to $4,069.40 per ounce at the New York close; US gold futures fell 4.4% to $4,092.30 per ounce.

Metals Futures Market:At the New York close, spot silver dropped 3% to $63.33 per ounce; US silver futures declined 2.35% to $63.710 per ounce; US copper futures fell 2.3%, spot platinum dropped 3.75%, and spot palladium declined 1%.

[Disclaimer]

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