Financial Daily: US July CPI rose only 0.1%, boosting rate cut expectations; South Korea's KOSPI surged over 3.6%; gold prices returned to $4,400; A-share optical communication sector exploded.

– Hot Topics

– The US July CPI index rose moderately by 0.1%, somewhat dampening market bets on a Fed rate hike in September.

– The People's Bank of China released its Q2 Monetary Policy Implementation Report, stating that it will timely plan and introduce practical and effective incremental policies.

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– Stock Markets

[US Market] Mild CPI data boosts rate cut expectations; S&P 500 approaches all-time high.

On Wednesday, the three major US stock indices showed mixed performance. The year-over-year growth rate of core CPI in July hit its slowest pace since March 2021, significantly cooling market expectations for Federal Reserve rate hikes within the year. AI-related stocks led gains in the tech sector, with the S&P 500 approaching record highs and the Nasdaq touching a one-month high. At the close, the S&P 500 rose 0.26% to 7,748.50; the Dow Jones Industrial Average fell 0.04% to 53,770.27; and the Nasdaq Composite rose 0.54% to 26,588.49. The VIX fear index dropped to around 14, with market volatility falling to its lowest level of the year. In terms of sector ETFs, semiconductor ETFs led with a 2.32% gain, robotics and AI ETFs rose 0.88%, while consumer discretionary ETFs fell 1.15%.

Performance among the 'Magnificent Seven' US tech stocks was divergent. NVIDIA rose 3.03%, boosted by AI infrastructure financing plans and strong earnings from companies like CoreWeave. Tesla fell 1.59%, Amazon dropped 1.83%, Meta declined 3.38%, and Apple slipped 0.87%. Microsoft led declines on the Dow, falling over 2%. The Nasdaq Golden Dragon China Index dropped 2.37%. Among popular Chinese ADRs, WeRide fell over 9%, Legend Biotech dropped more than 5%, Boss Zhipin fell nearly 4%, New Oriental Education declined nearly 4%, Vipshop dropped over 3%, and Tencent Music fell more than 3%; Niu Technologies rose over 3%. In individual stocks, SpaceX surged 9.65%, SK Hynix jumped over 9%, SanDisk rose more than 5%, and Micron Technology gained over 4%.

[European Markets] European stocks edged lower, breaking away from their streak of consecutive record highs.

European markets generally closed slightly lower on Wednesday, snapping a streak of consecutive record closing highs as the market underwent mild consolidation following the release of US CPI data. At the close, the Euro Stoxx 50 index fell 0.26% to 6,533.99.

Germany's DAX 30 index fell 0.23% to 26,331.07; the UK's FTSE 100 index dropped 0.10% to 10,833.15; and France's CAC 40 index declined 0.46% to 8,674.94.

[Asian Markets] Asia-Pacific stocks showed divergent trends, with South Korea's KOSPI surging over 3.6%.

Major Asian stock markets showed divergent performance on Wednesday. The South Korean market recorded a significant gain of over 3.6%, driven by strong performance in the semiconductor sector. Japanese stocks edged higher, while Southeast Asian markets were generally under pressure. The Nikkei 225 closed up 0.83% at 67,524.06. The South Korean KOSPI rose 3.68% to 6,579.04, boosted by news that Temasek plans to make its first direct investment in the Korean stock market, focusing on Samsung Electronics and SK Hynix. The FTSE Straits Times Index in Singapore fell 0.58% to 5,720.75, and Thailand's SET Index dropped 0.72% to 1,612.62.

[Hong Kong Market] Hong Kong stocks opened lower and continued to decline, with all three major indices closing in negative territory.

All three major Hong Kong stock indices weakened on Wednesday. The Hang Seng Tech Index fell nearly 1%, reflecting overall weak market sentiment. However, the real estate, memory chip, and optical communication sectors bucked the trend with significant gains. At the close, the Hang Seng Index fell 0.83% to 25,440.17; the Hang Seng Tech Index dropped 0.99% to 4,776.44; and the Hang Seng China Enterprises Index declined 0.96% to 8,446.27.

In terms of sectors, real estate stocks strengthened across the board, boosted by the implementation of new property policies in Beijing. China Jinmao surged 13.92%, Yuexiu Property rose 9.99%, and Sunac China gained 8.93%. Memory chip stocks were lifted by news of Temasek's plan to directly invest in the Korean stock market, focusing on Samsung Electronics and SK Hynix. Montage Technology rose 7.60%, GigaDevice increased 5.10%, and leveraged long ETFs for Samsung Electronics and SK Hynix both jumped over 12%. Optical communication stocks rallied in line with their A-share counterparts, as Lumentum's earnings confirmed strong demand for AI optical communications. Haiguang Xinzheng surged 12.72%, Zhongji Innolight rose 8.83%, and Huahong Hongli gained 7.13%. PCB concept stocks also strengthened, with Kingboard Laminates up 10.70%, Guanghe Technology rising 5.92%, and Kingboard Group gaining 4.82%. Internet and tech stocks generally corrected, with Tencent Music plunging 12.55%, NetEase falling 5.08%, and Bilibili dropping 3.34%. Oil stocks also weakened, with Yanchang Petroleum International down 2.95% and PetroChina falling 2.31%.

[A-Share Market] The three major A-share indices strengthened collectively, with the ChiNext Index rising nearly 1.5%.

On Wednesday, all three major A-share indices rose across the board. The Shenzhen Component Index and the ChiNext Index both gained over 1%, reflecting a broad market advance. CPO (Co-Packaged Optics), optical communications, and optical chips were the main drivers of the rally, while the real estate industry chain saw a comprehensive surge. At the close, the Shanghai Composite Index rose 0.32% to 3,946.68 points; the Shenzhen Component Index rose 1.09% to 14,414.43 points; and the ChiNext Index rose 1.49% to 3,602.08 points.

In terms of sector concepts, more than ten stocks in the CPO, optical communications, and optical chip sectors hit their daily price limits. The optical chip concept index closed up 5.66%, and the optical communications concept index rose 3.79%. Global optical communication giant Lumentum reported Q4 FY2026 earnings, showing a year-over-year surge of 109%, far exceeding market expectations. Yongding Shares hit the daily limit, Juguang Technology recorded a 20% daily limit gain, and Advanced Micro-Fabrication Equipment Inc. China (AMEC) and Zhichun Technology also hit their daily limits. AMEC, Hua Hong Hongli, and Cambricon Technologies moved higher in tandem. The entire real estate industry chain strengthened significantly: the decoration and renovation sector surged 4.11%, hitting a one-month high; real estate development rose 3.47%; and the housing rental concept rose 3.96%. Urban Construction Development, Jingtou Development, and Rongsheng Development hit their daily limits, while Heung Kong Holdings has gained over 100% in the past month. The large consumption sector also saw synchronized movement, with Zhongxing Commercial, Anji Food, Haoxiangni, and Jinshiyuan hitting their daily limits. The computing power leasing concept remained active, with Chengdi Xiangjiang and Hongbo Shares both securing two consecutive daily limit gains, while Yunsai Zhilian and Hubei Radio & Television Information Network hit their daily limits. Conversely, nuclear power, medical aesthetics, coal, and oil & petrochemical sectors fell against the trend, as capital flowed from traditional energy and defensive sectors toward technology growth and policy-benefited directions.

– Bonds

[US Treasuries] US Treasury yields fluctuated slightly following mild CPI data.

On Wednesday, US Treasury yields showed mixed performance following the mild CPI data and the 10-year Treasury auction. Short-end yields dipped slightly, while long-end yields remained largely flat. At the New York close, the yield on the US 10-year Treasury note rose slightly by 0.21 basis points to 4.684%; the yield on the US 2-year Treasury note fell by 0.64 basis points to 4.197%.

[Non-US Bond Markets] German government bond yields declined.

Yields on sovereign bonds in major European countries edged lower due to relatively stable oil prices and mild US CPI data. The yield on the German 10-year government bond fell by approximately 2 basis points to 3.157%; the yield on the German 2-year government bond dropped by about 1 basis point to 2.774%.

[Chinese Bond Market] Treasury futures generally weakened on Wednesday.

Treasury futures overall performed softly on Wednesday, as the strength in A-shares and rising risk appetite exerted some pressure on the bond market. At the close, the main contract for the 30-year Treasury future fell 0.07%; the main contract for the 10-year Treasury future dropped 0.01%; the main contract for the 5-year Treasury future remained flat; and the main contract for the 2-year Treasury future rose 0.01%.

– Foreign Exchange

[US Dollar] The US Dollar Index rebounded, with the yen once again approaching the 160 intervention warning line.

On Wednesday, the US Dollar Index initially fell before rebounding, reversing intraday losses to sustain its strength. Although CPI data was moderate, market sentiment remains heavily focused on awaiting Fed policy actions. At the New York close, the ICE US Dollar Index rose 0.22%, hitting a fresh daily high of 99.874.

The USD/JPY pair weakened again, trading at 159.48 yen. The EUR/USD fell 0.2% to 1.1523; the GBP/USD dropped 0.1% to 1.3491; and the AUD/USD remained largely flat around 0.7063.

[RMB] The USD/offshore RMB rate was quoted at 6.7464 yuan.

At the New York close, the USD/offshore RMB rate was quoted at 6.7464 yuan, unchanged from the previous session's close. The official closing rate for the USD/onshore RMB was 6.7456 yuan, up 1 pip from the previous session's official close.

[Virtual Assets] Cryptocurrency market surges then retreats

On Wednesday, the cryptocurrency market surged before pulling back. Bitcoin quickly retreated after hitting an intraday high of $64,500, ultimately closing down nearly 0.4% at $63,436.

– Commodities

[Energy] Unexpected surge in US crude oil inventories weighs on oil prices; WTI crude falls about 0.75%

International oil prices edged lower on Wednesday as US crude oil inventories unexpectedly surged last week, far exceeding market expectations of a decline. This, combined with OPEC's downward revision of global crude demand growth forecasts, weighed on oil prices. At the New York close, US crude futures fell about 0.75% to settle at $82.58 per barrel; Brent crude futures dropped about 0.6% to settle at $88.38 per barrel.

[Precious Metals] Safe-haven demand drives gold prices higher; spot gold returns to $4,400

Precious Metals:Gold prices rose, supported by the US dollar's initial dip followed by a rebound, as well as safe-haven demand. At the New York close, spot gold prices rose about 0.85% to $4,408.84 per ounce; US gold futures gained about 0.6% to $4,467.50 per ounce.

Metals Futures Market:Spot silver surged intraday, with gains narrowing to approximately 1.02% at close, settling at $65.322 per ounce; US copper futures rose initially before falling, strengthening by 1.25% intraday but ultimately declining 0.37% to close at $6.5549 per pound.

[Disclaimer]

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