Financial Daily: US July PPI shows zero growth, S&P 500 hits new highs, global risk appetite rebounds

– Hot Topics

– US to impose tariffs of up to 100% on imported drones and components

– US July PPI data remains flat, dampening market expectations for a Fed rate hike in September

– Fitch Ratings confirms the US sovereign credit rating at AA+

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– Stock Markets

[US Market] PPI data shows inflation continues to cool, S&P 500 hits another all-time closing high

On Thursday, the three major US stock indices closed higher across the board. July PPI data indicated that inflation continues to cool, further dampening market expectations for a Fed rate hike in September. Risk appetite rebounded, and the S&P 500 index hit another all-time closing high. At the close, the S&P 500 rose 0.65% to 7,798.99 points, setting a new record closing high; the Dow Jones Industrial Average gained 0.13% to 53,885.10 points; and the Nasdaq Composite rose 0.81% to 26,803.03 points. The Philadelphia Semiconductor Index climbed 0.46% to 12,456.00 points. The VIX fear index fell 4.78% to 14.55.

The index of the Magnificent Seven US tech stocks rose 0.82%. Tesla led the gainers with a 3.80% surge, boosted by expectations around AI and autonomous driving; Meta rose 2.74%, Apple 1.01%, Microsoft 0.90%, NVIDIA 0.56%, and Google 0.44%; while Amazon fell 0.80%. The Nasdaq Golden Dragon China Index closed down 1.89%, with mixed performance among popular Chinese ADRs. JD.com fell 7.31%, PDD Holdings dropped 5.46%, Alibaba declined 2.44%, and Li Auto slipped 1.60%; GDS Holdings rose 6.20%.

[European Market] Major European stock indices generally closed lower

European stock indices generally closed lower on Thursday, following the decline in US Treasury yields and cautious market sentiment ahead of the PPI data release. The pan-European STOXX 600 Index remained largely flat compared to the previous trading session, closing at 659.24 points.

The UK FTSE 100 Index closed at 10,772.67 points, down 0.56%; the French CAC 40 Index closed at 8,650.56 points, down 0.28%; and the German DAX 30 Index closed at 26,299.74 points, down 0.12%.

[Asian Market] Asia-Pacific stocks generally strengthened, with South Korea's KOSPI rising more than 3.5%

Major Asian stock markets generally strengthened on Thursday. The South Korean stock market recorded a significant gain of over 3.5% for the second consecutive day, while the Japanese stock market also rose by more than 1%. The Nikkei 225 Index closed up 1.16% at 68,308.59 points; the South Korean KOSPI Index, continuously boosted by the AI and memory chip sectors, closed up 3.56% at 6,813.34 points; the FTSE Straits Times Index of Singapore edged down 0.01% to 5,720.05 points; and Thailand's SET Index closed up 0.11% at 1,614.36 points.

[Hong Kong Market] HK stocks showed divergent trends, with the Hang Seng Tech Index closing higher

Hong Kong stocks showed mixed performance on Thursday across the three major indices. The Hang Seng Tech Index rose, boosted by MSCI's quarterly rebalancing and strength in the AI sector, while the Hang Seng Index and the Hang Seng China Enterprises Index weakened slightly. At the close, the Hang Seng Index fell 0.17% to 25,396.51; the Hang Seng Tech Index gained 0.33% to 4,792.39; and the Hang Seng China Enterprises Index dropped 0.23% to 8,426.49.

In terms of sectors, AI and artificial intelligence stocks rallied broadly, supported by the results of MSCI's quarterly index rebalancing. MSCI China Index added 33 new constituents, including Zhipu and Siyuan Micro. Zhipu surged 9.02%, Haiqing Zhiyuan rose 7.53%, and MINIMAX gained 5.43%. Optical communication stocks followed the strong overnight performance of their overseas peers, with Haiguang Xinzheng up 7.91%, Cambridge Technologies up 6.61%, and Huahong Hongli (Hongli) up 3.08%. Pharmaceutical stocks continued their upward trend: Pharmaron Beijing rose 4.83%, Genscript Biotech gained 4.51%, and Wuxi Apptec increased 2.16%. Recently, several pharmaceutical companies disclosed new clinical progress for innovative drugs, with self-developed products covering small molecules, peptides, and biologics achieving phased breakthroughs. Gold stocks weakened broadly due to volatile high international gold prices, with Lingbao Gold falling 9.43%, China Gold International down 7.69%, and Shandong Gold dropping 6.25%. Real estate stocks also faced pressure as the traditional August sales slump continued; Shimao Group fell 8.57%, China Jinmao dropped 7.07%, and Sunac China declined 6.56%. Internet and tech stocks showed divergent performance; Tencent fell over 4% impacted by its Q2 earnings report. Data showed that computing power procurement significantly pushed capital expenditures to RMB 52.78 billion, turning free cash flow negative, which raised market concerns about the return on AI investments.

[A-Share Market] A-share's three major indices retreated from highs to close lower across the board

On Thursday, A-share's three major indices retreated from intraday highs to close slightly lower across the board. At the close, the Shanghai Composite Index fell 0.50% to 3,926.96; the Shenzhen Component Index dropped 0.87% to 14,289.44; and the ChiNext Index declined 0.45% to 3,586.04.

Regarding sectors and concepts, the pharmaceutical sector surged broadly, with sub-sectors such as CRO, innovative drugs, biological products, and cellular immunotherapy leading the gains. Boji Medicine, Wanbang Medicine, Longshen Rongfa, Nanmo Biology, and Nearshore Protein hit the 20% limit up. In the pharmaceutical e-commerce segment, Yaoyigou, Shenqi Pharmaceutical, and Foci Pharmaceutical hit the limit up. The power sector emerged strongly in the afternoon, becoming a rare bright spot against the backdrop of declining indices. Meiyan Jixiang hit a straight limit up, Datang Power hit the limit up, and Huadian Energy, Jinkai New Energy, and Huitian Thermal Power also hit the limit up. The computing hardware supply chain continued its recent strength, with the computing leasing concept remaining active, and CPO and optical communication sectors resonating higher. Gongjin Shares and Star-Net Ruijie hit the limit up, Chengdi Xiangjiang secured its third consecutive limit up, and Qunxing Toys and Ketong Electronics hit the limit up. Overnight, US AI computing leasing companies reported earnings well above expectations, providing continuous catalysts for the sector. Precious metals, industrial metals, education, non-ferrous metals, real estate services, photovoltaic equipment, and glass/fiberglass sectors were among the top decliners.

– Bonds

[US Treasuries] PPI data reinforces expectations of unchanged interest rates; US Treasury yields fall across the curve

The US Treasury market strengthened broadly on Thursday after the release of PPI data. Signals of cooling inflation further solidified market expectations that the Federal Reserve will keep interest rates unchanged in September, driving yields down across the curve. At the New York close, the yield on the US 10-year Treasury note fell 4.57 basis points to 4.65%; the yield on the US 2-year Treasury note dropped 4.82 basis points.

[Non-US Bond Markets] European sovereign bond yields generally decline

Sovereign bond yields in major European countries fell across the board, following the trend in US Treasuries. The UK 10-year gilt yield fell 1.9 basis points to 4.951%; the German 10-year Bund yield dropped 2.9 basis points to 3.129%; the French 10-year OAT yield declined 3.5 basis points to 3.943%; and the Italian 10-year BTP yield fell 4.8 basis points to 3.893%.

[Chinese Bond Market] Government bond futures generally rebounded and rose on Thursday

Treasury futures rose across the board on Thursday, supported by a pullback in A-shares from highs and safe-haven demand. At the close, the main contract for 30-year Treasury bonds rose 0.29%, the 10-year by 0.06%, the 5-year by 0.04%, and the 2-year by 0.01%.

– Foreign Exchange

[USD] The US Dollar Index weakened slightly, with the yen approaching the 160 level.

The US Dollar Index edged lower on Thursday. PPI data weighed on the greenback, though losses were limited. In late New York trading, the ICE US Dollar Index fell 0.05% to 99.964, while the Bloomberg Dollar Spot Index dropped 0.05% to 1,203.75.

The USD/JPY pair rose 0.05% to 159.51, once again nearing the 160 threshold. The EUR/USD gained 0.03%, while GBP/USD declined 0.05%.

[CNY] The USD/offshore CNY rate was quoted at 6.7444.

In late New York trading, the USD/offshore CNY rate fell 14 pips from the previous session's close to 6.7444. The onshore CNY/USD rate rose 9 pips from the previous night's close to 6.7450.

[Virtual Assets] Cryptocurrency market declines.

The cryptocurrency market trended lower on Thursday. Bitcoin fell below the $63,000 mark to near $62,000. Ethereum declined in tandem, dropping to around $1,860.

– Commodities

[Energy] Demand concerns weigh on oil prices; WTI crude falls over 2.4%.

International oil prices dropped significantly on Thursday as concerns over slowing global economic growth and crude demand outlooks outweighed geopolitical risk premiums. Additionally, the marginal weakening of the US dollar following the PPI data release failed to provide effective support for oil prices. In late New York trading, US crude oil futures settled down 2.43% at $81.25 per barrel, while Brent crude futures fell 2.15% to settle at $87.07 per barrel.

[Precious Metals] Gold prices pull back from highs, with spot gold down approximately 1.3%

Precious Metals:Gold prices retreated from recent highs. At the New York close, spot gold fell about 1.35% to $4,350.20 per ounce, while U.S. gold futures dropped roughly 1.1% to $4,420.40 per ounce.

Metals Futures Market:At the New York close, spot silver declined about 1.43% to $64.427 per ounce, trending lower throughout the day. London copper futures edged down 0.05% to $14,126.50 per tonne.

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