July 1 Financial Breakfast: 10-Year U.S. Treasury Yield Hits Two-Month Low! Euro/US Dollar Rises for Eight Consecutive Days! S&P and Nasdaq Reach New Historical Highs

Canada cancels digital services tax, EU may accept US 10% baseline tariff but requests exemptions for certain goods. The favorable trade tariff continues to boost market risk appetite, and concerns about inflation are easing, leading to increased expectations for the Federal Reserve to restart interest rate cuts in September. The yield on 10-year US Treasury bonds fell to 4.22%, hitting a two-month low. US stocks rose across the board, with the S&P and Nasdaq reaching new historical highs; the Dow Jones increased by 0.63%; the S&P rose by 0.52%, closing at 6204 points; the Nasdaq gained 0.48%, closing at 20369 points; the China Golden Dragon Index retreated by 0.49%.

In terms of popular stocks, Apple Inc.'s stock price closed up 2%, down 17.9% for the first half of the year; Meta closed up 0.6%, reaching a historical high, with a cumulative increase of over 26% in the first half of the year; Oracle announced it secured a large cloud service contract, expected to bring in $30 billion in annual revenue starting from 2028, stimulating its stock price to close up 4%. All major Wall Street banks passed the Federal Reserve's annual stress tests, with Goldman Sachs' stock price closing up 2.4%, making it the strongest performer among Dow components.

The US dollar index fell by 0.48%, continuing to hit a new low for the year at 96.7; the euro/USD rose by 0.59%, rebounding close to 1.1800, marking eight consecutive days of increase. The dollar/yen fell by 0.44%; gold rose by 0.9%, recovering above the $3300 mark; WTI crude oil fell by 0.15%, maintaining around $65.0; Bitcoin fell by 1.11%, dropping below $108,000; Ethereum fell by 0.35%.

Macro News

Canada suspends digital services tax to advance trade negotiations with the US

After US President Trump threatened to terminate trade negotiations with Canada, Canada made concessions by announcing the cancellation of the digital services tax (DST) to advance trade negotiations with the US, just hours before the tax policy was set to take effect. According to statements from both governments, negotiations between the two countries will continue with the aim of reaching an agreement before July 21.

The Canadian Ministry of Finance stated that the tax plan will be suspended on Monday, and the finance minister will propose legislation to abolish the digital services tax law. The statement noted that the digital services tax was announced in 2020 to address the issue of many large tech companies operating in Canada potentially not having to pay taxes on revenue generated from Canadian users. Canada has always preferred to reach a multilateral agreement on the digital services tax.

Trump stated that after the deadline for the implementation of reciprocal tariffs on July 9, he does not intend to fully extend the deadline for all countries. The US government will notify all countries that have not reached a trade agreement with it within a few days, informing them whether they will receive an extension of the implementation deadline or if reciprocal measures will take effect immediately.

EU reportedly accepts US 10% baseline tariff, requests exemptions for certain goods

According to foreign media reports, the EU plans to accept the 10% baseline tariff currently implemented by the US but requests that the US agree to provide lower tariff treatment for goods in key industries such as pharmaceuticals, alcohol, semiconductors, and commercial aircraft. Both the US and EU are seeking to reach an agreement before the July 9 deadline for the suspension of implementation; otherwise, the US may impose a 50% reciprocal tariff on all goods imported from the EU According to reports, the European Union has agreed to accept the 10% baseline tariff that the United States has already implemented in the latest stage of negotiations, but it requires some industry products to receive tariff reductions. There are limits on automobiles, auto parts, and steel and aluminum products, with no tariffs to be paid if below the quota of 25% and 50%. The EU believes that these terms are already favorable to the United States but are acceptable compromise terms.

European Central Bank Vice President Luis de Guindos pointed out that the current interest rate policy is consistent with the goal of reducing inflation to 2%. Given the uncertainty, all interest rate options must be retained. Despite numerous uncertainties and chaos, the market remains optimistic, hoping to reach a US-EU trade agreement before July 9.

Trump again urges Powell to cut interest rates, and the US Treasury Secretary states that the tax reform bill will proceed smoothly.

Trump has once again pressured Federal Reserve Chairman Jerome Powell to significantly cut interest rates. At the same time, he has expanded his criticism to the entire Federal Reserve Board, emphasizing that the United States should only pay 1% or higher interest. White House Press Secretary Karoline Leavitt stated that Trump sent a letter to Powell on Monday, discussing the current global interest rate situation and directly pointing out that Powell's actions are too late and should involve significant rate cuts.

Goldman Sachs predicts that the Federal Reserve will cut interest rates for the next time in September this year, earlier than the previously expected December. Federal Reserve Chairman Powell testified before Congress last week, leaving the possibility of a rate cut in July, but given the expectation that tariffs will drive up inflation in June, July, and August, Powell hinted that there would be no rate cuts during this period. Goldman Sachs stated that it has become a foregone conclusion that Powell will not be extended by Trump as Federal Reserve Chairman next year, and the likely candidate for the next Federal Reserve Chairman is someone who is extremely dovish or inclined to significantly lower Federal Reserve interest rates.

US Treasury Secretary Janet Yellen stated that she believes the tax reform bill will proceed smoothly, and Trump will sign the bill before July 4. Yellen described the tax reform bill as the beginning of addressing the debt issue, stating that the federal government will turn the situation around and reduce the debt level, but does not acknowledge the claim that "the bill cuts Medicaid." As inflation decreases, the overall curve may decline.

The US Senate passed a procedural vote on Saturday for the tax and spending bill known as the "Big and Beautiful Act," clearing the main obstacle to the bill's consideration. This means that once the bill becomes law, the likelihood of US national debt increasing by more than $3 trillion over the next decade rises.

Goolsbee: The US economy is unlikely to experience stagflation.

Austan Goolsbee, President of the Chicago Federal Reserve Bank, stated that there is currently no indication that tariff measures or renewed supply chain shocks will trigger a possibility similar to the stagflation experienced in the United States in the 1970s. The US unemployment rate remains slightly above 4%, and inflation is around 2.5%, reflecting a good economic situation. He believes that while the economy could indeed become worse than it is now, it is difficult to provide a definitive answer. Goolsbee has a voting right on monetary policy at the Federal Open Market Committee (FOMC) this year. Additionally, Raphael Bostic, President of the Atlanta Federal Reserve Bank, predicts that the FOMC will cut interest rates once this year and three times next year. Bostic stated that there is still significant debate over whether US companies can fully pass on tariffs and what price levels consumers will accept Regarding the transfer of tariffs, companies are currently showing restraint, while consumers are behaving more cautiously, but there are no signs of weakening expectations in the job market, and wage growth has returned to pre-pandemic levels.

Morgan Stanley expects U.S. stocks to continue their upward trend in the second half of the year.

Morgan Stanley strategist Michael Wilson believes that the market will continue to anticipate aggressive interest rate cuts by the Federal Reserve, which will be sufficient to keep the S&P 500 rising in the second half of the year. Wilson believes that large companies will drive this round of market upturn. He stated that three factors will drive U.S. stocks higher in the next 6 to 12 months: first, the market will revise corporate earnings forecasts upward, reflecting that the pessimistic estimates made by companies in April will not materialize; second, the easing of monetary policy, with expectations that the Federal Reserve will cut rates a total of 7 times before the end of next year; and third, policy and geopolitical risks will gradually diminish.

Market Overview

U.S. Stocks: All three major U.S. stock indices rose, with the Dow Jones up 0.63%, the S&P 500 up 0.52%, and the Nasdaq up 0.48%.

European Stocks: European stock markets fell across the board, with the German DAX 30 index down 0.51%. The French CAC 40 index fell 0.33%. The UK FTSE 100 index dropped 0.43%.

Bond Market: The yield on the U.S. 10-year benchmark Treasury bond is about 4.23%, down 4 basis points from the previous trading day.

Commodities: Gold rose 0.91%, priced at $3,303 per ounce. WTI crude oil fell 0.15%, priced at $65.0 per barrel.

Foreign Exchange: The U.S. dollar index fell 0.48%, priced at 96.78. The USD/JPY fell 0.44%, while the EUR/USD rose 0.59%.

Cryptocurrency: Bitcoin fell 1.11% in the last 24 hours, currently priced at $107,170. Ethereum fell 0.58% in the last 24 hours, currently priced at $2,488.

Hong Kong Stocks: The Hang Seng Index night market futures closed at 24,170 points, down 86 points, 98 points higher than yesterday's Hang Seng Index closing of 24,072 points, with a turnover of 8,212 contracts. The night market futures for the National Index closed at 8,703 points, 25 points higher than yesterday's National Index closing.

Global Company News

Zuckerberg announces Meta Superintelligence plan and new hiring.

Meta Platforms CEO Mark Zuckerberg announced a major reorganization of the company's artificial intelligence (AI) team, which includes a focus on developing artificial intelligence superintelligence. The newly established team is called Meta Superintelligence Labs and will be led by Alexandr Wang, former CEO of Scale AI, who will serve as Chief AI Officer, along with Nat Friedman, former CEO of GitHub.

Zuckerberg announced the addition of 11 new employees in the field of artificial intelligence, including researchers from OpenAI, Anthropic, and Google, who will work on developing advanced models and AI assistants Apple considers using external AI technology to empower Siri

According to Bloomberg, Apple is considering using artificial intelligence technology from Anthropic PBC or OpenAI to empower the new version of Siri, which may marginalize its internal models. Apple has been in talks with Anthropic and OpenAI to explore the application of their large language models to Siri and has commissioned them to train a version of the model that can run on Apple's cloud infrastructure for testing. If Apple decides to use third-party models, it would represent a significant shift, indicating that the company acknowledges its struggles in the competitive field of generative AI, and may enable Apple to offer Siri capabilities comparable to AI assistants on Android phones.

Stablecoin issuer Circle applies to establish a national trust bank in the U.S.

Stablecoin issuer Circle is applying to establish a national trust bank in the United States. Earlier this month, the company achieved a valuation of nearly $18 billion through its initial public offering, and this application is a key move in its follow-up. If approved by the Office of the Comptroller of the Currency (OCC), Circle will be able to act as a custodian for its own reserves and hold crypto assets on behalf of institutional clients. However, unlike traditional banks, this license does not allow Circle to accept cash deposits or issue loans. Currently, the only digital asset company with a national trust bank license is the cryptocurrency platform Anchorage Digital. Experts and analysts say that once the bill is signed into law, it could pave the way for more traditional financial institutions and retailers to incorporate stablecoins into their businesses.

Today's Key News Preview

China's June Caixin Manufacturing PMI

UK June Nationwide House Price Index MoM

Switzerland May Real Retail Sales YoY

France June Manufacturing PMI Final

Germany June Seasonally Adjusted Unemployment Change

Eurozone June Manufacturing PMI Final

Eurozone June CPI YoY Preliminary

Global Major Central Bank Governors Group Meeting

U.S. June ISM Manufacturing PMI

U.S. May JOLTs Job Openings

U.S. May Construction Spending MoM

U.S. API Crude Oil Inventories for the week ending June 28