Pre-market market trends
1. Before the US stock market on July 31 (Friday), futures on the three major US stock indexes rose sharply. As of press release, Dow futures were up 0.54%, S&P 500 futures were up 0.34%, and NASDAQ futures were up 0.94%.
2. As of press release, the German DAX index rose 0.45%, the UK FTSE 100 index rose 0.18%, the French CAC40 index rose 0.79%, and the European Stoxx 50 index rose 0.76%.
3. As of press release, WTI crude oil rose 2.12% to $85.36 per barrel. Brent crude rose 1.92% to $88.55 per barrel.
Market news
The delivery of 16 billion “bloody chips” has been completed: is the sharp fall of Citadel's demolition AI, the end point or the starting point for dominoes? Hedge fund giant Citadel, headed by Wall Street billionaire Ken Griffin, reached a deal with Situational Awareness, an up-and-coming hedge fund that is in the midst of collapse, to help trigger a global AI hashrate themed stock, especially semiconductor stocks closely linked to AI computing power, to a long-lost “irrational catharsis of bullish sentiment” super counterattack. Wall Street traders also began a heated debate: whether the worst AI sell-off phase has passed, or will there still be more stocks in the AI computing infrastructure industry chain in the future Market collapse event. According to some market participants, Situational Awareness was forced to liquidate almost all of their open stock market AI investment positions, which helps explain the ongoing forced deleveraging liquidation and intense selling pressure in the global semiconductor sector in July: one round of sales will be transmitted repeatedly between global markets and further evolved into another round of super sales. Before retail investors and professional traders drastically cut loans, the Korean financial market's margin financing even hit a record high last month. After Citadel took over most of the public stock portfolio at a discount, the market no longer had to endure the sell-off of highly leveraged hedge funds on the exchange, and other investors no longer worried about unknown large-scale strong orders. As a result, short recovery, dealer hedging adjustments, and the return of fundamental capital jointly created a violent rebound in global semiconductor stocks that began on Thursday.
The AI engine has been restarted, and European stocks have strongly reached new all-time highs! The Pan-European Stoxx 600 sword refers to four consecutive yangs. Driven by a rebound in global technology stocks and a recovery in artificial intelligence (AI) investment sentiment, the European stock market experienced a general rise on Friday. The pan-European Stoxx 600 index hit a record high intraday high and is expected to rise monthly for the fourth month in a row, bringing a successful end to the already tough July market. The core impetus for this round of gains comes from the rapid restoration of confidence in the global AI industry chain. At one point, the European tech sector surged more than 2%, perfectly taking on the strength of US stocks overnight and the blowout in Asian semiconductor stocks. Florian Elpo of Lombard Odier Investment Managers said, “The most intense position clearance stage is probably over. From a valuation perspective, I think it's more reasonable now than a month ago, even though it's still not cheap. Therefore, this does not mean the end of AI trading, but it probably marks the end of the easy phase of 'buy with your eyes closed'.”
Japan may have spent about 52.8 billion US dollars to intervene in the foreign exchange market on Thursday, and the yen recorded its biggest one-day increase in nearly three years. According to account data and market agency forecasts released by the Bank of Japan on Friday, the Japanese authorities may invest about 8.45 trillion yen (about 52.8 billion US dollars) to intervene in the exchange rate on Thursday to boost the yen trend. The intervention occurred during the New York trading session. The yen surged about 3.3% intraday against the US dollar on the same day, the biggest one-day gain since December 2023. Market sources pointed out that while the Japanese authorities intervened, the US side also carried out an “exchange rate inquiry” operation around the early morning of Beijing time, showing that the two sides maintained communication at a time when fluctuations in the foreign exchange market intensified. The scale of this suspected intervention is higher than the level previously anticipated by supermarkets, reflecting the Japanese government's high level of caution against excessive depreciation of the yen. The market will pay close attention to subsequent exchange rate trends and official statements to determine whether there is room for further action.
It was revealed that South Korea sell-off of dollars was rare, and traders suspected that Japan and South Korea would join forces to interfere in the foreign exchange market. Market sources revealed that South Korea's foreign exchange authorities implemented a rare US dollar sell-off intervention on Thursday, pushing the won to a nine-month high. South Korea's move coincided with Japan's intervention to buy yen and sell dollars in the New York market on Thursday, which pulled the yen back from a 40-year low. The won appreciated 2% against the US dollar to 1418.0 won against the US dollar on Thursday, the strongest level since October 20 last year. The won hit a 17-year low of 1561.50 last month and has risen more than 8% this month, which is expected to be the biggest monthly increase since March 2009. A foreign exchange official from South Korea's Ministry of Finance declined to confirm the intervention. A South Korean foreign exchange trader said that the market suspected a joint intervention between South Korea and Japan because the two countries had previously indicated that they would coordinate closely. On July 2, South Korea's Deputy Minister of Finance said at a press conference that Seoul is maintaining close communication with Japan and other major allies on foreign exchange issues. Japan's top foreign exchange official then made a follow-up statement on July 7, saying that Tokyo is in close communication with foreign exchange officials in Seoul. The reason is that the financial markets of the two countries sometimes show similar fluctuation trends.
Global equity funds attracted more than $27 billion in a single week, the technology sector became the main force behind the rebound, and the AI narrative remains the core driving force. In the week ending July 29, the net inflow of global equity funds was about US$27.2 billion, the highest level in three weeks. Investors took advantage of the early pullback to increase their layout and bet that the AI-driven market still has room for further upside. US equity funds reversed the previous two-week trend of outflows, with net purchases of about 11.8 billion US dollars during the week. European and Asian equity funds also attracted net inflows of approximately US$7.8 billion and US$5.4 billion respectively, and global risk appetite showed a simultaneous recovery. The net inflow of technology sector funds for the week was about 5.7 billion US dollars, the largest single week since July 8. Previously, Alphabet (GOOGL.US) and Tesla (TSLA.US) raised market concerns due to cash flow data, but the strong financial reports released later by Microsoft (MSFT.US) and Amazon (AMZN.US) significantly alleviated investors' anxiety about the huge capital expenditure on AI and boosted sector sentiment recovery. Global bond funds had a net inflow of about $6.2 billion for the week, a 17-week low. The net outflow of high-yield bond funds was about 800 million US dollars, basically reversing the net buying trend of the previous week. The net inflows of government bond funds and short-term bond funds were also significantly narrower than the previous week. Money market funds experienced net redemptions for the third week in a row, amounting to approximately US$6.6 billion. Gold and precious metals funds recorded a net inflow of approximately US$280 million for three consecutive weeks. In emerging markets, equity funds received a net inflow of about US$1.8 billion for the third consecutive week, but bond funds were redeemed at around US$800 million.
Cutting-Edge AI Models “Get Out of Control” One After Another! Anthropic and OpenAI have revealed cyber intrusion incidents one after another, and calls for strengthened supervision are getting louder and louder. Security alarms for the AI industry have been sounded one after another. Anthropic revealed on Thursday that its AI model Claude hacked the three companies' systems during testing. Just a few days ago, competitor OpenAI revealed a similar danger: its AI agent independently hacked the open source platform Hugging Face's system. Anthropic said in its blog post on Thursday that after OpenAI revealed the security breach, the company discovered the issue after reviewing its own cybersecurity tests. Anthropic pointed out that in OpenAI and Anthropic's tests, AI models were able to access the internet from an otherwise closed test environment. Anthropic said the company reviewed 141,006 evaluation test reports and found that its Claude AI tool had accessed the internet three times and hacked “the real infrastructure of external organizations.” The company said the earliest incident occurred in April. During the cybersecurity test, Anthropic's Claude model was told that it was unable to access the Internet, but due to communication deviations between Anthropic and the evaluation partner, the test system was actually connected to the public network. This vulnerability eventually led to the model hacking into the three agencies' systems without authorization, and the company did not disclose the names of the agencies involved.
Individual stock news
US semiconductor stocks continued their gains. After hitting bottom yesterday, the US semiconductor sector continued to rise before the market on Friday. As of press release, SK Hynix (SKHY.US) rose about 7%, SanDisk (SNDK.US) and Western Digital (WDC.US) rose 6%, Micron Technology (MU.US) and Intel (INTC.US) rose 5%, and AMD (AMD.US) rose 4%. South Korea's KOSPI index closed up 18% on Friday, drastically reversing the downward trend of the previous three days and recording the biggest single-day increase in history. According to LSEG data, five of the top ten single-day increases in the KOSPI index in history have occurred since March, while three of the four major one-day declines in the past ten years have occurred in the last five weeks.
Samsung Electronics (SSNLF.US) and SK Hynix executives “paid out of their own pockets” one after another to increase their holdings of the company's shares. According to reports, after SK Group Chairman Choi Tae-won bought SK Hynix shares in the market's secondary market, with a total transaction of about 4.8 billion won, Roh Tae-moon, president and co-CEO of Samsung Electronics' DX division, also spent about 700 million won to increase his holdings of the company's shares. The Electronic Information Disclosure System (DART) of the Korea Financial Supervisory Service (DART) revealed on July 31 that Roh Tae-moon bought 3,045 shares of Samsung Electronics at a price of 230,000 won each the day before, for a total amount of about 703.5 million won. After this increase in holdings, the total number of shares held reached 124,280 shares.
Is Tesla considering divesting its Chinese business? Tesla China responds: Untrue news. Recently, foreign media reported that Tesla is considering divesting its Chinese business to pave the way for a potential merger with SpaceX (SPCX.US). The founder of SpaceX and Tesla is Elon Musk. The former is the world's leading private commercial space company, with core businesses such as space launches, Starlink Starlink satellite internet, etc., and was listed on the NASDAQ in June this year, breaking the record for the world's largest IPO in one fell swoop. The report quoted a person familiar with the matter as saying that some Tesla executives have been told to prepare for this. Another source familiar with the matter revealed that Tesla advisors have discussed various plans, including the spin-off, sale, or closure of the Chinese business (including a factory in Shanghai). The starting point of the divestment is to resolve conflicts of interest that SpaceX's business as a major US defense contractor may cause. According to this, the relevant media sought evidence from Tesla China, and the other party responded that this was “false news.” Musk himself said via social media that the divestment of the Chinese business was “This is fake news (This is fake news).”
Ali (BABA.US) Qian Q has been tested internally on Tesla vehicles. According to reports, the Doubag Big Model Assistant has been integrated into some new Tesla cars. Meanwhile, a number of people familiar with the matter revealed that Qianwen has already entered the in-depth testing phase of Tesla's Chinese cars, and they are about to get on the bus. According to the person familiar with the matter mentioned above, Qianwen has now completed a large number of boarding tests in Tesla's actual vehicle environment, and “being able to hear and answer, control the car, be able to navigate, and be able to do things” are already in the plan. In the future, the capabilities that a thousand questions can provide on Tesla vehicles may far exceed the definition of a single “voice assistant.” As of now, neither Alibaba Cloud nor Tesla China have made an official response to a thousand questions about when Tesla will officially launch.
Apple (AAPL.US) Cook responds to memory price increases. On July 30, local time, Apple CEO Tim Cook said in an earnings conference call that as the price of memory chips continues to rise, the company is evaluating all countermeasures. He stressed that currently the dynamic random access memory (DRAM) market is mainly controlled by three vendors. Having more vendors will help improve supply and have a positive impact on product pricing, and announced that Apple has more than 1.5 billion paid subscribers worldwide.
The cost of the computing power arms race: CoreWeave (CRWV.US) bond issuance costs are rising, and investors are wary of “renewal risks.” Although CoreWeave, a star AI cloud computing company, has long been accustomed to sharp fluctuations in the stock market, recent capital market shocks have had a substantial impact on its critical debt financing costs. After experiencing a roller coaster where stock prices plummeted and soared, the company had to complete a large-scale leveraged loan transaction at a higher cost. Previously, CoreWeave launched a $2.6 billion leveraged loan issuance program with the initial goal of setting interest rates 425 to 450 basis points above the benchmark interest rate. However, due to abrupt changes in the market environment, the company was forced to raise interest rates. According to Bloomberg's calculations, the interest rate that was finally locked in this Thursday was a full 100 basis points higher than the original upper limit, which means that the company will increase interest expenses by an additional 30 million US dollars every year. People familiar with the matter revealed that despite price increases and terms adjustments, the deal eventually attracted around $9 billion in subscription orders, showing that some of the market's interest in AI infrastructure assets is still strong.
America's two major oil giants made a whopping $26.5 billion in Q2, or angering Trump. Financial reports released by ExxonMobil Petroleum (XOM.US) and Chevron (CVX.US) show that in the context of the Trump administration's military action against Iran to push up crude oil and gasoline prices, the two companies achieved a total net profit of 26.5 billion US dollars in the second quarter. The huge profits announced by the two largest US oil companies on Friday will no doubt be welcomed by investors, but they may also clash them head-on with US President Trump. Trump has previously accused the energy industry of “driving up prices.” Chevron achieved net profit of US$12.2 billion in the second quarter, an increase of about 5 times over the same period last year, setting the record for the highest quarterly profit in the history of the Houston-based oil company. Rival ExxonMobil achieved net profit of 14.5 billion US dollars in the second quarter, double the same period last year, and the best quarterly performance since the Russian-Ukrainian conflict broke out in 2022.
Key economic data and event forecasts
20:30 Beijing time: Canada's monthly GDP rate after the May seasonal adjustment.
21:45 Beijing time: US Chicago PMI for July.
22:00 Beijing time: The final value of the US Consumer Confidence Index for July at the University of Michigan.
At 01:00 Beijing time the next day: The total number of US drills for the week ending July 31.