July 11 Market Analysis

US inflation has completely cooled down. In June, the CPI recorded its first month-on-month decline in four years, and the core CPI year-on-year growth rate reached its lowest point in more than three years. These data ignited the market's expectations that interest rates might be cut in September. As inflation eases, the market anticipates that the Federal Reserve may start cutting interest rates in September.

The S&P 500 and Nasdaq ended a seven-day record of continuous gains and retreated from their highest points. Nasdaq fell nearly 2%, and technology stocks were particularly under selling pressure. Among them, Tesla plummeted 8.4%, ending its 11-day continuous rise record. Nvidia also fell 5.6%, and chip stocks fell 3.5% overall.

At the same time, there was a significant shift in market style, with the Nasdaq 100 falling sharply, while the small-cap index soared, showing the biggest market differentiation since January 2021. In the small-cap sector, the Russell 2000 Index rose 3.6%, the best performance since November last year, and hit a new high of two and a half years.

In the real estate sector, the sector with the worst performance since this year saw the biggest increase in this round of market adjustments. Regional bank stocks rose more than 4%, and the China Securities Index also showed strong performance, rising more than 2%. Among them, JD rose about 7%, and Xiaopeng Motor rose more than 8%.

In the bond market, US Treasury yields fell sharply across the board, and the US dollar index also recorded its biggest one-day decline in two months. Meanwhile, the yen rose strongly, reaching 2.6% at one point, the biggest increase since the end of 2022. The Japanese government confirmed that it is interfering with the exchange rate to support the currency. The price of gold and silver also rose sharply, benefiting from increased safe-haven demand and the weakness of the US dollar.

In the Asian market, driven by expectations of interest rate cuts, the Asian stock market generally rose. Nikkei 225 closed above 42,000 points for the first time, and the South Korean and Taiwanese stock markets also hit record highs. In China, the Shanghai Index rose 1%, the A-share market recorded an increase of nearly 5,000 stocks, and the micro market index surged 4%. These developments show that the global market is sensitive to US inflation data and possible policy adjustments by the Federal Reserve, and market volatility is expected to continue.