CITIC Construction Investment: Copper and gold are cost-effective at the moment
The Zhitong Finance App learned that CITIC Construction Investment released a research report saying that the US-Iran conflict at the beginning of the year pushed up oil prices, changed the market's expectations about the Fed's policy path, and the colored market came to an abrupt end. Currently, the market is very divided about the non-ferrous market. The bank has two major judgments: First, at the current point, the decline in gold prices is limited, showing a more volatile pattern. The next catalyst for the rise in gold prices may be fiscal and monetary easing that exceeds expectations in the US. The logic is that from the end of last year until the US-Iran conflict this year, the sharp rise in gold prices essentially came from European and American ETF purchases corresponding to liquidity easing expectations. This part of demand was quickly washed away after high fluctuations in oil prices. Gold then returned to fundamental pricing, that is, the central bank bought gold. Second, with regard to copper, the broad framework of the global tariff game continues, and supply chain reshaping is also progressing, which means that copper prices rise easily and are difficult to fall. In summary, at the moment, copper and gold have a good price-performance ratio.
CITIC Construction Investment's main views are as follows:
Overview of the performance of major global asset classes this week
This week, global assets as a whole showed the characteristics of “rising inflation trading, declining risk appetite, and the dominance of cyclical assets”.
US stocks have been adjusted for the second week in a row. Doubts about whether AI capital expenditure can be realized as profits are heating up. Technology stocks are under pressure, and capital is rotating towards defense and value sectors; A shares and Hong Kong stocks fluctuate downward, extreme market differentiation continues, technology growth is under pressure, and resource products, finance, and high-dividend sectors are relatively dominant;
In terms of the bond market, Chinese debt has strengthened in the long term, and the curve has leveled off; US bonds have been impacted by oil prices, and the market is trading inflation and interest rate hikes again; commodity crude oil surged due to the situation in the Middle East, gold was supported by risk aversion and inflation expectations, and copper continued to strengthen the logic of tight supply and demand; the US dollar strengthened again in the foreign exchange market, and there was a clear differentiation within non-US currencies due to energy exposure, central bank policies and growth expectations. The RMB still fluctuated around the US dollar trend in the short term;
Next week, we will focus on the Federal Reserve interest rate meeting, Microsoft/Meta/Amazon earnings and AI capital expenditure verification, global inflation data, and the evolution of the geographical situation. The core macro-trading variables are still: whether the rise in oil prices continues, whether AI return expectations are being reassessed, and whether major central bank policy paths are being redirected.
1. Chinese stock market: A shares fluctuated widely, and the Hong Kong stock cycle picked up
China AH Stock Review: Volatile Adjustments
A-shares: A-shares fluctuated widely this week, with extreme differentiation throughout the week, with weighted blue chips significantly outperforming the small and medium markets. At the industry level, the building materials, textile and clothing, and media sectors led the decline in both markets; the non-ferrous metals, petroleum and petrochemicals, power equipment and new energy sectors led the way.
H shares: The core contradiction of Hong Kong stocks this week is the macro-narrative shift behind “cyclical frenzy vs. technological pressure”. The market is shifting from “AI+ easing” transactions to “inflation+safe-haven” transactions. Resources and finance dominate in the short term, but Hengke's weighted stock valuations will continue to be under pressure. Southbound capital was almost flat throughout the week, and there was a net outflow on the 3rd, reflecting that the current position's capital performance is still uncertain.
China Stock Market Outlook: Volatility bottoms out
A-shares: After experiencing extreme differentiation and continued contraction of transactions this week, the overall risk appetite of the market is low. It will take time to recover sentiment after the leveraged funds are cleared, but there has been no substantial shift in fundamentals and core industry trends on various tracks, and the general pattern where A-share shocks have bottomed out has not changed. The official launch of Changxin Storage next Monday is a landmark event in the process of replacing domestic DRAM storage with domestic production. It will also become the core game focus of next week's technological growth circuit. In the short term, the event window period can easily trigger concentrated capital transactions, and the probability of sector fluctuations will increase: on the one hand, it is expected to generate emotional catalysts for upstream links such as storage chips, semiconductor equipment, and materials, and attract the return of stock capital to the technology circuit; on the other hand, in the current market environment where stock games and shrinkage differences, there is also the possibility that some capital can be leveraged to redeem profits, or further exacerbate segmentation within the sector, and the probability of breaking out of a one-sided trending market is low.
Hong Kong stocks: The probability of the Fed's recent interest rate hike is increasing. Continued suppression of growth stocks will follow up on two verification windows. First, the FOMC meeting in July focused on whether the Fed's interest rate hike and declining logic would be further strengthened to provide continued support for the Hong Kong stock denominator side; second, the lifting of the ban on Hong Kong stocks and the second-quarter earnings season, focused on whether Internet platform profits had an inflection point and whether the AI application-side monetization logic could be verified.
2. China's bond market: the narrow fluctuation pattern has been broken, and the curve has leveled off
This week's bond market review: The bond market strengthened this week.
This week, the ultra-long-term bond market strengthened due to the combined efforts of abundant capital, widespread currency rumors, and long-term follow-up by non-banks. The previous narrow volatile pattern of the bond market was broken, and the curve leveled off. Interest rates on 2Y treasury bonds rose 0.6 BP to 1.27% this week, interest rates on 10Y treasury bonds fell 1.25BP to 1.72%, and interest rates on 30Y treasury bonds fell 5.5 BP to 2.19%.
Bond market outlook: On the eve of the Politburo meeting, the market is cautious. Due to the steep curve in the early period, the ultra-long end is relatively more cost-effective, and there is more room for imagination in interest spreads compression. The rest of the term varieties may maintain a narrow fluctuation pattern, and the curve is expected to continue to flatten.
3. US stocks: two consecutive weeks of decline
US stock review: Geographic and AI capital expenditure concerns were doubly squeezed, and the three major indices fell for the second week in a row.
US stocks declined this week under alternating pressure from the two main lines. The S&P 500 fell 0.6% to 7,412 points throughout the week, the tech-focused Nasdaq Composite Index fell 2.1% to 24,976 points, the Dow Jones index fell 0.4% to 51,947 points, and the Russell 2000 Index fell 1.1% to 2,930 points.
Technology's performance in the sector is relatively weak, and the two financial reports have brought back to the front desk doubts about whether huge investments in artificial intelligence can be turned into profits. Alphabet once again raised its annual capital expenditure guide to 190 billion to 205 billion US dollars. Free cash flow turned negative for the first time since listing in the second quarter. Tesla's adjusted earnings per share were only 33 cents. Since Apple is basically out of this round of capital expenditure competition, it has been relatively resistant to falling throughout the week.
US stock outlook: In the short term, it is necessary to absorb the triple disturbances of oil prices, AI capital expenditure revaluation, and tariffs. Next week's earnings reports from Microsoft, Meta, and Amazon will become a key test point for the capital expenditure narrative. A similar sharp rise in momentum in history is usually followed by several months of adjustment. Although hedge fund positions have clearly declined, they are still high compared to the past few years, and the fluctuations themselves will cause further reduction in positions.
4. Overseas interest rates: Soaring oil prices have brought interest rate hikes back to pricing, and US bond yields are on full line
This week's overseas interest rate exchange rate review: The main pricing line this week is energy, and US bond yields are moving across the board. The escalation of the US-Iran conflict was compounded by attacks on Red Sea shipping. Brent crude oil rose by about 11.7% in a single week and rose above $100 per barrel on Thursday. Against the backdrop of poor data and a period of silence for the Federal Reserve, US bonds are dominated by oil prices, and yields are moving across the board. Looking at the whole week, the 2-year yield increased from 4.18% to 4.34% (+16bps), the 10-year term from 4.54% to 4.68% (+14bps), and the 30-year term from 5.06% to 5.16% (+10bps). The bet for the July conference rate hike rose all the way from about 10% at the beginning of the week to about 35%, and the rate hike before September was fully priced.
Foreign interest rate and exchange rate outlook for this week: The direction of US bond interest rates depends on whether oil prices can peak. Next week's geopolitical trend and the Federal Reserve's decision are key. The bank expects oil prices to not get out of control within the 70-100 US dollar range, so the US 10-year yield is expected to fall slightly to the center of around 4.4%, about 30 bps lower than the current high. The market's pricing of interest rate hikes has risen again to a high level. The bank expects the Federal Reserve to stay on hold, and the June inflation and employment data do not support interest rate hikes for the time being.
5. Commodities: Gold, oil, and copper rose at the same time
Commodity review for this week:
The underlying logic of the same rise in oil and gold this week is the start of the “supply shock to stagflation trading” chain triggered by the shutdown of the Strait of Hormuz, while copper still benefits from independent fundamental logic for continued resilience
① The escalation of the war in the Middle East boosted oil price breakthroughs and became the pricing anchor for the three major commodities.
② The sharp rise in oil prices directly boosted inflation expectations, and both inflation-resistant and safe-haven purchases of gold stabilized around $4,050.
③ Copper, on the other hand, has broken out of the logic of independent rise in structural shortages and AI data center demand on the mining side.
Global Commodity Outlook:
Gold: The market may remain cautious in the short term, and the 4,000 mark support may still be effective. Next week, pay attention to the interest rate signal released by the Federal Reserve's FOMC meeting in July.
Crude oil: After breaking through high oil prices, there are concerns or the possibility of peace talks, and short-term market volatility may still be difficult to subside.
Copper: The fundamental pattern of mine-side constraints and LME storage may still be an important support for copper prices.
6. Foreign exchange: Oil prices are rising again. The US dollar is stronger but not the US is different from March
Foreign exchange review: The overall foreign exchange market this week showed a pattern of “the US dollar strengthened again, and the differentiation of non-US currencies under pressure”. The US dollar index rose from around 100.8 to around 101.4, returning to its high level since July. Oil prices are the most important macro variable this week, driving the market to retrade inflationary pressure and the Federal Reserve's hawkish risk. Compared with March, the current round of rising oil prices also benefited the US dollar, but non-US currencies did not simply fall, but showed more obvious structural differentiation: the euro was suppressed by the ECB on hold, but expectations of subsequent interest rate hikes were still supported; the yen rose above 163 due to the resonance of energy import pressure, weak interest rate spreads, and fiscal expansion pressure, and the USD/JPY rose above 163, hitting a new high since 1986, making it the main currency with the greatest pressure this week.
Foreign exchange outlook: Looking ahead to the future market, the short-term operating range of the US dollar may move upward to 101.0-102.0.
If oil prices remain high and further boost expectations of US inflation and interest rate hikes, the US dollar still has room to rise, and the pressure on the yen, the euro, and energy-importing Asian currencies may be more obvious; however, if oil prices rise and fall, the US dollar may fluctuate at a high level. On the RMB side, focus on USDCNH's performance around 6.80-6.82. Overall, the biggest difference between this week and March is that “the rise in oil prices triggered a decline between the US and the US,” while the current round was more like “rising oil prices boosting the dollar, but it is not a repolarization within the US based on energy exposure, central bank reactions, and growth expectations.”
Risk Alerts
AI trading congestion and risk of deleveraging. If capital expenditure returns and monetization fall short of expectations, the profit settlement of crowded positions may further amplify fluctuations.
The Federal Reserve's policy path is uncertain. The new Chairman Walsh's communication framework has changed, and expectations of market interest rate hikes are repeated. If inflation stickiness exceeds expectations, it may push up interest rates and the US dollar and suppress global risk asset valuations.
The risk of repeated geopolitics. The cease-fire and navigation arrangements between the US and Iran in Hormuz are still unstable. If the conflict resumes, the risk of oil prices and inflation may rise again.
There is still uncertainty about the sustainability of domestic real estate and consumption recovery, and weak off-season demand and high-frequency data may slow down the performance of the procyclical sector.