Original|Odaily Planet Daily(@OdailyChina)
Author|Wenser(@wenser2010 )
Following a surprise U.S. military attack on Iran and Trump's threats to "take tough action against Iran" which were subsequently called off, Trump has for the 38th time proclaimed that a 'final agreement is imminent'. Global financial markets, including U.S. stocks, have seemingly jolted awake to embrace another 'TACO-style surge'.
This morning, all three major U.S. stock indices closed higher: the Dow rose 1.90%, the Nasdaq surged 3.42%, and the S&P 500 gained 1.73%. Cryptocurrency-related stocks also broadly rose, with COIN up 4.99% intraday and HOOD up 7.40% intraday. Japanese and South Korean markets opened higher. The South Korean KOSPI index opened up 519.25 points, or 6.69%, at 8283.2 points, briefly triggering a trading halt, with subsequent gains expanding to 8%. The Nikkei 225 opened up 880.53 points, or 1.37%, at 65097.80 points. Possibly influenced by this news, oil prices plunged 4.3% while gold prices rebounded 3.1%.
As the U.S.-Israel-Iran conflict enters its fourth month, global financial markets, particularly U.S. equity markets, are pre-pricing potential positives such as an end to the war, leading to a recent series of 'news-driven rallies'.
Macro Background: Trump 'Negotiates for Change', U.S. CPI Hits 3-Year High, Fed Rate Hike Expectations Fade
Overall, the macro backdrop for today's stock market rally primarily involves a turn towards peace talks in the war situation, the release of U.S. CPI data, and diminishing expectations for a Federal Reserve rate hike.
Trump's Remarks Showcase 'TACO Power' Again
According to the latest news overnight, Trump first canceled strikes and bombing operations against Iran that were originally scheduled for that night. Subsequently, he posted online stating that relevant consultations had been submitted to Iran's supreme leadership and approved. The final terms (both in general conception and specific details) have been approved by all relevant parties, including the U.S., Israel, Saudi Arabia, the UAE, Qatar, Turkey, Pakistan, Bahrain, Kuwait, Jordan, Egypt, etc. Although Iran and Israel later denied this, the market accepted it nonetheless.
Furthermore, Trump commented on the Iran issue, saying an 'excellent agreement' had been reached, claiming the relevant documents were in the final drafting stage and could be finalized and signed in the coming days. He also stated the agreement might be signed in Europe, possibly this weekend, with U.S. Vice President Vance in attendance. And that 'once Iran signs the agreement, the Strait of Hormuz will open.' Despite the Iran negotiations taking 'too long', financial markets are currently choosing to 'believe first'.
U.S. Core CPI Annual Rate Hits 3-Year High
This Wednesday, U.S. May CPI data was released, showing:
- CPI MoM (Seasonally Adjusted): 0.5%, expected 0.50%, previous 0.60%.
- Core CPI MoM (Seasonally Adjusted): 0.2%, expected 0.30%, previous 0.40%.
- CPI YoY (Not Seasonally Adjusted): 4.2%, expected 4.20%, previous 3.80%, hitting the highest level since April 2023.
- Core CPI YoY (Not Seasonally Adjusted): 2.9%, expected 2.90%, previous 2.80%, hitting the highest level since September 2025.
Some analysts believe that with U.S. inflation returning to the '4-handle', the peak of war-related inflation may be past. The third consecutive month of significant CPI increases highlights growing pressure on household spending, with signs that more consumers are tapping into savings to cover expenses. After the data release, the probability of the Fed holding rates steady in June stood at 96.3%, greatly easing previous expectations of a Fed rate hike. Trump boasted about the data, saying: "I love inflation."
Fed Rate Hike Expectations for the Year Ease Significantly
Following the CPI data release, the latest news shows the market no longer fully prices in a Fed rate hike this year.
Seema Shah, Chief Global Strategist at Principal Asset Management, stated, "U.S. inflation remains at an uncomfortable high of 4%, but the weaker-than-expected core data does relieve some pressure. With energy price rises being the main driver and housing costs easing, we haven't seen clear signs of broader second-round effects, which should allow the Fed to remain patient."
Afonso Borges, an analyst at Julius Baer, also noted that a mild rally led by short-term Treasuries after Wednesday's CPI report was 'reasonable' because better-than-expected inflation data should reduce the risk of the Fed hiking later this year.
Japan and South Korea Markets: Retail Investors Borrow to Buy the Dip, Yen Continues to Depreciate
Turning attention to Japanese and South Korean stock markets, they are in a strong rebound phase after recent declines.
On June 10th, Yonhap News reported that due to negative news from U.S. stocks and a sharp drop in semiconductor stocks, the South Korean Composite Stock Price Index (KOSPI) experienced severe adjustments over two days. During this period, overdraft account balances at major commercial banks increased by more than 600 billion won (approximately 2.67 billion RMB). Analysis suggests this is retail investors, anticipating a market rebound after the plunge, beginning to use overdraft accounts for 'borrowing to invest'.
According to Nikkei reports, the Bank of Japan (BoJ) is expected to raise its short-term policy rate from 0.75% to 1.0% at its monetary policy meeting on June 15-16, which would be the highest policy rate level since 1995. Possibly influenced by this news, USD/JPY rose 0.2% intraday, with the current exchange rate at 160.168.
Overall, capital flows in Japanese and South Korean stock markets are still growing steadily, but a BoJ rate hike could gradually tighten liquidity in the Japanese capital market. Bank of America analyst Shusuke Yamada stated that if the BoJ takes a hawkish stance and hikes rates at next week's meeting, it is expected to support the yen. He noted that the market has already priced in the rate hike expectation.
Looking Ahead: War Situation Unclear, Institutions Warn of Deep Correction, Stock Markets Face Liquidity Test
Although today's rally in global stock markets was stimulated by Trump's capricious 'positive news', a closer look at various dynamic factors shows market sentiment remains in a cautiously optimistic stage, wary of a deep correction.
No Turning Point Yet in U.S.-Iran Situation
Ali Akbar Dareini from the Tehran Center for Strategic Studies stated that despite Trump's announcement canceling strikes on Iran, the situation hasn't changed. From Iran's perspective, before any negotiations begin and before Iran is prepared to discuss nuclear issues, the U.S. first needs to take confidence-building measures, which hasn't happened. Reality shows the U.S. has taken no steps to ease tensions. Iran's position is that it will not compromise under coercion.
Institutions Turn Cautious, Warning of Deep Correction
Alex Altmann, Barclays' Head of Global Equity Strategy, who has repeatedly urged 'holding stocks' and accurately timed rebounds during market volatility, recently issued a rare cautionary warning. In his latest market analysis, he stated that due to a combination of technical overbought conditions, overheated sentiment, and macroeconomic pressures, he has turned bearish on the short-term outlook for U.S. stocks. He believes U.S. stocks are currently in the 'midst' of a structural correction, with the biggest current market concern being a severe disconnect between retail sentiment and macro reality. He even bluntly stated, "The S&P 500 could face a total correction of 6%-7%."
Recent American Association of Individual Investors (AAII) sentiment survey data shows the bearish percentage surged to 47.7% over the past week, nearing the year's high of 52% (March 18th) and far above the historical average of 31%.
Additionally, several institutions have recently expressed bearish views: Previously, BofA Securities stated investors should be cautious about U.S. stocks, as increasing bearish signals suggest the market is approaching a top.
A team of strategists led by Savita Subramanian wrote in a report dated June 5th that about 70% of bear market signals have now been triggered, consistent with average levels during historical market tops. The S&P 500 shows statistical overvaluation in 17 out of 20 valuation metrics, with 8 metrics above levels seen during the tech bubble. Furthermore, high P/E stocks significantly outperforming low-valuation stocks is seen by strategists as a sign of excessive speculation. Within the tech sector, the performance gap between the top and bottom quintiles has widened to its highest level since February 2000.
Of course, this view has been openly opposed by the 'new stock god' Serenity, who believes Bank of America's bearish arguments should be viewed cautiously, as a flood of negative news often appears when institutions need liquidity.
Regarding the South Korean stock market, on June 10th, the open interest in put options for the South Korean Kospi 200 index has recently surged sharply relative to call options, nearing levels that have historically foreshadowed market declines. As of the previous trading day's close, the ratio of protective put options to speculative call options was close to 2.5 times, hitting its highest level in five years. This indicator has only breached this threshold a few times before. Notably, South Korean retail investors sold over 1 trillion won worth of overseas stocks in the first week of June, potentially signaling a return of these investors to the domestic stock market.
SpaceX IPO Looms, Testing U.S. Stock Market Liquidity
The latest news states that retail subscription amounts for the SpaceX U.S. IPO have exceeded $100 billion. Combined with previous news that 'SpaceX plans to raise $75 billion, with 30% of shares offered to individual investors', retail subscriptions are already over 4 times oversubscribed.
U.S. investment manager Jim Chanos stated that investors are pricing in grand narratives rather than realistic profit prospects, with SpaceX's valuation multiples far exceeding those of Tesla (TSLA.O). Furthermore, institutions like Franklin Templeton, Saudi and Kuwaiti sovereign wealth funds have joined the IPO subscription wave. According to foreign media reports, several institutional investors have each placed orders for about $10 billion or more in shares. Two days ago, the SpaceX IPO had already attracted over $250 billion in investment demand, exceeding its planned $75 billion fundraising target, making it nearly 4 times oversubscribed; based on market trend projections, the oversubscription ratio could climb to 10 times by this Friday's official listing.
'Wall Street Oracle' and Bitmine Chairman Tom Lee stated that at this stage, U.S. stock investors are actively selling existing holdings and pooling cash to participate in this heavyweight IPO, with the fund diversion effect continuing to ferment, potentially the main culprit behind recent U.S. stock weakness. Christophe Boucher, Chief Investment Officer at ABN Amro Investment Solutions, part of Dutch bank ABN Amro, also said, participating in the SpaceX IPO is similar to buying cryptocurrencies about 15 years ago – you could either lose all your principal or potentially achieve exponential returns.
Although the SpaceX IPO has raised concerns about market liquidity, according to market sources, S&P Dow Jones Indices believes SpaceX is eligible for rapid inclusion in some indices. At that point, SpaceX could become a 'phenomenal giant' in the U.S. stock market.
In summary, global stock markets will continue to face influences from factors such as capital liquidity, domestic market policies, and changes in the global situation like the U.S.-Israel-Iran conflict. In the short term, be wary of Trump staging another round of market manipulation with 'threatening bearishness' and 'TACO-style bullishness'.
