Breakfast | China-US Kuala Lumpur Economic and Trade Consultations: Basic Consensus Reached on Arrangements to Address Each Other's Concerns

Market Overview

The core CPI growth in the U.S. slowed in September, significantly raising expectations for two rate cuts by the Federal Reserve this year. Tech stocks and small-cap stocks led the rally, driving the S&P 500 and Nasdaq to new highs, while the Dow Jones Industrial Average closed above 47,000 for the first time.

Apple reached a historic high, accumulating over 4% for the week. Tesla fell 3.4%, the only decliner among the seven tech giants. AMD rose 7.6%, and IBM increased nearly 8%, with reports stating that IBM can use AMD chips in quantum computing. Ford surged 12%, marking its largest single-day gain since March 2020.

After the CPI data was released, U.S. Treasury yields initially plummeted, but later narrowed the decline significantly due to better-than-expected Markit PMI data. The 2-year Treasury yield dropped 6.2 basis points from its daily high, recovering most of the losses afterward. The 10-year yield still closed above 4%. The dollar briefly plunged but quickly rebounded, ultimately showing little change from the previous day's close. The dollar against the Canadian dollar briefly broke above 1.40, then fell significantly, down 0.33% from its daily high.

Gold continued to decline before the CPI, rising 2.44% after the data was released, but fell back at the New York close on Friday, closing lower than the previous day. Oil's upward momentum paused, with U.S. crude down about 0.5%.

In the Asian session on Monday morning, S&P 500 futures rose 0.8%, Nasdaq futures rose 0.9%, and Dow futures rose 0.7%, while spot gold gapped down over 1%.

Key News

China and the U.S. reached a basic consensus on arrangements to address each other's concerns during trade discussions in Kuala Lumpur. People's Daily Zhong Sheng: Jointly maintain the hard-won results of China-U.S. economic and trade consultations. Li Chenggang: The two sides had constructive discussions, with the U.S. expressing a tough stance while China firmly protects its interests.

Wall Street bets on “the Supreme Court overturning tariffs, forcing the U.S. government to refund taxes,” with the son of the U.S. Secretary of Commerce even participating at one point.

Bessent's “confession bureau”: Pushing MAGA while protecting the market, Trump “always announces high tariffs to create leverage, then lowers them.”

Kawasaki Saimi delivered her first policy speech, with “hawkish” policies raising widespread concerns.

NVIDIA “the only short”: This is not the first time I’ve seen a bubble, setting a target price of $100.

JP Morgan downgraded Oracle's rating, pointing to three major credit risks behind its aggressive expansion.

Sora engages in social networking, advertising on ChatGPT, OpenAI may be replicating early Facebook.

Tencent disclosed its R&D progress for the first time: AI generated 50% of new code, with R&D automation levels improving by 67% year-on-year.

Zhao Changpeng spoke out after the “exemption,” stating “we want to make the U.S. the cryptocurrency capital,” with Binance aiming to regain the U.S. market

The gaming circle gives young people their first liquidation: $2 billion evaporated in an instant. Some lost everything, while others became rich overnight. Valve cut off the dreams of wealth for scalpers.

Moutai changes leadership again! Chen Hua, the Secretary of the Party Leadership Group and Director of the Guizhou Provincial Energy Bureau, replaces Zhang Deqin as Chairman.

Market Report

US and European Stock Markets: The S&P 500 rose 0.79%, closing at 6791.69 points, with a cumulative increase of 1.92% for the week. The Dow Jones Industrial Average rose 1.01%, closing at 47207.12 points, with a cumulative increase of 2.20% for the week. The Nasdaq rose 1.15%, closing at 23204.867 points, with a cumulative increase of 2.31% for the week. The European STOXX 600 index closed up 0.23%, at 575.76 points, with a cumulative increase of 1.68% for the week.

A-shares: The Shanghai Composite Index closed at 3950.31 points, up 0.71%; the Shenzhen Component Index closed at 13289.18 points, up 2.02%; the ChiNext Index closed at 3171.57 points, up 3.57%.

Bond Market: The yield on the 10-year U.S. Treasury bond fell by 0.21 basis points, closing at 3.9988%, with a cumulative decrease of 1.19 basis points for the week. The yield on the 2-year U.S. Treasury bond fell by 0.65 basis points, closing at 3.4821%, with a cumulative increase of 2.47 basis points for the week.

Commodities: COMEX gold futures fell by 0.65%, closing at 4118.50 yuan/ounce, with a cumulative decrease of 2.25% for the week. WTI December crude oil futures closed down 0.47%, at $61.50/barrel, with a cumulative increase of 7.61% for the week. Brent December crude oil futures closed down 0.08%, at $65.94/barrel, with a cumulative increase of 7.74% for the week.

News Details

Global Highlights

China-U.S. Economic and Trade Consultations in Kuala Lumpur: Basic Consensus Reached on Addressing Each Other's Concerns. The two sides, guided by the important consensus reached in the various calls between the leaders of the two countries this year, engaged in candid, in-depth, and constructive exchanges on important economic and trade issues of mutual concern, including the U.S. maritime logistics and shipbuilding industry 301 measures, extending the suspension period of reciprocal tariffs, fentanyl tariffs and law enforcement cooperation, agricultural product trade, and export controls, and reached a basic consensus on arrangements to address each other's concerns. Both sides agreed to further determine specific details and fulfill their respective domestic approval procedures.

• People's Daily Zhong Sheng: Jointly Maintain the Hard-Won Achievements of China-U.S. Economic and Trade Consultations. The article points out that from October 25 to 26 local time, China and the U.S. held a new round of economic and trade consultations in Kuala Lumpur, Malaysia. The two sides engaged in candid, in-depth, and constructive exchanges on a series of important economic and trade issues, guided by the important consensus reached in the various calls between the leaders of the two countries this year A basic consensus has been reached on arrangements to address each other's concerns. This achievement is hard-won and once again demonstrates that it is normal for the two major powers, China and the United States, to have differences on economic and trade issues. However, as long as they sit down to talk, uphold equal consultation and a constructive stance, they can completely resolve differences and find the right way to coexist.

Li Chenggang: The two sides have conducted constructive discussions on this matter, with the U.S. side expressing a tough stance and the Chinese side firmly safeguarding its interests. According to Xinhua News Agency, Li Chenggang, the international trade negotiation representative and vice minister of the Ministry of Commerce of China, stated on the 26th that the discussions included numerous topics, such as the export control issues of mutual concern, the further extension of the suspension period for reciprocal tariffs, the tariff on fentanyl and cooperation on fentanyl drug control, further expansion of trade issues, and the U.S. measures related to Section 301 tariffs on vessels, among others. The two sides have conducted constructive discussions on these matters.

A week that will determine the fate of the market is coming. The informal meeting of APEC leaders is about to be held, and the leaders of China and the United States will go to South Korea. It's a super central bank week, with the Federal Reserve, Bank of Japan, European Central Bank, Bank of Canada, and others announcing interest rate decisions. It's also a super earnings week, with earnings reports from the "seven giants" of U.S. stocks, including Google, Meta, Amazon, Apple, and Microsoft, as well as concentrated performance reports from several companies in A-shares such as Kweichow Moutai, BYD, and Vanke. In addition, China's latest PMI and the Federal Reserve's favorite inflation indicator, PCE, will be announced.

Wall Street bets on "Supreme Court overturning tariffs, U.S. government forced to refund taxes," the son of the Secretary of Commerce even participated at one point. Investment banks on Wall Street are constructing a special "financial gamble." It has been reported that hedge funds are purchasing claims for potential future tariff refunds from cash-strapped importers at a price of 20 to 40 cents for every dollar of claim.

Besant's "Confession Bureau": Promoting MAGA, but protecting the market, Trump "always announces high tariffs to create leverage, then lowers them". Besant admitted that his core work is to seek a balance between promoting the "MAGA" agenda and "not provoking market anger." He stated that he has a sense of awe towards the market and must "respect the market."

“The gold crash that everyone expected has happened, and now everyone is waiting to buy the dip?” The gold crash on Tuesday not only did not trigger panic but instead ignited the enthusiasm of global retail investors rushing into the market to "buy the dip," while the core views of most precious metals analysts have also remained unchanged. However, analysts represented by Bank of America strategist Michael Hartnett have raised doubts against the tide, arguing that the logic of "devaluation trades" supporting gold prices is not solid High City Sanao delivers her first policy speech, “hawkish” stance raises widespread concerns. According to Global Times, High City stated that she will deepen multilateral security cooperation centered on the Japan-U.S. alliance, including Japan-U.S.-South Korea, Japan-U.S.-Philippines, and Japan-U.S.-Australia-India partnerships, aiming to create a "free and open Indo-Pacific region." She mentioned that China is an important neighbor of Japan and that constructive and stable bilateral relations need to be built, but there are still some unresolved issues in the security field between the two countries.

Nvidia's “only short seller”: This is not my first time seeing a bubble, sets a target price of $100. Seaport Global analyst Jay Goldberg believes that Nvidia's astonishing growth currently relies heavily on massive capital expenditures from a few tech giants. However, the actual returns generated from these huge investments so far have been very limited. This model is very similar to the telecom infrastructure construction during the dot-com bubble, "largely for psychological reasons, we will build all these AI facilities. At some point, spending will stop, and then the entire system will collapse, leading to a reset."

JP Morgan downgrades Oracle rating—an insight into the bond market's view on “AI infrastructure financing”. The report points to three major credit risks behind its aggressive expansion: first, the $35 billion massive capital expenditure conflicts with its vague financing strategy and “unfriendly” credit history; second, the $300 billion order from OpenAI poses customer concentration risk, and its cloud business's mere 14% “thin profit” is insufficient to support high leverage; third, there may be “capital internal circulation” among AI giants that could amplify demand bubbles.

Sora does social networking, ChatGPT advertises, is OpenAI replicating early Facebook? In its pursuit of user growth and commercialization, OpenAI is gradually adopting a Meta-style development logic—from bringing in a large number of former Meta executives, to turning ChatGPT into a high-frequency social application, and shifting its attitude towards advertising to openness. With high valuations and increasing profit pressure, OpenAI is transforming from an idealistic research lab into a business giant focused on growth and engagement.

Tencent discloses R&D progress for the first time: AI generates 50% of new code, R&D automation level up 67% year-on-year. Tencent's "2025 R&D Big Data Report" shows that AI has been deeply integrated into its R&D system, with over 90% of engineers using AI programming assistants, 50% of new code generated by AI, driving overall R&D efficiency improvement of over 20% The Hunyuan large model supports comprehensive AI participation in coding, review, and testing, significantly shortening coding time by 40% and increasing code review detection by 44%. Under the support of an efficient platform, the average daily demand completion volume has increased by 25% year-on-year.

Zhao Changpeng "exempted" speaks out "to make the United States the cryptocurrency capital," Binance aims to regain the U.S. market. Trump's pardon has cleared legal obstacles for Zhao Changpeng, who expressed gratitude and promised to "make the United States the cryptocurrency capital." This move paves the way for Binance to integrate its U.S. business and directly enter the U.S. market to respond to the challenges from Coinbase. The industry expects Zhao Changpeng to be more actively involved in Binance's operations and to use the pardon to eliminate regulatory barriers for global expansion, driving Binance to reclaim the U.S. market.

The first liquidation gift from the gaming circle to young people: $2 billion evaporated in an instant. Some lost everything, while others became rich overnight. Valve cut off the dreams of wealth for the scalpers.

Moutai changes leadership again! New "Chen" replaces "Zhang"! Chen Hua, Secretary of the Party Leadership Group and Director of the Guizhou Provincial Energy Bureau, has replaced Zhang Deqin as Chairman of China Guizhou Moutai Distillery (Group) Co., Ltd.

Domestic Macro

Comparing history to see the Fourth Plenary Session communiqué: industrial changes every five years. According to Guosen Securities, looking ahead, technological self-reliance and self-improvement will be the main theme for the next five years. Relevant sectors that are self-controllable and domestically produced are expected to welcome an optimistic market in the future. General computing equipment, electronic chemicals, discrete devices, and machine tools show significant competitive advantages and are also the sub-sector layout directions for technological self-reliance during the "14th Five-Year Plan" period.

The current state of the real estate market is: new houses are priced but not available, second-hand houses exchange price for volume. According to Guojin Securities, the crux of the new house market lies in "volume," while the crux of the second-hand house market lies in "price." In recent years, the total transaction area of newly built residential + second-hand residential properties in China has remained stable at around 1.5 billion square meters. The continuous contraction of new house transaction area is more due to changes in transaction structure, namely the accelerated substitution of second-hand houses for new house transactions.

Domestic Companies

Amid the Anshi Semiconductor turmoil, Wentai Technology's net profit surged 279% in the third quarter, "If Anshi's control cannot be restored, it may face risks of revenue and profit adjustments". Wentai Technology stated that in its semiconductor business, revenue from the Chinese market accounts for 49.29% of total global revenue, continuing to play a "core growth" role However, if the control of Anshi cannot be restored before the end of 2025, the company may face risks of phased adjustments in revenue, profit, and cash flow.

The world's first "high-performance" humanoid robot under 10,000 yuan, standing only 94 cm tall and weighing about 12 kg, priced at 9,998 yuan, sold 200 units in 3 hours! The core components of "Xiao Bu Mi" have basically achieved localization, with all core components such as structure, circuit boards, and domain controllers being independently developed, except for the motor. In addition, the production of "Xiao Bu Mi" also makes extensive use of composite materials, which helps with lightweighting and cost control.

Why can Agricultural Bank maintain a 1x PB? Tianfeng Securities believes that it is a trend for state-owned large banks to return to above 1x PB, and Agricultural Bank is expected to be the "vanguard" to stabilize at 1x PB first. On one hand, the central government has a clear positioning for state-owned large banks, places high importance on them, and provides full support. On the other hand, the reshaping of the banking competition landscape is accelerating, and the competitive advantages of state-owned large banks are expected to become more prominent. In the short term, the banking sector has a higher winning rate in the fourth quarter and the first quarter. If Agricultural Bank's stock price experiences a pullback again, it may mainly be disturbed by two factors: first, the impact of market style rotation. Second, the inherent demand for technical adjustments.

The largest overseas deal in the history of Chinese pharmaceuticals has arrived, exceeding 80 billion, setting a record! Foreign media commented that this transaction is a "turning point for China's innovative drug industry." In this deal, the most important aspect is not just the amount. In this Co-Co collaboration with Takeda, how to leverage the existing resources and experience of a well-established global pharmaceutical company to build its own global development and commercialization capabilities is what Innovent is most focused on.

WuXi AppTec's Q3 net profit surged by 53.27%, TIDES business doubled, and orders on hand increased by 41%. The chemical business remains the main growth engine, with revenue in the first three quarters increasing by 29.3% year-on-year. Among them, the TIDES business (oligonucleotides and peptides) performed outstandingly, with revenue skyrocketing by 121.1% year-on-year to 7.84 billion yuan. The small molecule CDMO business showed steady growth.

Overseas Macro

The US core CPI increased by 0.2% month-on-month in September, the slowest growth in three months, raising expectations for another rate cut by the Federal Reserve this year. The US CPI in September increased by 3% year-on-year, which was below expectations, and core inflation rose by 0.2% month-on-month, the slowest growth in three months, lower than the market expectation of 0.3%. The inflation in the service sector in September has slowed to the weakest level since November 2021. The market has fully digested the expectation of two rate cuts of 25 basis points each for the remainder of the year

• White House: CPI data is unlikely to be released next month. The U.S. government shutdown may result in the absence of October inflation data, which could be a historical first. Currently, the U.S. government shutdown has entered its fourth week.

To support Milei's election, the U.S. has purchased over $1 billion in pesos this month, and the Argentine currency has depreciated by 21% in four months. To stabilize the Argentine financial market and support the Milei government, the U.S. Treasury has taken the rare step of direct intervention before the midterm elections, amounting to over $1 billion, and has provided a $20 billion currency swap line. The Argentine peso has depreciated by 21% over the past four months. The results of the midterm elections will be a key test of support for the Milei government's reforms.

Overseas Companies

Tesla AI head reveals FSD autonomous driving methodology for the first time: Why did we choose end-to-end? Tesla is turning autonomous driving into a purely AI problem using an "end-to-end" neural network, rather than an engineering problem that requires countless engineers to write rules. They believe that the industry mainstream's "modular" approach of separating perception, prediction, and planning is not only cumbersome but also has a clear ceiling; the end-to-end AI model is the correct solution for autonomous driving.

Musk praises Zhuque-3: It can defeat SpaceX's Falcon 9. Musk rarely praises Chinese rockets, believing they have the potential to catch up with SpaceX.

Musk's Neuralink co-founder achieves artificial vision milestone, restoring sight to the blind. The latest issue of Nature published new research progress, where artificial vision technology has just helped a 70-year-old grandmother regain her sight. This is due to a world-first artificial vision research project called PRIMA. The team behind it includes a co-founder of Neuralink, who started his own venture focusing on retinal implants. The thickness is only the size of a human hair, yet it can significantly improve the vision of 80% of patients, allowing them to read letters, numbers, and words smoothly.

"Stablecoin giant" Tether is "riding high," with profits expected to reach $15 billion this year, a profit margin of 99%, over 500 million users, and a valuation of $500 billion! Stablecoin giant Tether is expected to achieve nearly $15 billion in profits this year, thanks to its astonishing 99% profit margin and returns on reserve assets in a high-interest-rate environment. The company is negotiating a round of financing, with a valuation potentially reaching $500 billion, likely making it one of the most valuable private companies in the world Tether stated that its USDT market capitalization accounts for about 60% of the stablecoin market, with over 500 million users, and its footprint is continuously expanding.

AI impacts the advertising industry, Oreo's parent company has invested $40 million in AI tools, reducing marketing content production costs by 30% to 50%. Oreo's parent company Mondelez International has invested over $40 million to develop generative AI tools in collaboration with Publicis and others, aiming to significantly cut marketing costs. The tool has been used for social media content production for products like "Oreo Thins," and is expected to save 30% to 50% in production costs. Mondelez International plans to extend AI applications to e-commerce platforms and television advertising, and may even use it for "Super Bowl" ads in the future.

Today's News Preview

China and the U.S. will hold economic and trade consultations in Malaysia from October 24 to 27.

The 18th meeting of the Standing Committee of the 14th National People's Congress will be held in Beijing from October 24 to 28.

The 2025 Financial Street Forum Annual Conference opens, with key leaders from the "One Bank, Two Commissions, and One Association" delivering keynote speeches.

U.S. President Trump visits Japan.

China's industrial enterprises above designated size profit for September year-on-year.

U.S. durable goods orders for September.