In the first half of last week, there was significant uncertainty in the market regarding debt negotiations. However, in the latter half of the week, concerns eased as McCarthy repeatedly confirmed the potential for bipartisan agreement over the weekend. Risk appetite increased significantly, with equity assets experiencing initial suppression followed by a rebound, while gold and cryptocurrencies saw an initial rise followed by a decline.

In the stock market, particularly the large-cap technology sector, price movements last week displayed signs of panic buying as investors worried about missing out on the next bull market.

All three major U.S. stock indices closed higher, with the Nasdaq rising over 3%, the S&P 500 gaining 1.65%, and the Dow Jones Industrial Average increasing by 0.38%. In terms of sectors, the technology sector surged by 4.19%, communication services rose by 3.06%, and technology stocks continued to lead the market. Utilities declined by 4.36%, and real estate fell by 2.40%.

Net long positions in Nasdaq 100 futures (held by asset management companies and leveraged funds) surged last week to the highest level since May 2022. Net long positions in the S&P 500 remained unchanged, while net positions in the Russell 2000 index remained slightly bearish.

On Friday, the trading volume of bullish options on the Nasdaq index reached its highest level in nearly 10 years, since 2014. The ongoing surge in artificial intelligence (AI) hype in the market continues to drive trend trading demand and “animal spirit” behavior in related market sectors.

The Skew index for the S&P 500 experienced a significant decline later last week, which could indicate a reduced level of market concern about future downturns.

The options market indicates that the debt ceiling is still not priced in for risk, making the upcoming June FOMC meeting on June 14, 2023, the next significant event.

In terms of interest rates, the yield curve for government bonds shifted upward this week, creating a situation of short-term decline and long-term rise. The 2-year Treasury yield rebounded from under 4% to nearly 4.3%, while the 10-year Treasury yield increased from 3.44% to 3.68%. The one-month Treasury yield, on the other hand, declined from 5.7% to 5.5%

The Shanghai Composite Index in China saw a slight increase of 0.4%, while the German stock index surged nearly 2%, reaching a new all-time high. The Japanese stock market also experienced a significant increase of 4.4%, reaching a new high since 1990.

The U.S. Dollar Index (DXY) also rose by 0.48% to 103.20. Oil prices showed a slight rebound, rising by 2.54% and closing at $71.82 per barrel. However, gold declined by 1.5% to $1979 per ounce.

In the cryptocurrency market, there was significant volatility last week. Bitcoin (BTC) experienced a slight decrease of 0.58%, while Ethereum (ETH) saw a small increase of 0.21%.

The Total Cryptocurrency Market Cap declined from $11.26 trillion to $11.19 trillion, representing a 0.6% decrease over the past seven days. The Total Cryptocurrency Market Capitalization (Excluding Bitcoin) decreased from $604.3 billion to $600.1 billion, a 0.69% decline over the same period.

Among cryptocurrencies with a market capitalization exceeding $100 million, there was a global resonance surrounding the AI concept. The decentralized graphic rendering network token, RNDR, topped the list with a 37% increase, followed by MASK (+18%), AGIX (+14%), and SNX (+13%). The largest decreases were seen in TON (-8%), SUI (-6%), and SOL (-6%).

The Total Stablecoins Market Cap contracted by 0.41% to $129.47 billion, compared to $137.56 billion at the beginning of the year.

Review of Major Macro Events Last Week:

1.Several Federal Reserve officials delivered speeches, signaling a hawkish stance and briefly raising expectations of interest rate hikes.

2. However, Fed Chair Powell clarified on Friday, suggesting a possible pause in rate hikes, which led to a decline in market expectations.

3. The debt ceiling crisis negotiations faced twists and turns. House Speaker McCarthy and President Biden assured no default would occur, but the expected weekend agreement fell through, dashing hopes of a breakthrough before Monday’s market opening. Negotiations will continue this week, with President Biden and Speaker McCarthy meeting on Monday evening.

4. The G7 communiqué on Sunday expressed support for Ukraine and called on China to exert pressure on Russia to cease military aggression. It also emphasized that China, acting in accordance with international rules, would be in line with global interests. The G7 stated it does not seek policies to harm China or impede its economic development, nor does it seek “decoupling nor turning inwards.” Furthermore, President Biden indicated over the weekend that G7 should establish a hotline with China, expecting relations with China to improve “soon” following a dispute earlier this year involving alleged spy balloons that derailed bilateral relations. China expressed strong dissatisfaction with the communiqué, with the Chinese Embassy in the UK urging the G7 to abandon Cold War mentality and stop interfering in other countries’ internal affairs.

5.In terms of individual stocks, last week Tesla held its shareholders’ meeting, during which Elon Musk hinted at two new car models and agreed to test advertising. Home Depot reported overall weak financial results, while Walmart’s financial report reflected continued strength in consumer demand. Target’s financial report was in line with expectations, and its business adjustments showed initial signs of effectiveness. Netflix’s advertising-supported version surpassed 5 million monthly users, resulting in a significant increase in its stock price. Meta announced the development of an AI chip. The Japanese government reached an agreement with Micron to provide financial assistance for the manufacturing of next-generation storage chips.

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