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1. Yen carry trade risks linger, market may face turbulence

U.S. stocks closed higher on Monday, with major indices partially recouping losses from last week. This week, the market is focusing on August CPI and PPI inflation data to gauge the extent of the Federal Reserve's potential rate cut in September. Last Friday's U.S. August non-farm payrolls data once again fell short of expectations, causing investors, already on edge, to swiftly return to a "recession trade," with the S&P 500 and Nasdaq posting their worst weekly performance since March 2023 and March 2022, respectively. The CBOE Volatility Index (VIX) rose to 22.38, surging approximately 49% last week. Commodities also declined across the board. Yesterday, during the Asia-Pacific trading session, the Nikkei 225 index futures fell more than 5% at one point. Analysts warn that due to the recent resurgence of yen carry trades, coupled with expectations of continued interest rate hikes by the Bank of Japan and a sustained appreciation of the yen against the U.S. dollar, further unwinding of these trades could lead to another period of aggressive selling in global stock markets. Morgan Stanley strategist Michael Wilson believes that if the Fed makes a significant rate cut this month, U.S. stocks may face the risk of further unwinding of yen carry trades. If the initial rate cut exceeds 25 basis points, it could further strengthen the yen, prompting yen traders to withdraw from U.S. assets after domestic interest rates rise, and global markets could relive a pattern of volatility. Wilson, who accurately predicted last month's U.S. stock market correction, noted that the U.S. Treasury market has already reflected that the Fed has waited too long to ease policy. He expects market volatility to continue to rise before the Fed's meeting next week, and U.S. stocks are unlikely to rebound in the short term.

DBS Bank's Deng Zhijian: The weak U.S. economic data is a fact, but it is not a recession, nor does it necessitate a significant rate cut by the Federal Reserve. Both manufacturing PMI data from two U.S. institutions are below 50, but the manufacturing population in the U.S. only accounts for 8%, having a limited impact on the U.S. job market. On the contrary, the two service industry PMI data remain above 50, hence non-farm employment continues to rise on a month-over-month basis. If it were a recession, the service industry PMI should be below 50, and non-farm employment should decrease both month-over-month and year-over-year. However, many investors still have concerns, so they will be more cautious in the short term. Coupled with Japan's interest rate hikes and balance sheet reduction, carry trade unwinding will continue for a while, and it is expected that the stock market may be relatively weak throughout September.

2. iPhone 16 series unveiled! Apple AI to support Chinese next year

Apple unveiled four new smartphones (iPhone 16, iPhone 16 Plus, iPhone 16 Pro, and iPhone 16 Pro Max) in the early morning today. The main upgrades are in the chip (with a more significant numerical version enhancement) and the addition of a camera control button on the right side of the body. The Pro version has a slightly larger screen, further enhanced video shooting capabilities, and the Pro Max boasts the "best battery life ever." According to Apple's official Chinese website, the pricing of the four new models is exactly the same as the iPhone 15 series, ranging from 5,999 yuan to a maximum of 13,999 yuan. Pre-orders will also begin this Friday, with shipments starting next Friday. Also released are AirPods 4 (standard and active noise cancellation upgrade versions), as well as the Apple Watch Series 10. The new iPad mini and Mac mini are expected to be released in October. It is worth mentioning that "Apple AI" support for the English language will be launched in October and Chinese support will be introduced next year. During the launch event, Apple's stock price mostly continued to decline, initially turning positive briefly, then gradually rebounding with the broader market after the event ended, ultimately closing up slightly by 0.04%, stabilizing at the low point set by the drop on Friday, which was the lowest closing since August 12.

DBS Bank's Deng Zhijian: Apple's new chip and thermal management technology are worth paying attention to, as they relate to the future application of AI. Apple's latest chip technology is based on the ARM V9 architecture. However, this architecture already dominates 50% of the global high-end smartphone chip architecture. Huawei has also obtained authorization for this architecture. Although this does not mean that global smartphones have entered the AI era, as there are still many technological breakthroughs needed, such as storage and network speeds, at least the performance of mobile devices has been elevated to a new level. Additionally, another new breakthrough for Apple's smartphones is the graphene cooling system. The future trend of mobile devices integrating AI is significant, but thermal management is a challenge. Huawei smartphones have already implemented a superior graphene cooling system. If Apple can solve the thermal issue, it will be able to equip more high-performance chips in the future.

Hai Shun Investment Consulting's Huang Jun: There are no particularly bright spots in Apple's new products; they have only seen some improvements in certain functions.

3. Cloud business drives profit beyond expectations, post-earnings rise of over 9% in collaboration with Amazon AWS

Oracle's financial report released after the market closed this morning showed that the revenue for the first fiscal quarter, ending August 31, increased by 7% to $13.3 billion; earnings per share excluding certain items were $1.39, operating profit was $5.71 billion, and the operating profit margin was 43%, all exceeding expectations. Cloud business revenue grew by 21% to $5.6 billion, in line with expectations, with $2.2 billion coming from the rental of computing and storage services. Chief Executive Safra Catz stated in a declaration that as cloud services become Oracle's largest business, the company's revenue and earnings per share are accelerating growth. Oracle has 162 cloud data centers in operation and under construction globally. The largest of these data centers is 800 megawatts, which will include several acres of NVIDIA GPU clusters for training large-scale AI models. Due to previous multi-cloud agreements with Microsoft and Google, the company's database business growth rate is increasing. As of the end of the first fiscal quarter, Microsoft has launched 7 Oracle cloud regions, with another 24 under construction, and Google has launched 4 Oracle cloud regions, with another 14 under construction. The recently signed contract with Amazon AWS is a milestone in the multi-cloud era. Soon, customers will be able to use the latest Oracle database technology in the cloud of each hyperscaler. Oracle expects adjusted earnings per share of $1.45-$1.49 for the second fiscal quarter. Revenue is expected to grow by 8%-10% year-over-year. Cloud revenue is expected to grow by 24%-25% year-over-year. It is projected that expenses in fiscal year 2025 will double year-over-year, with revenue seeing a double-digit percentage increase. Oracle's stock price soared by more than 9% after the market closed, making Oracle one of the best-performing large-cap software stocks this year, with a stock price increase of over 34%.

DBS Bank's Deng Zhijian: Over the past few years, although software stocks have not been investment hotspots, it does not mean that the industry is weak. The revenue of the software category has already broken through 800 billion U.S. dollars, with a compound annual growth rate of 9% over the past decade. The future software industry will be dominated by SaaS cloud service software, and business development will accelerate, with a compound annual growth rate of up to 16% over the next five years. System software is expected to have a compound annual growth rate of 17%, and application software 16%. Oracle is the world's second-largest software company, mainly developing enterprise management software, providing solutions for many enterprises, as well as database organization and analysis. As inflation rises and labor costs increase, corporate profits are gradually shrinking. Oracle not only reaches the ceiling of its main business but also joins the AI battle. Oracle's OCI cloud infrastructure service turns infrastructure into cloud software services. Cohere, previously acquired in Canada, has been integrated into OCI and has cooperated with OpenAI and Google, and has recently announced a collaboration with Amazon AWS.Haishun Investment Consulting Huang Jun: The scarcity in the field of artificial intelligence hardware brings substantial revenue and profit to Oracle's cloud infrastructure business. At the same time, Oracle is also continuously gaining benefits from the increasing data demands for training and running artificial intelligence models.

④ Adobe's Third Quarter Expected to See Profit Growth, AI Business Remains in Focus

Adobe is set to report its third-quarter financial results after the U.S. stock market closes on Thursday, with investors watching whether the company's artificial intelligence business can maintain its growth momentum. According to data compiled by Visible Alpha, analysts expect the software company to report third-quarter revenue of $5.37 billion, a year-over-year increase of 10%; net profit of $1.57 billion, a year-over-year increase of 12%; and earnings per share of $3.51. Adobe's digital media division (including Creative Cloud subscriptions) achieved net annual recurring revenue (ARR) of $487 million in the second quarter, higher than the $470 million in the same period last year, helping the company to exceed expectations for the second quarter, which propelled the stock price to rise by more than 14% the day after the results were announced. However, analysts expect a slight decline in the net ARR of the digital media division to $462 million in the third quarter. Oppenheimer analysts say that investors may still see an acceleration of this metric in the second half of the year. In addition, investors may also pay attention to the latest monetization of Adobe's artificial intelligence products. The company has previously indicated that many Creative Cloud users are upgrading their subscription plans to access its generative AI model Firefly. In addition to Firefly, Adobe has also introduced generative AI in Document Cloud and Adobe Express. It may also launch new AI services at the Adobe MAX conference in October. Oppenheimer analysts expect Adobe to announce "near-testing-stage generative video, editing, and audio dubbing solutions" at that time. Adobe's stock closed up 1.15% overnight. Since announcing stronger-than-expected second-quarter results, the company's stock price has soared by nearly 24%, although it is still down nearly 4.5% year-to-date.

DBS Bank Deng Zhijian: Adobe is one of the world's top software companies and the highest market value SaaS company globally, with 95% of its revenue coming from SaaS service subscription fees. If classified by business type, the company derives 73% of its revenue from digital media, 25% from digital experience, and 2% from publishing and advertising. Digital media is divided into Creative Cloud and Document Cloud, with Creative Cloud accounting for 60% of Adobe's annual revenue. It is expected that the company's revenue will grow by 10% year-over-year in the third quarter, with profits growing by 38% year-over-year.

Haishun Investment Consulting Huang Jun: Adobe's products and services are widely used in advertising, media, entertainment, printing and publishing, web design, and other fields, and are highly popular with users worldwide. Domestic related companies are also continuously innovating and seizing market opportunities, and related investment opportunities can be paid attention to.

⑤ Meta Announces Opening of Third-Party App Access to Its Messaging Apps in Europe

In response to the EU's Digital Markets Act, Meta has announced that it will open up third-party applications to interoperate with its WhatsApp/Facebook Messenger messaging apps in Europe, with the expected introduction of cross-app messaging functionality next year, and the realization of "advanced messaging" such as calls and video in 2027. In addition, Meta has previously launched an "ad-free subscription" service option for its Facebook Messenger app in the EU.

DBS Bank Deng Zhijian: Meta's WhatsApp and Facebook Messenger hold a dominant position in terms of user volume and e-commerce traffic in Europe. However, due to the inability to share data, Europe has always targeted Meta on the grounds of security. If Meta accepts the integration of other third-party platforms in Europe, it means that data will be shared with Europe, which may weaken its dominant position in European commerce, but at least it can solve the urgent issues of operating in Europe. Europe's revenue accounts for 23% of Meta's total revenue, making it the second-largest market, so Meta definitely does not want it to shrink. However, between "zeroing out" and "weakening," Meta has chosen the latter first, as Meta's future AI, cloud services, and the comprehensive advantages of its business model are still obvious, and it still has the opportunity to continue to dominate the European market in the future.

Haishun Investment Consulting Huang Jun: Meta's opening of third-party app integration with its own chat system in Europe will facilitate EU consumers' use of Meta software. Domestic related application software companies are also striving to expand their market share.