Several trading sessions during the holiday saw sharp divergence between overseas markets and H-shares.

It's hardly news that US stocks hit new highs, but it is surprising that Hong Kong stocks fell to a stage low.

The biggest change during the holiday was the 10-year US Treasury yield briefly spiking to 5.3% (a near 24-year high), with the dollar index holding firm above 102.

The pressure on non-US markets was significant—South Korea, for instance, did not perform well (though we won't say who did worse).

High-frequency data during the holiday was actually decent, with many travel metrics hitting new records, but strong foot traffic without strong spending remains the biggest problem.

More people in my social circle traveled abroad, suggesting consumption willingness is still rising, but the divergence is severe—bad sectors are really bad, good ones are really good, and perceptions vary widely.

Overall, younger people are willing to go out, while the middle-aged mostly stay put.

On the news front, things were relatively quiet, with neither China nor the US offering much new commentary.

But just as A-shares were about to open, the Fed stepped in again.

In the early morning of October 7 Beijing time, several Fed officials spoke.

Among them, Kansas City Fed President Jeffrey Schmid said that with inflation picking up again, the Fed's available policy tool is to raise the policy rate—short-term interest rates.

Schmid stated that without further action to bring inflation down to 2%, the Fed's credibility would be at risk.

Additionally, San Francisco Fed President Mary Daly said that AI-related chip demand is increasing and could intensify inflationary pressure.

Daly reiterated her support for the Fed's rate hike three weeks ago, and whether further hikes are needed depends on the evolution of tariffs, oil prices linked to Middle East conflicts, and AI impacts.

Similar to our previous judgment, if oil prices and AI demand cannot adjust in the short term, then higher-for-longer inflation may still be something we have to face.

But rate hikes cannot solve the oil supply problem, so they can only dampen demand.

Whether it's hitting real industrial demand or AI demand, the point is the economy needs to cool down.

On Tuesday, October 6, the EIA released its short-term energy report, raising its 2026 average Brent crude price forecast to about $98 per barrel, 8% higher than previously; the fourth-quarter average is expected at around $105 per barrel, 15% above the EIA's earlier estimate.

After all, rate hike expectations have actually increased...

As for why US stocks didn't react—well, they are the source of inflation.

But what A-shares will do when they return tomorrow remains uncertain.

If H-shares are used as a gauge, the probability of a decline tomorrow is higher, which would be a rough start after the Golden Week holiday.

But if domestic liquidity recovers, whether there is new bullish energy is unknown.

In short, the news front is calm.

On the industry side, foreigners are touting AIDD again.

Although H-share pharma performance was volatile during the holiday, it shows there is still capital gaming in this sector, though constrained by high rates, performance has been hard to describe.

On October 4, Freda Duan, a partner at top US dollar fund Altimeter Capital, published an article noting that the "bottleneck trade" in the AI pharmaceutical sector (AIDD) is taking shape, with a structure highly similar to the previous semiconductor chain rally extending from GPU to HBM, networking, and power.

If there is an expectation gap, it feels like this sector might have one.