The first trading day after the National Day holiday brought a sharp decline in the A-share market.

All three major indices retreated, with the ChiNext Index falling more than 3% and the STAR 50 Index opening lower and sliding further.

Driven by unfavorable policy news, the optical communications and optical module sectors led the losses, with several stocks hitting their daily limit down, dragging down the performance of the entire STAR board.

This was tied to a bearish rumor circulating in the market.

In fact, it was merely a research report written by an investment bank suggesting that the U.S. Federal Communications Commission (FCC) might impose restrictions on optical modules in the future.

Unlike a full import ban, the relevant policy could set a threshold for U.S. component content, preserving a channel for qualifying products to enter the U.S. market.

The report speculated that one potential approach would be to grant an exemption from the import restrictions if at least 65% of the value in an optical module's bill of materials (BOM) comes from American companies.

The report argued that such restrictions would likely begin with next-generation 3.2T high-speed optical modules rather than directly targeting current 800G and 1.6T products.

This was a research report published by Morgan Stanley during the holiday period, suggesting that the United States may in the future adjust optical module import rules to increase the share of American companies in the core component supply chain.

However, there is no official U.S. document to support this, and such cost controls do not fall within the FCC's statutory responsibilities; it is merely an analyst's personal extrapolation based on auto industry rules.

Nevertheless, the impact on the market was obvious.

On top of that, U.S. stocks saw a significant correction overnight, ending a previous streak of sharp gains.

Japanese and Korean markets also fell for consecutive days today.

South Korea's KOSPI closed down 2.6%, its third straight daily decline, as a pullback in chip stocks weighed on the broader index.

Japanese stocks also fell notably.

On October 8, the Nikkei 225 closed down 1.4%.

After the Japanese market recently broke through the 70,000-point mark, a large amount of profit-taking pressure had accumulated, and in the absence of further positive catalysts, machinery stocks that had risen sharply earlier and financial stocks sensitive to interest rate volatility saw clear pullbacks, becoming an important reason for the market adjustment.

Overall, overseas markets first surged during the holiday period and then fell for three consecutive trading days, greatly affecting A-share performance after the holiday.

Rumors about optical communications also disturbed investor sentiment, causing a short-term market pullback.

In terms of international oil prices, Brent crude broke above $101 per barrel, and rising shipping prices boosted VLCC route earnings, which in turn drove a sharp rally in the oil and gas sector, even triggering a wave of daily limit-ups and making it the market's biggest hotspot.

The Middle East conflict has shown no sign of ending so far, and international oil prices remain elevated, which is positive for oil and gas companies and shipping companies but continues to affect global inflation.

This has also caused market style to continue favoring dividend sectors, with banks, power and other dividend stocks showing relative strength.

The possibility of a Federal Reserve rate hike by year-end still exists, which has also pushed U.S. Treasury yields persistently higher and in turn weighed on tech stocks.

U.S. President Donald Trump has pressured the Federal Reserve to cut rates.

He even said that although Fed Chairman Warsh has performed excellently, other Fed officials have performed poorly because some officials publicly said the Fed might raise rates again by year-end.

This could adversely affect the U.S. economic outlook and U.S. stock performance, triggering strong dissatisfaction from the U.S. president.

Trump criticized the Federal Reserve Board for wanting to see the country in trouble and once again called for rate cuts.

The latest Fed monetary policy meeting minutes show that most policymakers believe another rate hike may be needed by the end of this year to address persistent upside inflation risks.

On October 7, the Fed released the minutes of its September meeting, showing that although officials had raised the federal funds rate target range by 25 basis points to 3.75%–4% at the mid-September policy meeting, there were still clear disagreements over the future path of rates and the reasons for hiking.

Most participating officials believed that, given inflation will remain elevated in the short term, another increase in the benchmark rate before the end of this year may be appropriate.

Some officials stressed that rate hikes would help block sector-wide price increases driven by energy market shocks and the artificial intelligence boom, thereby further easing inflation pressure.

But others pointed out that the current level of interest rates is only mildly restrictive and that the Fed needs to adjust policy promptly based on the latest market information.

In addition, the meeting also discussed in depth the potential reasons behind the recent rise in long-term Treasury yields.

There is still considerable disagreement over whether the Fed will raise rates, because this round of U.S. inflation mainly stems from imported inflation, namely international oil prices.

Due to the outbreak of war in the Middle East, sustained oil price increases have pushed up prices, and there is still great disagreement over whether Fed rate hikes can curb inflation.

Rising U.S. Treasury yields directly increase the U.S. government's borrowing costs, which undoubtedly puts greater pressure on the U.S. government.

But overall, U.S. stocks are still in a strong consolidation, even hitting a record high during the National Day period, and remain in a bull market trend that has not ended.

Back to the A-share market, it is still in a weak adjustment phase and continues the adjustment trend from the third quarter, with no fundamental trend change yet.

However, this does not mean the slow bull market in A-shares has ended.

It should be said that the kind of sharp rally in tech stocks seen in the first half of the year is unlikely to reappear, and a major market-wide surge is hard to see again; more likely, there will be structural opportunities, meaning repeated market fluctuations with rotation opportunities among sectors.

The market may still see a new round of gains in the fourth quarter.

Multiple departments have introduced important policies to support economic recovery, which will help promote some economic improvement and help stabilize market confidence.

The sharp drop on the first trading day after the National Day holiday does not mean the entire fourth quarter will be in adjustment.

Market style in the fourth quarter may also be mainly volatile.

In a fourth-quarter rebound, especially some high-quality stocks or high-quality funds that were wrongly sold off still have certain allocation value.

When the market adjusts, market confidence is repeatedly undermined and trading volume also shrinks significantly, so more time will be needed to digest the adjustment brought by market volatility.

Be patient and wait for the next rebound.

This slow bull market has not ended.

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