I. Yesterday’s News
International News

1. U.S. President Donald Trump and the European Union's chief executive, Jean-Claude Juncker, agreed on Wednesday to work toward eliminating trade barriers on industrial goods, as Trump appeared to give ground on his threat to impose car tariffs. The agreement to pull together a "high-level working group" to negotiate the tariff, subsidy and non-tariff barrier reductions could reduce fears of an escalating transatlantic trade war launched by Trump's tariffs on steel and aluminum and a threat to impose a 25 percent tariff on imported cars and auto parts. News of the agreement helped global stocks extend their recent rally. Trump and Juncker said after a White House meeting that they agreed to hold sweeping trade talks that also cover increased European purchases of American soybeans and liquefied natural gas (LNG) and reducing barriers to transatlantic trade in services, chemicals, pharmaceuticals and medical products.

2. Some Chinese banks have received notice from the country's central bank that a specific capital requirement will be eased in order to support lending, as the authorities try to mitigate increasing risks to the economy from the trade war. The People's Bank of China (PBOC) told some institutions that the so-called "structural parameter" in the macro-prudential assessment (MPA) of their balance sheets will be lowered by around 0.5 points. It was unclear in the report which banks could be subject to the downward adjustment in the parameter, which is set at 1.0. The PBOC said in its notice that the change is being made to support local financial institutions in meeting credit demand effectively, the report said.

3. Qualcomm Inc, the world's biggest maker of chips for mobile phones, said on Wednesday it would drop its bid to buy Dutch chipmaker NXP Semiconductors after failing to secure regulatory approval from China. The company promised to compensate shareholders for the collapse of the $44 billion deal by buying back $30 billion of its own shares. Shares in the San Diego California-based firm rose 4.2 percent to $61.87 in trading after the bell. NXP Semiconductors shares fell 2 percent to $96.42.

4. Sales of new U.S. single-family homes fell to an eight-month low in June and data for the prior month was revised sharply lower, the latest indications that the housing market was slowing down. The moderation in housing is largely driven by supply constraints, but there are concerns that persistent weakness could eventually spill over to the broader economy. The Commerce Department said on Wednesday new home sales decreased 5.3 percent to a seasonally adjusted annual rate of 631,000 units last month, the lowest since October 2017. Economists polled by Reuters had forecast new home sales falling 2.8 percent to a pace of 670,000 units in June. May's sales pace was revised down to 666,000 units from the previously reported 689,000.

5. China has withdrawn its approval for Facebook Inc's plan to open a new venture in the eastern province of Zhejiang. A Chinese government database showed that Facebook had gained approval to open a subsidiary, but the registration has since disappeared. Facebook Inc fell short of analysts’ estimates for monthly active users on Wednesday and reported lower-than-expected quarterly revenue. The company said monthly active users rose to 2.23 billion, falling short of a consensus estimate of 2.25 billion from Thomson Reuters I/B/E/S. Shares in Facebook fell 8.6 per cent to $198.7 in trading after the bell as investors reacted to the results.

Domestic News

6. China will adopt more “proactive” fiscal policy to boost investment amid a mounting downward pressure in Chinese economy, the State Council decided in an executive meeting on Monday, sending a clear signal of policy easing. Is that another aggressive loosening like the stimulus China rolled out in 2015 and 2008. The answer is no. Economists said, the change of monetary stance only happened with the RRR cut without resorting to a deluge of strong stimulus policies; the support to infrastructure sector is more about tempering to the over tightening policy in the first half of the year, instead of staring up new infrastructure projects. The sector is expected to bottom up and steadies the overall economy amid rising external uncertainties.

7. China’s inflation remained steady, the country's state planner said. Inflation is expected to slow in the second half of the year, with full-year consumer inflation to be around 1.8 percent and the producer price index to be about 3.5 percent, the National Development and Reform Commission said.

8. China will help boost the real economy to stabilize employment, the country's top economic planner said Monday. China's overall employment conditions are stable, but still face structural challenges due to the transformation and upgrading of industries as well as domestic and international uncertainties, according to a guideline released by the National Development and Reform Commission.

9. American Airlines Group Inc was set to change how they refer to Taiwanese airports on their websites, which will be followed by other two major airlines. The three biggest U.S. airlines changed how they refer to self-ruled Taiwan on their websites to avoid Chinese penalties.

II. Market Overview
FX
1. Global Market

The U.S. dollar weakened against the euro on Wednesday after the United States and the European Union agreed to deescalate a transatlantic trade conflict, leaders from the two trading partners announced in a joint statement in Washington. The euro rose to $1.173 following the report, up 0.4 percent. Against a basket of six major currencies, the dollar fell 0.44 percent during the session. The dollar fell 0.24 percent to 110.92 yen. The offshore yuan strengthened 0.8 percent against the dollar to 6.756 yuan. The Canadian dollar reached its highest level against the U.S. dollar in six weeks after Canadian and Mexican policymakers said they were optimistic about a deal on NAFTA. The loonie was 0.8 percent higher at 1.3044 Canadian dollars to the greenback.

2. Home Market

China's yuan inched up slightly against the dollar in the morning, shrugging off the headwinds that the People's Bank of China set the midpoint rate at an almost 13-month low. Dollar selling and swap trading onshore pushed the yuan up 220 bps despite that the dollar index was little changed, traders said. But we still maintain our bearish view on the yuan in the medium term due to the greenback’s strength.

Precious Metals

Gold ticked higher on Wednesday, but was still hovering near one-year lows as the dollar slipped. Spot gold closed at $1,231.16 per ounce. U.S. gold futures for August delivery settled up $6.30, or 0.5 percent, at $1,231.80 per ounce.

Commodities
1.Crude Oil

Oil prices rose for the second consecutive day on Wednesday after U.S. government data showed domestic crude inventories fell to their lowest levels since February 2015, easing worries about oversupply that have weighed on markets in recent weeks. Brent crude futures rose 49 cents to settle at $73.93 a barrel, a 0.67 percent gain. U.S. West Texas Intermediate (WTI) crude futures rose 78 cents to settle at $69.30 a barrel, a 1.14 percent gain.

2.Base Metals

Copper held at two-week highs on Wednesday after jumping nearly 3 percent the previous session, as the market awaited a resolution to wage talks at the world's largest miner of the industrial metal. LME copper ended 0.1 percent lower at $6,290 per tonne. LME zinc finished 1.2 percent higher at $2,585, adding to a 2.4 percent rise recorded in the previous session. Aluminium ended 1.1 percent lower at $2,062.

U.S. Treasuries
1. U.S. Bonds

U.S. Treasury yields hits session highs across maturities on Wednesday afternoon after President Donald Trump and European Commission President Jean-Claude Juncker announced they had agreed to work on lowering trade barriers. The benchmark 10-year Treasury yield rose to a session high of 2.97 percent, up 2 basis points from Tuesday's close. The two-year Treasury note yield was up 4 basis points to a session high of 2.68 percent.

2. Chinese bonds

Chinese interest rates bond in interbank market steadied in the morning, with interest rates little changed from the previous session. While credit bonds remained strong, driven by low-value bonds. Trading of the longer-dated bonds were lackluster after Wednesday’s slump. But the tightening of credit financing will be greatly relieved after the State Council decided in an executive meeting to adopt a combination of fiscal and financial measures.

Stock Market
1. U.S. Equities

Wall Street rose on Wednesday as U.S. President Donald Trump secured concessions from the European Union on trade. The benchmark S&P 500 jumped more than half a percent in the last half-hour of trading and closed at its highest level since Jan. 29. The Dow Jones Industrial Average rose 172.16 points, or 0.68 percent, to 25,414.1, the S&P 500 gained 25.67 points, or 0.91 percent, to 2,846.07 and the Nasdaq Composite added 91.47 points, or 1.17 percent, to 7,932.24.

2. Hong Kong Equities

Hong Kong shares rose on Wednesday, led by energy stocks, as sentiment improved on signs Beijing is loosening monetary and fiscal policies to prevent a drastic slowdown in the economy. The Hang Seng index rose 258.33 points or 0.9 percent to 28,920.90, while the China Enterprises Index gained 0.91 percent to 11,074.16 points. The sub-index of the Hang Seng tracking energy shares rose 2.22 percent while the IT sector rose 1.25 percent, the financial sector was 0.46 percent higher and property sector rose 1.64 percent.

3. China Equities

China stocks ended slightly lower on Wednesday, snapping a three-day wining streak. The Shanghai Composite Index also eased 1.91 percent or 0.07 percent to 2,903.65 points. The turnover of Shanghai A shares plunged almost 30 percent to 166.3 billion yuan. After recent gains, correction is expected in the near term before testing the key mark of 3,000. The blue-chip CSI300 index ended down 0.11 percent at 3,577.75 points.