I. Yesterday's News
International News
1. The dollar dropped to seven-month lows on Friday after data showed the U.S. economy created fewer jobs than expected last month, which could derail a possible interest rate hike by the Federal Reserve in the second half of this year. U.S. benchmark and long-dated Treasury yields fell to nearly seven-month lows, and short-dated yields touched their lowest in more than two weeks on Friday after weaker-than-expected U.S. employment data suggested cautious Federal Reserve policy beyond June. U.S. stocks closed at record levels for a second consecutive session on Friday, as market still expected an interest rate hike in June.

2. U.S. job growth slowed in May and employment gains in the prior two months were not as strong as previously reported, suggesting the labor market was losing momentum despite the unemployment rate falling to a 16-year low of 4.3 percent. Nonfarm payrolls increased by 138,000 in May as the manufacturing, government and retail sectors lost jobs, well short of the 185,000 expected by economists, the Labor Department said on Friday. The prior two months were revised lower by 66,000 jobs than previously reported. The 18 primary dealers surveyed on Friday expected the Fed to increase the target range on key overnight borrowing costs to 1.00-1.25 percent at its June 13-14 meeting. As for the rate rise after that, 10 of the primary dealers expected the Fed to hike rates to 1.25-1.50 percent at its September meeting. Six others forecast a rate rise in December. Six of the 18 said the Fed may detail its balance sheet normalization at its September meeting, while the rest thought it would wait until December.

3. Philadelphia Federal Reserve Bank President Patrick Harker said on Friday that the U.S. central bank remains on track to meet its inflation goal and reiterated his support for a further two interest rate increases this year. A lack of certainty about where the Trump administration's economic policies are heading is the main current threat to the U.S. economy, he added.

4. British construction activity grew at its fastest rate since the end of 2015 last month, as a pick-up in housebuilding helped builders shake off a lacklustre start to the year, a survey showed on Friday. The Markit/CIPS construction purchasing managers' index (PMI) jumped to 56.0 from 53.1, its highest since December 2015 and above all forecasts in a Reuters poll.

5. The Bank of Japan hit a new milestone as its balance sheet topped 500 trillion yen ($4.48 trillion), roughly the same size as that of the Federal Reserve, having more than tripled since it started aggressive stimulus in 2013. The massive size of the BOJ's money printing, however, has barely moved it nearer to its ultimate policy goal of lifting inflation to 2 percent, highlighting the difficulty the central bank is facing as the pace of its bond buying appears unsustainable. Data from the BOJ showed its total assets rose to 500.8 trillion yen at the end of May, compared to 425.7 trillion yen a year earlier. It was 164.8 trillion yen when Governor Haruhiko Kuroda took the helm in March 2013.

Domestic News
6. China and the European Union will seek on Friday to save a global pact against climate change from which U.S. President Donald Trump appears to be set to withdraw. As China emerges as Europe’s unlikely global partner on areas from free trade to security, Premier Li Keqiang will meet top EU officials at a summit in Brussels that will also address North Korea’s missile tests and global steel overcapacity.

7. Zhu Dantou, deputy head of the Central Financial Work Leading Group said the curious coexistence in China of excess capacity with insufficient supply is just a superficial symptom of the challenges facing the economy. The root of the problem, Zhu said, is the failure to let market forces take their full effect. This enables all manner of twisted policies and bureaucratic arrangements to flourish, sending price signals haywire and blocking the free flow of basic elements in the system. In sum, it is this that created the misallocation of resources we see in China today.

8. Top leaders were changed in the Ministry of Housing and Urban-Rural Development and the Ministry of Land and Resources, with Wang Menghui replacing Chen Zhenggao and Sun Shaocheng replacing Jiang Daming as new Minister.

9. The NDRC said China’s grid companies will lower the power prices on railway transport firms, and the latter will also lower freight rates to cut logistics cost.

10. California Governor Jerry Brown said on Thursday he will discuss merging carbon trading markets in his state and China when he travels to Asia later this week, a sign of the governor's ambition to influence global climate change policy.

II. Market Overview
FX
1. Global Market
The dollar dropped to seven-month lows on Friday after data showed the U.S. economy created fewer jobs than expected last month, which could derail a possible interest rate hike by the Federal Reserve in the second half of this year. In late trading, the dollar index was last down 0.5 percent at 96.725. The euro was 0.6 percent higher against the dollar at $1.1276, after earlier rising to a seven-month peak of $1.1282. The dollar also slid to seven-month troughs versus the Swiss franc, trading last at 0.9633 franc, down 0.9 percent. Against the yen, the dollar fell to two week lows and last changed hands at 110.44 yen, down 0.8 percent.

2. Home Market
China's yuan pulled back against the U.S. dollar despite the midpoint rate rose; while offshore yuan fell over 400 bps. CNH crossed below the key mark of 6.79 after liquidity tightness eased and the dollar index steadied. After that, onshore yuan declined, but losses were limited.

Precious Metals
Gold prices rose to a six-week high on Friday after disappointing U.S. non-farm payrolls data weighed on the dollar and lowered some expectations for more aggressive U.S. interest rate increases this year. Spot gold was up 1 percent at $1,277.76 per ounce by 1934 GMT, after hitting its highest since April 21 at $1279.10 and was headed for its fourth week of gains. U.S. gold futures ended the session up 0.8 percent at $1,280.20 an ounce.

Commodities
1.Crude Oil
Crude closed down more than 1 percent on Friday for a second straight week of losses, on worries that U.S. President Donald Trump's withdrawal from the Paris climate accord could accelerate U.S. production and flood the global oil market. Brent crude futures settled at $49.95 per barrel, down 68 cents or 1.3 percent, while U.S. West Texas Intermediate crude futures fell 70 cents to settle at $47.66 per barrel or 1.5 percent. Both contracts ended the week down more than 4 percent.

2.Base Metals
Nickel bounced off its weakest level in nearly a year on Friday while zinc hit a two-week low, pressured by weaker iron ore and oil prices as well as concern about demand in top consumer China. LME nickel failed to trade in closing open outcry activity and was bid up 0.8 percent at $8,910 a tonne, recovering from a low of $8,700, the weakest since June 8, 2016. Benchmark zinc on the London Metal Exchange closed down 1.6 percent at $2,529 a tonne after touching $2,512, the weakest since May 18. Three-month LME copper finished 0.6 percent weaker at $5,665.

U.S. Treasuries
1. U.S. Bonds
U.S. benchmark and long-dated Treasury yields fell to nearly seven-month lows, and short-dated yields touched their lowest in more than two weeks on Friday after weaker-than-expected U.S. employment data suggested cautious Federal Reserve policy beyond June. U.S. 10-year Treasuries were last up 16/32 in price, with yields dropping to 2.161 percent from 2.217 percent late on Thursday. The three-year was up 1/32 in price, and its yield fell to 1.427 percent from 1.446 percent. Yields on U.S. Treasuries maturing between 3-30 years were set to post their biggest weekly declines in seven weeks, while two-year yields were on track to post their biggest weekly fall in three weeks. Benchmark 10-year yields were on course to decline nine basis points for the week.

2. Chinese bonds
China’s interbank cash bond yields rose slightly, while government bond futures slid, snapping its two-day upward momentum. Liquidity tightness continued despite of small injection in early June, as institutional investors still worried about liquidity.

Stock Market
1. U.S. Equities
U.S. stocks closed at record levels for a second consecutive session on Friday, as gains in technology and industrial stocks more than offset a lukewarm jobs report. The Dow Jones Industrial Average rose 62.11 points, or 0.29 percent, to 21,206.29, the S&P 500 gained 9.01 points, or 0.37 percent, to 2,439.07 and the Nasdaq Composite added 58.97 points, or 0.94 percent, to 6,305.80. For the week, the S&P rose 0.95 percent, the Dow added 0.59 percent and the Nasdaq gained 1.54 percent.

2. Hong Kong Equities
Hong Kong stocks closed the week at a near two-year high, supported by an upbeat mood in global equity markets and continuous money inflows from China. Both the Hang Seng index and the Hong Kong China Enterprises Index rose 0.4 percent, to 25,924.05 and 10,666.43 points, respectively. For the week, the Hang Seng rose 1.1 percent, while the HSCI gained 0.4 percent.

3. China Equities
The Shanghai Composite Index inched up in thinned volume after lingering around 3,100. The second board bottomed up in the afternoon session after hitting a more than two-year low. But subdued market morale kept trading volume in check.