I. Yesterday's News
International News
1. U.S. retail sales recorded their biggest increase in seven months in July as consumers boosted purchases of motor vehicles as well as discretionary spending, suggesting the economy continued to gain momentum early in the third quarter. The Commerce Department said on Tuesday that retail sales jumped 0.6 percent last month. That was the largest gain since December 2016. Economists polled by Reuters had forecast retail sales increasing 0.4 percent in July. May and June's retail sales were upwardly revised 0.3 percent, instead of the previously reported 0.1 and 0.2 percent dip. The report helped to shift investors' attention from recent weak inflation data as markets try to forecast the Fed's next policy move. The dollar rose to near a three-week high against a basket of currencies on Tuesday, while prices for U.S. Treasuries fell. Stocks on Wall Street were mixed.

2. China's short-term growth outlook has strengthened but there is growing risk of a sharp medium-term adjustment due to reliance on stimulus to meet targets and a credit-expansion path that may be "dangerous", the International Monetary Fund said on Tuesday. The IMF raised its forecast for China's average annual growth from 2018-2020 to 6.4 percent from 6.0 percent and said there is now a greater chance that authorities will meet their target of doubling 2010 real GDP by 2020. The IMF did not see China making much progress on reducing debt, with the report forecasting that its total non-financial sector debt will increase from about 235 percent of gross domestic product (GDP) in 2016 to more than 290 percent by 2022. The Fund projected that China's non-financial debt through 2022 will rise "even more strongly" than it forecast a year earlier.

3. North Korea likely has the ability to produce its own missile engines and intelligence suggests it does not need to rely on imports, U.S. intelligence officials said on Tuesday. The assessment disputes a new study by the London-based International Institute for Strategic Studies that said that the engines for a nuclear missile North Korea is developing to hit the United States likely were made in factories in Ukraine or Russia and probably obtained via black market networks. The New York Times cited the study on Monday. The newspaper's report said that classified assessments by U.S. intelligence agencies mirrored the IISS finding.

4. British consumer price inflation unexpectedly held steady last month after fuel prices fell. Consumer price inflation fell 0.1 percent month-on-month, but held at 2.6 percent year-on-year in July, the Office for National Statistics (ONS) said. Economists polled by Reuters had on average forecast unchanged from June and a rise to 2.7 percent in July. The prices factories charge for goods rose 0.1 percent month-on-month. While on an annual basis, they grew at the slowest rate since December at 3.2 percent. But Tuesday's data showed this eased to a one-year low of 6.5 percent in July.

5. Australia's central bank was confident of a pick-up in inflation and jobs when it left interest rates at record lows this month, foreshadowing a couple of years of "above potential" growth in the economy. Yet household debt at all time highs and a strong local dollar were key risks to that rosy outlook, minutes of the Reserve Bank of Australia's (RBA) August policy meeting showed. A further rise in the currency could compress consumer prices and weigh on the outlook for growth and employment, the RBA warned. Still, it is not considering raising rates anytime soon, largely due to the burden of household debt, currently at 190 percent of disposable income.

Domestic News
6. The United States should respect objective facts, act prudently, the Ministry of Commerce said in a statement. "If the U.S. side ignores the facts, and disrespects multilateral trade principles in taking actions that harms both sides trade interests, China will absolutely not sit by and watch, will inevitably adopt all appropriate measures, and resolutely safeguard China's lawful rights."

7. Chinese banks extended 825.5 billion yuan ($123.7 billion) in net new yuan loans in July, above analysts' expectations. Analysts polled by Reuters had predicted new yuan loans of 800 billion yuan. Broad M2 money supply (M2) in July grew at a record low of 9.2 percent from a year earlier, central bank data showed on Tuesday, missing forecasts for an expansion of 9.4 percent.

8. China plans to include negotiable certificates of deposit (NCDs) - a popular short-term debt instrument for smaller banks - in its quarterly risk assessments. Test runs showed the move to improve risk assessments on banks' interbank liabilities, "will not have a big impact" on the banking sector, said Xu Zhong, head of the PBOC's research bureau. In dynamical terms, banks can easily achieve their goals after an 8-month transitional period as their interbank liabilities declined compared with the first quarter, Xu wrote in a financial magazine.

9. China's central bank is unlikely to tighten policy further in the second half of this year, which could cap rises in market interest rates, a central bank adviser said on Tuesday. "An RRR cut would send too strong a signal on policy loosening to the market. The central bank is much happier to increase money supply via monetary tools," Sheng Songcheng, an advisor to the People's Bank of China, was quoted as saying.

II. Market Overview
FX
1. Global Market
The dollar rose to its highest level against a basket of major currencies in nearly three weeks on Tuesday after U.S. retail sales data showed the largest gain in seven months. Gains were also supported by news that North Korean leader Kim Jong Un had delayed a decision on firing missiles toward the U.S. Pacific territory of Guam. The dollar index was last up 0.45 percent at 93.848. It earlier touched its highest level since July 26. The dollar rose by more than 1 percent against the Japanese yen. The euro fell to its lowest against the dollar since July 28. The pound was 0.75 percent lower against the dollar at $1.2863.

2. Home Market
China's yuan fell against the U.S. dollar in the morning session on Tuesday, with its guidance off a 11-month high. Market steadied despite of strong forex settlement demand. Yuan is expected to consolidate at highs in the near term unless the dollar shows a clear trend, or regulators intentionally give guidance on yuan's moves.

Precious Metals
Gold fell nearly 1 percent, down for a second day on Tuesday after better-than-expected U.S. economic data and easing tensions over North Korea encouraged investors to buy riskier assets, boosting stocks, the U.S. dollar and bond yields. Spot gold was down 0.8 percent at $1,271.58 an ounce, taking losses since Friday's high to nearly 2 percent. U.S. gold futures for December delivery fell 0.8 percent to settle at $1,279.70. Silver was down 2.1 percent at $16.65 an ounce, falling below its 100- and 200-day moving averages.

Commodities
1.Crude Oil
Oil prices settled little changed on Tuesday after slumping to three-week lows as the U.S. dollar climbed and signs of weaker petroleum demand in China weighed the market down for a second day. Benchmark Brent crude settled up 7 cents a barrel at $50.80, after retreating to $50.02 during the session. U.S. light crude settled down 4 cents at $47.55, off a session low of $47.02, the lowest since July 25.

2.Base Metals
Lead prices climbed on Tuesday after Beijing banned imports of lead ore from North Korea, while other base metals rebounded as geopolitical tensions eased and lending data in top metals consumer China beat expectations. Benchmark lead prices were the biggest gainers on the London Metal Exchange, closing 1.9 percent higher at $2,380 a tonne. Three-month LME copper dipped 0.3 percent to finish at $6,379. LME zinc climbed 1.5 percent to end at $2,960. LME aluminium gained 1.3 percent to close at $2,049.

U.S. Treasuries
1. U.S. Bonds
U.S. benchmark Treasury yields rose to one-week highs on Tuesday as investors pared low-risk bond holdings on signs of easing U.S.-North Korean tensions and on strong domestic retail sales and regional factory activity data. Benchmark U.S. 10-year Treasuries fell 12/32 in price to yield 2.26 percent, up from 2.2 percent on Monday.

2. Chinese bonds
China's inter-bank cash bonds reversed the losing course on Tuesday, while T-bond futures paring gains. Profit-taking prevailed in cash bonds on tight liquidity as the central bank renewed MLF as expected, but at a less-than-expected scale, and the bank halted reverse repo. Incoming financial data shall be closely watched.

Stock Market
1. U.S. Equities
U.S. stocks ended little changed on Tuesday as declines in Home Depot and other retailers following results offset upbeat U.S. retail sales data. Home Depot's stock was down 2.7 percent and was the biggest drag for both the S&P 500 and Dow. Although the home improvement chain reported strong earnings and raised its forecast, investors appeared to be worried about supply constraints in the housing market that could be a drag on Home Depot's future earnings. The Dow Jones Industrial Average was up 5.28 points, or 0.02 percent, to 21,998.99, the S&P 500 lost 1.23 points, or 0.05 percent, to 2,464.61 and the Nasdaq Composite dropped 7.22 points, or 0.11 percent, to 6,333.01.

2. Hong Kong Equities
Hong Kong shares finished down on Tuesday, falling late in the session after profit-taking pressures overcame support from a strong performance in banking shares. The Hang Seng index fell 0.3 percent, to 27,174.96 points, while the China Enterprises Index gained 0.3 percent, to 10,738.00 points. The China Enterprises Index had earlier risen as much as 1.4 percent in the morning session, and the Hang Seng index rose as much as 0.7 percent.

3. China Equities
China's stocks rose for the second consecutive day on Tuesday, led by financial sector. But gains were pared in the afternoon session under the heavy resistance of 3,250. Trading volume remained low. The benchmark Shanghai Composite Index rose 13.90 points or 0.43 percent to 3,251.26. The CSI index climbed 0.31 percent to 3,706.06.