I. Yesterday’s News
International News

1. China and the United States will hold lower-level trade talks this month, the two governments said on Thursday, offering hope that they might resolve an escalating tariff war that threatens to engulf all trade between the world's two largest economies. Still, White House Economic adviser Larry Kudlow warned Beijing not to underestimate President Donald Trump's resolve in pushing for changes in China's economic policies. A Chinese delegation led by Vice Minister of Commerce Wang Shouwen will meet U.S. representatives led by Treasury Under Secretary for International Affairs David Malpass, China's Ministry of Commerce said in a statement on its website. The Wall Street Journal reported that the talks in Washington would take place on Aug. 21 and 22, just before $16 billion in new U.S. tariffs on Chinese goods take effect, along with an equal amount of retaliatory tariffs from Beijing.

2. Finance Minister Berat Albayrak assured international investors on Thursday that Turkey would emerge stronger from its currency crisis, insisting its banks were healthy and signalling it could ride out a dispute with the United States. In a conference call with thousands of investors and economists, Albayrak said Turkey fully understood and recognised all its domestic challenges but was dealing with what he described as a market anomaly. The lira held steady during Albayrak's conference call but later weakened when Treasury Secretary Steven Mnuchin said the United States was prepared to levy more sanctions on Turkey if detained American pastor Andrew Brunson was not freed.

3. U.S. homebuilding rebounded less than expected from a nine-month low in July, suggesting the housing market was likely to tread water for the rest of this year against the backdrop of rising construction costs and labor shortages. Housing starts rose 0.9 percent to a seasonally adjusted annual rate of 1.168 million units in July, the Commerce Department said. But the fundamentals for the housing market remain strong. New filings for jobless benefits fell again last week, other data showed on Thursday, pointing to sustained labor market strength despite an escalating trade war between the United States and China that has rattled financial markets. The PHLX housing index was trading higher, tracking a broadly firmer U.S. stock market. The dollar slipped against a basket of currencies and U.S. Treasury prices fell.

4. British shoppers spent more than expected in July, after hot weather and the World Cup continued to boost food sales and other retailers offered discounts, pointing to a solid start to the third quarter for the economy. Retail sales volumes rose by 0.7 percent, and were 3.5 percent higher than a year earlier, above economists' average forecasts in a Reuters poll for a 0.2 percent monthly rise and a 3.0 percent annual gain. Looking at the three months to July as a whole, retail sales grew by 2.1 percent versus the previous three months, the biggest expansion since February 2015. Excluding fuel purchases -- which were dented by higher oil prices -- sales growth over the three months was the fastest since March 2004. But that offered little respite for the pound which traded just above the $1.27 level.

5. Argentina's central bank said on Thursday it hiked reserve requirements by 3 percentage points for the country's largest banks, as it tries to keep its plan for reducing short-term debt from adding to already high inflation. Separately, the central bank has agreed to a $4 billion currency swap with China to boost its reserves, local news website Infobae reported. A spokeswoman for the central bank told Reuters talks with China over the swap were "advanced". The peso closed 0.67 percent higher at 29.8 per U.S. dollar.

6. Business confidence among Japanese manufacturers was at its highest in seven months in August thanks to a firm global economy, a Reuters poll showed on Friday, but the service sector's mood hit its lowest since 2016, casting doubt on the robustness of domestic demand. The mixed results of the monthly poll, which tracks the Bank of Japan's closely watched tankan quarterly survey, underscore the fragility of an economy that has emerged from a first-quarter contraction.

Domestic News

7. China’s Vice-Commerce Minister Wang Shouwen, the deputy representative on international trade negotiations, will meet a senior US treasury official, Mr David Malpass, in late August at the invitation of the US, the ministry said in a statement. Mr Wang will lead a delegation to discuss bilateral trade issues with a team led by Mr Malpass, Secretary of Treasury for International Affairs.

8. During the first seven months of 2018, the country cut its coal capacity by 80 million tonnes and crude steel capacity by 24.7 million tonnes, accomplishing over 50 percent and 80 percent of its annual goals, respectively, Zhao Chenxin, spokesperson for the National Development and Reform Commission, told a news conference. China has also made headway in deleveraging, resulting in improvements in efficiency and supply-demand mismatch, the country's top economic planner said Thursday.

II. Market Overview
FX
1. Global Market

The U.S. dollar slipped below a 13-1/2 month peak on Thursday, while the Chinese yuan recovered from its weakest level since January 2017 on news China and the United States will hold a new round of trade talks later this month. The ICE index that tracks the greenback against six major currencies fell as much 0.4 percent before ending 0.06 percent lower on the day at 96.637. The yuan in offshore trading gained 1.1 percent to 6.8714 per dollar. Turkey's lira rose for a third straight day, gaining 2.4 percent to 5.8101 after Finance Minister Berat Albayrak's presentation to assure international investors. The euro was up over 0.1 percent at $1.13575, edging up from a 13-month low of $1.13010 set on Wednesday.

2. Home Market

China's yuan rose against the dollar, snapping a four-day losing streak. The midpoint rate fell for the fourth consecutive session, hitting a 15-month trough. The yuan slumped to 6.9220 per dollar under the strength of the dollar index. Offshore yuan rebounded sharply to hit as high as 6.8730 per dollar before paring some gains following onshore yuan.

Precious Metals

Spot gold prices bounced from 19-month lows on Thursday, as the U.S. dollar slipped on news that China and the United States will hold trade talks this month, although sentiment remained negative. Spot gold ended at $1,173.56 an ounce, from an earlier low of $1,159.96, its weakest since January last year. U.S. gold futures for December delivery settled down $1, or 0.1 percent, at $1,184 per ounce.

Commodities
1.Crude Oil

Oil rose slightly as global markets steadied on Thursday, recovering some of the previous day's 2 percent slide, though a weakening outlook for crude demand kept prices in check. Brent crude oil futures settled 67 cents higher at $71.43 a barrel, while U.S. crude futures rose 45 cents to $65.46 a barrel.

2.Base Metals

Industrial metals prices regained ground on Thursday as planned trade talks between China and the United States and a recovery in Turkey's currency rekindled appetite for riskier assets and weakened the dollar. Benchmark copper on the LME closed up 2.4 percent at $5,939 a tonne. LME zinc finished 4 percent higher at $2,392 a tonne. Lead surged 5.9 percent to $2,040, and nickel gained 3.7 percent to $13,325.

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

U.S. Treasury yields rose on Thursday after reports of new trade talks between the United States and China boosted risk appetite and reduced demand for safe-haven bonds. Benchmark 10-year notes fell 7/32 in price to yield 2.877 percent, up from 2.851 percent on Wednesday. The yield curve between 2-year and 10-year notes steepened to 25 basis points.

2. Chinese bonds

Cash bonds in China’s inter-bank market recovered as sharp decline in overnight global stocks and commodities buoyed sentiment. Yields of the 10-yearinter-bank interest rate debts fell 1.5 bps, while CFFEX Treasury bonds also rebounded.

Stock Market
1. U.S. Equities

U.S. stocks rebounded on Thursday with the Dow posting its biggest percentage gain in over four months, as positive earnings and waning trade jitters buoyed investor confidence. The Dow Jones Industrial Average rose 396.32 points, or 1.58 percent, to 25,558.73, the S&P 500 gained 22.32 points, or 0.79 percent, to 2,840.69 and the Nasdaq Composite added 32.41 points, or 0.42 percent, to 7,806.52.

2. Hong Kong Equities

Shares in Hong Kong fell for a fifth consecutive session on Thursday, as concerns over slower growth in China and Turkey's currency crisis weighed on regional markets, but hopes of a possible rapprochement between the United States and China helped the Hang Seng index cut losses. At the close of trade, the Hang Seng index fell 0.82 percent to 27,100.06, while the China Enterprises Index lost 0.53 percent to 10,479.68.

3. China Equities

Shanghai stocks extended the losing streak to the fourth day, hitting the lowest in 2-1/2 years dampened by global market. But it managed to pared some losses lifted by insurance, broker and banking sector, before trading range-bound. The Shanghai Composite Index fell 18.07 points or 0.66 percent to 2,705.19, after hitting an intra-day low at 2,672.741, only inches away from the lowest since March 1 at 2,668.76. Hushen 300 index closed at 3,276.73, down 0.46 percent.