I. Yesterday’s News
International News

1. U.S. President Donald Trump sought to ratchet up pressure on China for trade concessions by proposing a higher 25 percent tariff on $200 billion worth of Chinese imports, his administration said on Wednesday. US officials are in contact with Chinese counterparts to determine whether conditions are right to hold negotiations. Trump has directed the U.S. Trade Representative Robert Lighthizer to prepare new tariffs as different options to "encourage" China to change behavior. The USTR said it would extend a public comment period for the tariff to September 5 from August 30, and communication with China remains open to try to resolve trade differences. Trump also said he remains open to communications with Beijing.

2. The U.S. Federal Reserve kept interest rates unchanged on Wednesday but characterized the economy as strong, keeping the central bank on track to increase borrowing costs in September. The Fed said economic growth has been rising strongly and the job market has continued to strengthen while inflation has remained near the central bank's 2 percent target since its last policy meeting in June, when it raised rates. The Fed currently expects another two rate rises by the end of the year. Federal funds futures implied traders are pricing in about a 91 percent chance of a rate rise in September and a 71 percent chance of an additional hike in December, according to CME Group's FedWatch program. Market reaction to the Fed decision was muted as it met expectations on where the central bank would push policy rates, with the dollar slightly stronger against a basket of currencies and U.S. Treasury yields little changed.

3. U.S. manufacturing activity slowed in July amid signs that a robust economy and import tariffs were putting pressure on the supply chain, which could hurt production in the long term. The Institute for Supply Management (ISM) said its index of national factory activity fell to a reading of 58.1 last month from 60.2 in June. Other data on Wednesday showed private employers stepped up hiring in July, suggesting strength in the labor market and the overall economy at the start of the third quarter. The dollar was trading slightly higher against a basket of currencies. Prices for U.S. Treasuries fell. Stocks on Wall Street were mixed.

4. Euro zone manufacturing growth remained subdued in July as worries about trade tensions, tariffs and rising prices kept optimism in check, a survey showed on Wednesday. IHS Markit's July final manufacturing Purchasing Managers' Index only nudged up to 55.1 from June's 18-month low of 54.9.

5. British house prices gained a bit of momentum in July after rising at their slowest annual rate in five years in June, mortgage lender Nationwide said on Wednesday. House prices rose by an average 2.5 percent from July last year, faster than growth of 2.0 percent in June and above a forecast for a 1.9 percent rise in a Reuters poll of economists. In monthly terms, prices rose by 0.6 percent in July from June, faster than the Reuters poll forecast of 0.2 percent.

Domestic News

6. China's central bank said Wednesday that it will continue to implement the prudent monetary policy in the latter half of 2018 to ensure economic and financial stability. The People's Bank of China will fine-tune monetary policy in a "pre-emptive" way and maintain control over the floodgates of monetary supply to keep liquidity at a reasonable and ample level. It would balance risk prevention with support for the economy, it added. "At present, domestic and external economic and financial situations are complicated, so the PBOC faces arduous tasks in doing its work well in the latter half of 2018," the central bank said. To that end, the PBOC will make policies more forward-looking, flexible and effective, ensure the proper policy intensity and tempo, enhance policy coordination and pay more attention to guiding expectations, according to a statement following a teleconference.

7. The Politburo believes that the Chinese economy currently faces “new problems and new changes,” including “obvious changes in the external environment,” according to a statement issued by the country’s top leadership after the meeting. This probably refers primarily to the U.S.-China trade war, which has escalated over the past six months. The whole meeting sent a message that the country will move proactively to cope with changes. The Politburo’s tone regarding monetary policy still emphasizes stable monetary policy and maintaining a strong grip on the floodgates to the country’s money supply. This signals that monetary policy is unlikely to be relaxed significantly.

8. A survey showing Chinese manufacturing PMI fell to 50.8 in July , the slowest pace in eight months, as new export orders slipped to an over two-year trough, pointing to subdued confidence in the prospect for the incoming year. Weak demand, tough anti-pollution measures and rising Sino-U.S. trade friction poses many challenges to the industry.

9. Shenzhen announced its latest round of restrictions on Tuesday to curb housing market speculation. The new curbs are expected to stop enterprises and institutions from purchasing commodity housing, and forbid the transfer of commodity housing newly purchased by households within three years from the date of obtaining the property right certificate.

II. Market Overview
FX
1. Global Market

The U.S. dollar clung to gains against a basket of peers on Wednesday after the U.S. Federal Reserve kept interest rates unchanged but characterized the economy as strong, keeping the central bank on track to increase borrowing costs in September. The dollar index, which measures the greenback against a basket of six currencies, was up 0.14 percent at 94.629. Meanwhile, fears of an escalation in the trade dispute between the United States and China, and higher U.S. Treasury yields supported the greenback. The offshore Chinese yuan slid more than half a percent. The Aussie dollar slipped against its U.S. Counterpart. Sterling was little changed.

2. Home Market

China's yuan pared most gains against the U.S. dollar after surging almost 400 bps, while the central bank set midpoint 18 bps weaker to a 14-month low. Yuan is expected to remain subdued in the near term amid mixed news in global market overnight and a seesaw trading in offshore and onshore market.

Precious Metals

Gold eased on Wednesday as the dollar strengthened, and stayed weaker after the U.S. Federal Reserve kept interest rates steady as expected. Spot gold was down at $1,215.49 an ounce, close to a one-year low of $1,211.08 reached on July 19. U.S. gold futures settled down $6, or 0.5 percent, at $1,227.60 per ounce.

Commodities
1.Crude Oil

Oil prices fell about 2 percent on Wednesday as a surprise increase in U.S. crude stockpiles fed concerns about global oversupply, while investors worried that trade tensions could hit energy demand. Brent crude futures fell $1.82 to settle at $72.39 a barrel, a 2.5 percent loss. U.S. West Texas Intermediate (WTI) crude futures fell $1.10 to settle at $67.66 a barrel, a 1.6 percent loss.

2.Base Metals

Copper and other base metals slipped on Wednesday on fears of slower demand due to renewed U.S.-China trade tensions and worries about slowing growth in top metals consumer China. Three-month copper on the London Metal Exchange closed down 2 percent at $6,172 a tonne. Aluminium fell 1.4 percent to end at $2,052 a tonne. LME zinc lost 2.7 percent to finish at $2,555 a tonne. Nickle plunged 3.1 percent to 13,90 a tonne.

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

The benchmark 10-year U.S. Treasury note's yield reached its highest in 2-1/2 months on Wednesday, breaking above 3 percent after the government said it intended to boost borrowing in the bond market in the coming quarter to fund spending and debt obligations. The 30-year bond yield was up as much as 6.6 basis points from late Tuesday to 3.148 percent. The two-year yield was up 1.7 basis points from Tuesday to a session high of 2.686 percent. The 10-year note yield was last at 3.003 percent, slightly below its session high.

2. Chinese bonds

The Politburo’s tone regarding monetary policy still emphasizes stable monetary policy, signaling that monetary policy is unlikely to be relaxed significantly. Major interest rates bonds softened in the morning, but Treasury bond futures expanded gains after the noon bell as stocks slumped, pulling down the yield of 10-year CDB bonds below the previous session’s closing price.

Stock Market
1. U.S. Equities

The S&P 500 and Dow slipped on Wednesday as gains in Apple shares were offset by a drop in energy and industrial companies, while the U.S. Federal Reserve remained on course for an expected interest rate hike in September. Technology companies pushed the Nasdaq higher. The Dow Jones Industrial Average fell 81.37 points, or 0.32 percent, to 25,333.82, the S&P 500 lost 2.93 points, or 0.10 percent, to 2,813.36 and the Nasdaq Composite added 35.50 points, or 0.46 percent, to 7,707.29.

2. Hong Kong Equities

Shares in Hong Kong ended lower on Wednesday, dragged by property developers as China's government vowed to "resolutely curb" home price increases, and as weak data and an escalating trade war dimmed the outlook for growth in China. At close of trade, the Hang Seng index was down 0.85 percent to 28,340.74, while the China Enterprises Index lost 0.47 percent to 10,973.04.

3. China Equities

China's Shanghai stock market slumped 1.8 percent in expanded volume on Wednesday, posing the biggest one-day decline in a month. After testing the resistance of 2,800, Shanghai stocks reverse the course, led by property developers on downbeat fundamentals. The Shanghai Composite index was down 51.87 points or 1.80 percent at 2,824.53. The latest largest decrease was seen on July 2 when a 2.52 percent was lost.