I. Yesterday's News
International News
1. Chicago Federal Reserve Bank President Charles Evans said on Tuesday he is increasingly concerned that a recent softness in inflation is a sign the U.S. central bank will struggle to get price pressures back to its 2 percent objective. Evans, who is a voter this year on the central bank's rate-setting committee, said that global forces, not just specific one-off reasons, could be behind a retreat in inflation over the past three months.

2. With yields on U.S. 10-year Treasuries as low as they are, the Federal Reserve needs to be careful about raising U.S. interest rates further, Dallas Federal Reserve President Robert Kaplan said on Tuesday. The low yields suggest markets expect "sluggish" growth ahead, Kaplan said, and while he is comfortable about where interest rates are now. Kaplan also said now that the Fed has engineered two rate hikes this year it is time to wait for more evidence that recent weak inflation is indeed transitory, as Fed Chair Janet Yellen has said is likely.

3. S&P Global may not wait until the terms of Britain's divorce from the European Union are known before it takes action on its rating again, most likely resulting in another cut, its sovereign ratings chief Moritz Kraemer told Reuters on Tuesday.

4. The International Monetary Fund will introduce a new facility to give countries swift access to short-term dollar funds to guard against a potential financial crisis, a Japanese government source with direct knowledge of the matter said on Tuesday. Under the new scheme, member countries that undergo a preliminary review can tap the IMF for short-term dollar funds they can use to battle any speculative attack on their currencies, the source said. Its creation will be formally decided at the IMF's board meeting at the end of this month.

5. Embattled Toshiba Corp will pick a Japanese government-led group of Japanese, U.S. and South Korean firms and funds to buy the conglomerate's semiconductor business, public broadcaster NHK said on Tuesday. The group includes the state-backed fund Innovation Network Corp of Japan, the government's Development Bank of Japan, and U.S. private equity firm Bain Capital, sources have told Reuters.

6. Australia's central bank has stuck to its upbeat tune on economic growth, but heightened concerns about financial stability suggest interest rates will remain at record lows even as policy makers abroad turn hawkish. Minutes of the Reserve Bank of Australia's (RBA) June meeting showed soaring household debt in the country's red-hot property market and weak wages growth were at the forefront of policy makers' minds.

Domestic News
7. U.S. index provider MSCI said on Tuesday it would add mainland Chinese stocks to one of its key benchmarks, but shocked many emerging market investors by failing to upgrade Argentina from the frontier market category. MSCI also said it would consult investors about adding Saudi Arabia to the benchmark and that Nigeria would remain a frontier market, with the possibility of being downgraded to "standalone" status. The full inclusion of domestic Chinese stocks in the widely tracked MSCI Emerging Markets Index could pull more than $400 billion of funds from asset managers, pension funds and insurers into mainland China's equity markets over the next decade, according to analysts.

8. Healthy financial institutions are a prerequisite for preventing a financial crisis, China's central bank governor Zhou Xiaochuan said on Tuesday. "The experience of the global financial crisis teaches us that to prevent financial crisis, we must, first of all, ensure the health of financial institutions. We should not tolerate such phenomena as high-leverage, low capital and bad loans," Zhou said.

II. Market Overview
FX
1. Global Market
The dollar hit a one-month high on Tuesday against a basket of currencies on the view the Federal Reserve may raise interest rates once more this year, while sterling tumbled after the Bank of England's head threw cold water on the notion it was close to raising rates. The index that tracks the greenback versus six currencies was up 0.3 percent at 97.800. The euro fell to a three-week low of $1.1117, while the dollar reached 111.86 yen, the highest since May 26.

2. Home Market
China's yuan fell by over 100 bps, hitting the lowest since June, against the U.S. dollar along with weaker midpoint rates. Strengthened overnight dollar index sent midpoint rates lower, triggering bargain hunting. A support can be found at 6.83 yuan.

Precious Metals
Gold inched down to a five-week low on Tuesday as the dollar rose following hawkish comments from an influential U.S. Federal Reserve official and dovish remarks from the Bank of England governor. Spot gold fell to $1,242.81 an ounce. U.S. gold futures for August delivery settled down 0.3 percent at $1,243.50.

Commodities
1.Crude Oil
Oil fell about 2 percent on Tuesday, with Brent settling at seven-month lows and U.S. crude at its cheapest level since September, after increased supply from several key producers overshadowed high compliance by OPEC and non-OPEC oil producers with a deal to cut global output. Brent ended 89 cents lower at $46.02 a barrel, its lowest settlement since Nov. 15. The U.S. crude futures contract for July, due to expire later on Tuesday, settled down 97 cents at $43.23, the lowest since Sept. 16.

2.Base Metals
Zinc prices retreated on Tuesday after hitting their highest in more than two weeks as investors sought to balance concerns about tightening supplies with uncertainty over Chinese demand. Benchmark zinc on the London Metal Exchange closed 0.04 percent down at $2,555 a tonne, retreating from an intraday peak of $2,581.50, the highest since June 1. LME copper ended 1.2 percent weaker at $5,657 a tonne.

U.S. Treasuries
1. U.S. Bonds
The U.S. Treasury yield curve flattened to its lowest levels since December 2007 as more hawkish Federal Reserve officials led intermediate-dated notes to underperform long-term bonds, which are being supported by falling inflation. Five-year note yields have jumped to 1.76 percent. Thirty-year bond yields have tumbled to 2.74 percent. Benchmark 10-year notes were last up 8/32 in price to yield 2.16 percent.

2. Chinese bonds
China's bond market steadied after Monday's strength under the pressure of profit-taking. Interbank cash bonds yields steadied after a slight pullback. The shorter-dated Treasury bonds posted the largest decline.

Stock Market
1. U.S. Equities
U.S. stocks closed lower on Tuesday as a sharp drop in oil prices hurt energy stocks and retail stocks were pulled down by concerns about Amazon.com's plan to boost its apparel business, while investors also worried about future Federal Reserve rate hikes. The Dow Jones Industrial Average was down 61.85 points, or 0.29 percent, to 21,467.14, the S&P 500 had lost 16.43 points, or 0.67 percent, to 2,437.03 and the Nasdaq Composite had dropped 50.98 points, or 0.82 percent, to 6,188.03.

2. Hong Kong Equities
Hong Kong stocks fell on Tuesday as excitement over the city's plans for a new listing board for "new economy" companies waned, and investors shifted their attention to economic fundamentals. The Hang Seng index fell 0.3 percent, to 25,843.04, while the China Enterprises Index lost 0.5 percent, to 10,468.48 points.

3. China Equities
China's stocks edged lower on Tuesday, trading in a tight range before U.S. index provider MSCI add mainland Chinese stocks to one of its key benchmarks. New-energy auto and Apple chain names were top winners. The market is expected to remain uptrend as liquidity expectations and risk appetite improved after concerns over MPA evaluation eased. The Shanghai Composite Index closed down 4.36 points or 0.14 percent to 3,140.01. The CSI 300 index ended at 3,546.49, down 0.20 percent.