I. Yesterday's News
International News
1. Iran says OPEC considering deeper output cuts, delegates skeptical. OPEC members are considering further oil output cuts but should wait until the effect of the current reduced level of production is made clear, Iran said on Wednesday, hinting at possible further OPEC action after oil sank to a seven-month low. The comment is the first hint from an OPEC minister of possible further action, although OPEC delegates downplayed the idea of a new cut, citing the difficulty of getting the exempt producers to cap output.

2. Haldane blows open Bank of England rate debate. The Bank of England moved closer to ending its decade-long emergency support for Britain's economy on Wednesday when its chief economist, Andy Haldane, said he was likely to vote for an interest rate hike this year. All three of the votes in favour of higher rates were cast by external rate-setters. Haldane's comments on Wednesday represented the first sign of a shift in thinking among the internal members of the Monetary Policy Committee. The surprisingly hawkish tone of Haldane in a speech added new uncertainty about monetary policy. Sterling bounced off a two-month low and gained above $1.27 against the U.S. Dollar, while its two-year treasury yields soared to the highest since January.

3. U.S. home resales unexpectedly rose in May to the third highest monthly level in a decade and a chronic inventory shortage pushed the median home price to an all-time high. The National Association of Realtors said on Wednesday existing home sales increased 1.1 percent to a seasonally adjusted rate of 5.62 million units last month. Sales were up 2.7 percent from May 2016. Economists polled by Reuters had forecast sales declining 0.5 percent to a rate of 5.55 million units.

4. New Zealand's central bank kept its benchmark interest rate at a record low of 1.75 percent on Thursday, and reiterated it would remain unchanged for a while yet. The Reserve Bank of New Zealand Governor Graeme Wheeler said, "Numerous uncertainties remain and policy may need to adjust accordingly.” Longer-term inflation expectations remain well-anchored at around 2 percent. This will bring future headline inflation to the midpoint of the target band over the medium term.

5. Risks to global growth appeared to have diminished, with markets so far taking policy tightening from the U.S. Federal Reserve in their stride, the European Central Bank said on Wednesday in a regular economic bulletin. The chances of an abrupt shift in global financial conditions appear to have eased, major emerging market economies seem to be in better shape than in recent years and Chinese policy support for growth has mitigated concerns about the short-term outlook, the ECB said. But the outlook remains tilted towards the downside due to new factors, notably signals from the United States suggesting a shift towards protectionism.

6. BOJ's Kuroda said the central bank need to stick with easing, watch price trend. Bank of Japan Governor Haruhiko Kuroda said maintaining the current easy monetary conditions is appropriate because prices are lagging improvements in the economy and remain distant from the central bank's inflation target. Kuroda, in a speech on Wednesday, reiterated the BOJ's growing optimism on the economic outlook due to rising exports, higher factory output, and a tightening labour market. "Our economy is on firmer footing, but we are still distant from our 2 percent inflation target," Kuroda said. "It is appropriate to keep monetary conditions easy with our current market operations framework."

Domestic News
7. China strikes for civil-military integration (CMI) and reinforcing resource integration. China's president Xi Jinping said, “The ideas, decisions, and plans of military and civilian integration must be fully implemented in all fields of national economic and defence construction.” He added that China's CMI policy should “value national socialist advantages of pooling resources to solve major problems and raising working efficiency”.
 
8. S&P says real possibility of China downgrade, Russia sanctions would threaten upgrade hopes. There is a “real” chance of a downgrade to China's credit rating, S&P Global's top sovereign analyst said on Tuesday, while Russia's hopes of being lifted back to investment grade would be hurt by new U.S.-led Western sanctions.

9. 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. 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.

II. Market Overview
FX
1. Global Market
The dollar slipped from a one-month peak against a basket of currencies on Wednesday, as losses on Wall Street stocks spurred some traders to book profits on gains tied to expectations of possibly another U.S. interest rate increase later this year. The dollar index was down 0.2 percent at 97.541, below a one-month high of 97.871 reached on Tuesday. Sterling rose after the Bank of England's chief economist, Andy Haldane, said he expected to back a British rate increase this year. Commodity-linked currencies such as the Canadian dollar and the Australian dollar fell in step with lower oil prices. The Canadian dollar traded at C$1.3313 per dollar. The Aussie was down 0.3 percent at $0.7558.

2. Home Market
China's yuan indexes diverged on Wednesday. The CFETS index rose 0.05 percent to 93.31. The SDR inched down to 94.63, while the BIS rose to 94.3

Precious Metals
Gold rebounded on Wednesday from a five-week low as an oil price slump pushed down stock markets and a weaker U.S. dollar made bullion cheaper for holders of other currencies. Spot gold was up at $1,246.05 an ounce, while U.S. gold futures settled up 0.2 percent at $1,245.80.

Commodities
1.Crude Oil
Oil prices ended down more than 2 percent on Wednesday after hitting a 10-month low in volatile trade, as growing U.S. production and reduced Chinese refinery activity fed mounting concern over the stubborn global crude glut. U.S. crude futures settled at $42.53, down 98 cents or 2.3 percent. Brent crude futures settled down $1.20 or 2.61 percent at $44.82 a barrel.

2.Base Metals
Copper rose on Wednesday in response to a retreat in the U.S. dollar from its recent peaks and evidence of tightening supply, while zinc hit a three-week high on longstanding concerns over potential supply constraints. Three-month copper on the London Metal Exchange ended up 1.6 percent at $5,745 a tonne, having hit its lowest since June 8 at $5,630 earlier. Zinc ended 3.3 percent higher at $2,640.

U.S. Treasuries
1. U.S. Bonds
The U.S. Treasury yield curve flattened to almost 10-year lows on Wednesday as investors evaluated the impact of hawkish Federal Reserve policy on the economy even as inflation measures are deteriorating. Five-year note yields last traded at 1.77 percent. Meanwhile, 30-year bond yields dropped to 2.72 percent on Wednesday, the lowest since Nov. 9. The yield curve between five-year notes and 30-year bonds flattened to 95 basis points, the narrowest since December 2007.

2. Chinese bonds
China's interbank bond market was volatile with subdued volume with yields of cash bonds rising slightly and IRS gaining around 1 bp. Monetary policy remained neutral after the first net drainage in two weeks. Cautious sentiment on liquidity ahead of quarter-end capped gains.

Stock Market
1. U.S. Equities
The S&P 500 and Dow stock indexes were weighed down by falling energy shares as oil prices fell on Wednesday and added to investor concerns about low inflation, while healthcare and technology stocks helped lift the Nasdaq Composite index. The Dow Jones Industrial Average fell 57.11 points, or 0.27 percent, to close at 21,410.03, the S&P 500 lost 1.42 points, or 0.06 percent, dropping to 2,435.61 and the Nasdaq Composite added 45.92 points, or 0.74 percent, rising to 6,233.95.

2. Hong Kong Equities
Hong Kong stocks fell on Wednesday on fears that MSCI's decision to include more mainland China stocks in a key benchmark index will threaten the financial centre's role as a key global investor gateway to China. The Hang Seng index fell 0.6 percent to 25,694.58, while the China Enterprises Index, a popular channel for global investors to bet on China plays, lost 0.7 percent, to 10,393.59.

3. China Equities
China's stocks edged higher in a quiet market on Wednesday, as the news that U.S. index provider MSCI add mainland Chinese stocks to one of its key benchmarks was widely expected and new capital can hardly be in place in the near term. Market morale was restored due to stable and orderly regulatory policy. But the growth names is losing steam after last week's sharp gains. The Shanghai Composite Index closed up 16.20 points or 0.52 percent to 3,156.21. The CSI 300 index ended at 3,587.96, down 1.17 percent.