I. Yesterday's News
International News
1. The Federal Reserve raised interest rates on Wednesday for the second time in three months and said it would begin cutting its holdings of bonds and other securities this year, signaling its confidence in a growing U.S. economy and strengthening job market. In lifting its benchmark lending rate by a quarter percentage point to a target range of 1.00 percent to 1.25 percent and forecasting one more hike this year, the Fed seemed to largely brush off a recent run of mixed economic data. The initial cap for the reduction of the Fed's Treasuries holdings would be set at $6 billion per month, increasing by $6 billion increments every three months over a 12-month period until it reached $30 billion per month. For agency debt and mortgage-backed securities, the cap will be $4 billion per month initially, rising by $4 billion at quarterly intervals over a year until it reached $20 billion per month.
U.S. stocks were mixed and prices of U.S. Treasuries pared gains after the Fed's policy statement. The dollar was largely flat against a basket of currencies after reversing earlier losses, while the price of gold fell. In a separate report, Wall Street’s top banks brought forward their expectations for when they think the Federal Reserve will begin reducing its $4.5 trillion bond portfolio to as early September. They see Fed policymakers raising the bank’s key overnight borrowing rate one more time by the end of 2017 and three times in 2018 despite growing concerns that inflation would fall short of their 2.0 percent goal in the foreseeable future.

2. U.S. consumer prices unexpectedly fell in May and retail sales recorded their biggest drop in 16 months, suggesting a softening in domestic demand that could limit the Federal Reserve's ability to continue raising interest rates this year. The Labor Department said its Consumer Price Index dipped 0.1 percent last month, weighed down by declining prices for gasoline, apparel, airline fares, motor vehicles, communication and medical care services, among others. In the 12 months through May, the CPI rose 1.9 percent, the smallest increase since last November. The dollar fell to a seven-month low against a basket of currencies on the data, before retracing some of the losses. Prices for U.S. Treasuries rallied, while stocks on Wall Street were little changed. In a separate report, the Commerce Department said retail sales fell 0.3 percent last month amid declining purchases of motor vehicles and discretionary spending after a 0.4 percent increase in April. May's drop was the largest since January 2016 and confounded economists' expectations for a 0.1 percent gain.

3.British workers’ earnings after inflation are shrinking at the fastest pace since 2014, adding to the strain on household budget since last year's Brexit vote. The Office for National Statistics said the unemployment rate in the period between February and April held steady at a more than four-decade low of 4.6 percent, in line with the median forecast in a Reuters poll of economists. Inflation hit an almost four-year high of 2.9 percent in May, higher than analysts’ forecast.

4. Growth in oil supply next year is expected to outpace an anticipated pick-up in demand that will push global consumption above 100 million barrels per day (bpd) for the first time, the International Energy Agency said on Wednesday. The agency expect non-OPEC production to grow by 1.5 million bpd in 2018, which is slightly more than the expected increase in global demand.

5. A huge fire broke out in a 27-floor block of flats in central London on Wednesday, killing some people, injuring at least 50 more. The London Fire Brigade said 40 fire engines and 200 firefighters were battling the blaze which had engulfed all floors from the second to the top of the Grenfell Tower on the Lancaster West Estate in west London.

Domestic News
6. China's new yuan loans continued to increase in May with money pouring into the real economy, but M2 only expanded 9.6 percent, registering the slowest growth on record. Economists said that the slowdown in M2 came as the result of the financial de-leveraging and strengthened supervision. China’s central bank’s move after the Federal Reserve’s policy meeting in June need to be focused.

7. The State Council, China's cabinet, Wednesday announced its decision to set up pilot zones in Guangdong, Guizhou, Jiangxi and Zhejiang provinces and Xinjiang Uygur Autonomous Region for green finance to support financial institutions to set up green finance departments, and welcome foreign capital including PE to participate in green investments. The State Council will also encourage the development of "green credit" to explore innovative green financial products.

8. China's State Power Investment Corp (SPIC) is in exclusive talks to acquire energy company Latin America Power's Chilean assets for $325 to $400 million, two sources with knowledge of the process said this week, as SPIC steps up its involvement in the region. The potential acquisition by SPIC marks another big move by the company into Latin American renewables. SPIC, through a Chilean subsidiary, declined to comment, as did LAP and Colbun.

9. The International Monetary Fund on Wednesday raised its forecast for China's 2017 economic growth to 6.7 percent, citing "policy support, especially expansionary credit and public investment". The IMF said it now expects China's growth to average 6.4 percent annually during 2018-2020. Along with a higher growth forecast, the IMF on Wednesday recommended China speed up reforms to transition its economy to more sustainable growth and adopt less accommodative monetary policy.

10. Real estate investment in China rose 8.8 percent in the first five months of 2017 from a year earlier, official data showed on Wednesday. The pace of investment growth eased from 9.3 percent in January-April, the National Bureau of Statistics (NBS) said. New construction starts measured by floor area were up 9.5 percent in the first five months of the year, compared with a 11.1 percent rise in the first four months.

II. Market Overview
FX
1. Global Market
The dollar was steady on Wednesday, reversing major early losses, after the Federal Reserve raised U.S. overnight interest rates and said it was prepared to continue tightening monetary policy. The euro, after earlier rising to its highest level against the dollar since Nov. 9, was last little changed at $1.1215. Against the yen, the dollar was last down 0.35 percent, to 109.70 yen, after falling as much as 1 percent and hitting its lowest level against the Japanese currency since April. Commodity-linked currencies such as the Australian, New Zealand and Canadian dollars also pared gains against the U.S. currency following the release of U.S. data.

2. Home Market
China's yuan rose against the U.S. dollar in a tight range due to the caution ahead of the FOMC meeting. Forex buying and settlement is about to balance. But mounting sentiment for forex settlement is expected to cap yuan’s gains.

Precious Metals
Gold turned negative on Wednesday after the Federal Reserve increased interest rates but was less dovish than expected following a two-day meeting, and the dollar sharply pared its losses against a basket of major currencies. Spot gold fell 0.4 percent at $1,260.68 an ounce, while U.S. gold futures for August delivery settled up 0.6 percent at $1,275.90 prior to the Fed's statement.

Commodities
1.Crude Oil
Crude oil prices slumped nearly 4 percent to their lowest close in seven months on Wednesday, hit by an unexpected large build in gasoline inventories and an international outlook that suggests a big increase in supply in the coming year. After rising for three consecutive days, U.S. West Texas Intermediate crude futures fell $1.73, or 3.7 percent, to settle at $44.73 per barrel, its lowest close since Nov. 14. Brent also slumped, losing $1.72, or 3.5 percent, to settle at $47 a barrel. That was the lowest close for Brent since Nov. 29.

2.Base Metals
Copper was pushed lower ahead of an anticipated U.S. Federal Reserve interest rate rise later on Wednesday that is expected to strengthen the dollar, making industrial metals more expensive to holders of other currencies. But solid Chinese economic data limited losses and resulted in higher steel prices that pushed up zinc and lifted nickel from a one-year low. London Metal Exchange copper did not trade at the close but was bid down 0.3 percent at $5,698 a tonne. Nickel was up 1.6 percent to $8,940 a tonne. Zinc closed 0.9 percent higher at $2,494, trading near seven-month lows.

U.S. Treasuries
1. U.S. Bonds
U.S. Treasury yields pared declines but remained lower on Wednesday after the Federal Reserve raised interest rates, announced it would begin cutting its holdings of bonds and other securities this year, and forecast one more rate hike in 2017. U.S. 10-year yields were last at 2.138 percent after touching 2.103 percent earlier, their lowest since Nov. 10. U.S. 30-year yields were last at 2.780 percent after touching their lowest since Nov. 9 of 2.765 earlier. U.S. two- and three-year yields were last at 1.343 percent and 1.476 percent, compared to 1.363 percent and 1.505 percent late Tuesday.

2. Chinese bonds
China’s interbank debt market was little changed on Wednesday, with yields of 10-year CDB bonds inching down, shrugging off resilient economic data. The auction of 5-year treasury bond became the highlight in a quiet market, suggesting rising demand. Yields of cash bonds fell as a result.

Stock Market
1. U.S. Equities
A slide in technology stocks pulled down the Nasdaq Composite on Wednesday and the S&P 500 ended slightly lower, as investors worried about the pace of economic growth after weaker-than-expected inflation numbers and an interest rate hike from the Federal Reserve. The Dow Jones Industrial Average rose 46.09 points, or 0.22 percent, to 21,374.56, the S&P 500 lost 2.43 points, or 0.10 percent, to 2,437.92 and the Nasdaq Composite dropped 25.48 points, or 0.41 percent, to 6,194.89.

2. Hong Kong Equities
Hong Kong shares were little changed on Wednesday, as investors waited for more clues from the Federal Reserve on future U.S. policy after an expected interest rate rise later in the day. The Hang Seng index rose 0.1 percent, to 25,875.90 points, while the China Enterprises Index lost 0.1 percent, to 10,514.91 points.

3. China Equities
The Shanghai Composite Index closed down on Wednesday, suffering the worst one-day loss in a month on caution ahead of the U.S. central bank’s policy meeting. Financial names were sold off on new that the chairman of Anbang cannot fulfill his duty, triggering profit-taking in other blue chips.