I. Yesterday’s News
International News

1. The U.S. jobs market does not appear overly tight and the Federal Reserve should continue with a gradual pace of interest rate rises amid a strong economy to balance its employment and inflation goals, Fed Chairman Jerome Powell said. Powell also cautioned central banks against trying to run an excessively hot labor market for too long in case it undermines their credibility on low and stable inflation. "With the economy strong and risks to the outlook balanced, the case for continued gradual increases...remains strong," Powell said in prepared remarks before a central banking conference in Sintra, Portugal. He added that unemployment was likely to drop further but that with wage growth currently moderate "the labor market is not excessively tight."

2. U.S. Commerce Secretary Wilbur Ross said on Wednesday that President Donald Trump wants China to cut its trade barriers and protect U.S. intellectual property, but believes Beijing will not do so without increased pressure from the United States. "The president feels and I agree that now is the time for action," Ross said. "And unless than we make it more painful for them to continue those practices than to do otherwise, unless we put that kind of pressure on, it's unlikely we will succeed."

3. A developing trade war between the world's biggest economies is weighing on business confidence and could force central banks to downgrade their outlook, the world's most powerful policymakers argued on Wednesday. Sitting side by side in a Portuguese hill-top town, the heads of the U.S. Federal Reserve, the European Central Bank, the Bank of Japan and the Reserve Bank of Australia all took a gloomy view on the escalating conflict, arguing that the consequences are already evident. "Changes in trade policy could cause us to have to question the outlook," Fed Chair Jerome Powell said in some of his strongest remarks yet on the issue. "For the first time we are hearing (from business leaders) about decision to postpone investment, postpone hiring, postpone making decisions," he said. Speaking alongside Powell, ECB chief Mario Draghi said he had little reason to be optimistic, arguing that the ECB would have to incorporate the newest wave of punitive measures into calculation.But Haruhiko Kuroda, who heads the BoJ, said the biggest impact could be indirect, stemming from dented confidence among consumers and enterpreneurs.

4. U.S. home sales unexpectedly fell for the second straight month in May as an acute shortage of properties on the market pushed house prices to a record high. Existing home sales slipped 0.4 percent to a seasonally adjusted annual rate of 5.43 million units last month, the NAR said. Existing home sales, which make up about 90 percent of U.S. home sales, dropped 3.0 percent on a year-on-year basis in May. They have declined on that basis for three straight months. Home sales have largely treaded water this year as strong demand depletes the supply of properties on the market, causing house prices to rise faster than wages. Financial market was muted to the data. U.S. Treasury yields rose after Fed Chairman Jerome Powell said the U.S. central bank should continue with a gradual pace of rate increases. Stocks on Wall Street were trading mostly higher while the dollar was little changed.

5. A lone Bank of Japan policymaker said additional easing was needed to accelerate inflation, but most members wanted to keep monetary policy unchanged, minutes from the central bank's policy meeting in April showed on Wednesday. The minutes do not identify who spoke, but the call for additional easing most likely came from BOJ board member Goushi Kataoka, a reflationist economist who regularly votes against the BOJ's decisions to keep policy on hold. Other board members are unlikely to support Kataoka because of worries over the side effects of prolonged quantitative easing, but the minutes highlight the scepticism the BOJ faces after ditching the timeframe for its 2 percent price target.

6. Sanctions against North Korea will remain in place until Pyongyang can assure concerned parties such as South Korea that "complete denuclearisation has been achieved," the South's foreign minister said on Wednesday. Foreign Minister Kang Kyung-wha said South Korea expected to see "concrete action" by North Korea to "live up to its complete denuclearisation commitment," in return for guarantees of its security and other efforts for peace. North Korea’s Kim Jong Un and Chinese President Xi Jinping came to an understanding on issues discussed at a summit of the two leaders, including denuclearization of the Korean peninsula, the North’s state media said.

7. Brazil's central bank kept interest rates unchanged on Wednesday, as expected, refraining from hiking even after a sharp currency slide as policymakers highlighted the unclear impact of a nationwide protest by truckers in late May. The statement from the bank's nine-member monetary policy committee, which kept the benchmark Selic rate at 6.50 percent, raises the stakes for upcoming economic indicators, which may be key to determining the committee's next moves.

Domestic News

8. China has underestimated U.S. President Donald Trump's resolve to impose more tariffs unless it changes its "predatory" trade practices, White House trade adviser  Peter Navarro said on Tuesday, as Trump greatly expanded the amount of Chinese imports possibly facing new duties. China Daily said, the Trump administration has "blood lust" when it comes to pushing its trade agenda against China and wants to "suck the lifeblood" from China's economy.

9. Chinese President Xi Jinping held talks with the North Korean leader Kim Jong Un in Beijing. Both Xi and Kim agreed to safeguard and strengthen China-DPRK relations, and jointly push forward the momentum of peace and stability of the Korean Peninsula to establish a world and regional peace, stability, prosperity, and development. "We are happy to see that the DPRK made a major decision to shift the focus to economic construction, and the development of the DPRK's socialist cause has entered a new stage in history," Xi said, adding that China supports the DPRK's development path that accords with its national conditions. North Korea's Kim Jong Un and Chinese President Xi Jinping came to an understanding on issues discussed at a summit of the two leaders, including denuclearisation of the Korean peninsula, the North's state media said on Wednesday.

10. The European Commission is examining whether to extend measures to control imports of solar panels from China, a move that could fuel tensions with Beijing. The Commission is studying a request from at least one EU solar panel producer to open an "expiry review", according to EU sources familiar with the procedure.

II. Market Overview
FX
1. Global Market

The dollar was steady on Wednesday, hovering near an 11-month peak against a basket of major currencies as China's signal of tolerance of a stronger yuan offset anxiety about the global trade conflict. The greenback, as well as the yen and Swiss franc, remained well supported as traders braced for another possible round of U.S. tariffs against China. In U.S. afternoon trading, the dollar index was little changed at 95.090 after touching an 11-month peak of 95.299 earlier on Wednesday. The euro was marginally lower at $1.1579 and climbed 0.3 percent at 127.81 yen. The greenback rose 0.3 percent against the Japanese currency at 110.35 yen. Many emerging currencies steadied. The Mexican peso gained 0.7 percent on the day, while the South African rand rose 0.9 percent.

2. Home Market

China's yuan softened against the dollar in the morning session, as the People's Bank of China (PBOC) lowered the midpoint rate by 351 bps to an over five-month trough. Intensifying trade rift between Washington and Beijing buoyed risk appetite, and at the same time dampened market sentiment, a weight on yuan. the dollar index shall be closely watched.

Precious Metals

Gold prices dropped, remaining near a six-month low on Wednesday as the U.S. dollar hovered around 11 month peaks but was offset by festering global trade tensions, while platinum hit a 2-1/2-year trough. Spot gold closed at $1,267.70. U.S. gold futures for August delivery settled down $4.10, or 0.3 percent, at $1,274.50 per ounce. Platinum ended at $867.00 an ounce. Earlier in the session, it touched $854.50, its lowest since Feb. 3, 2016.

Commodities
Crude Oil

U.S. crude futures rose nearly 2 percent on Wednesday, supported by a drop in domestic inventories, while Brent edged down ahead of an OPEC meeting later this week that may result in increased global production. U.S. West Texas Intermediate (WTI) crude futures for July delivery, which expires on Wednesday, rose $1.15 to settle at $66.22 a barrel, a 1.8 percent gain. WTI futures for August closed 81 cents higher at $65.71. Brent crude futures for August delivery fell 34 cents, or 0.5 percent, to end at $74.74 a barrel.

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

U.S. Treasury yields on Wednesday rebounded from sharp falls in the previous session, as expectations of further U.S. interest rate increases diverted the market's attention from Washington's trade conflict with China. A slew of corporate bond supply also helped drive the sell-off in Treasuries, pushing yields higher, analysts said. In afternoon trading, U.S. benchmark 10-year yields rose to 2.927 percent. U.S. two-year yields were at 2.561 percent. The yield curve, meanwhile, steepened on Wednesday, with the spread between U.S. 5-year notes and 30-year bonds widening for a fourth straight session to 26.90 basis points.

2. Chinese bonds

Cash bond yields in China’s bond market softened in the morning session with yields of benchmark interest rate debts rising almost 2 bps. CFFEX Treasury bond yields also fell slightly. Profit-taking following the previous session’s sharp gains kept cash bond in check, but expectations that weakening stock market and economic downturn would deepen stimulus lingered, traders said. Cash bonds are expected to remain strong.

Stock Market
1. U.S. Equities

The Nasdaq closed at a record on Wednesday, lifted by a climb in large-cap tech and consumer discretionary names, while the Dow and S&P 500 were hemmed in as concerns over an escalation in the U.S.-China trade skirmish simmered. Names such as Facebook Inc up 2.3 percent, part of the so-called "FAANG" group, also rose. Alphabet advanced 0.5 percent and Amazon.com Inc rose 0.9 percent. The Dow Jones Industrial Average fell 42.41 points, or 0.17 percent, to 24,657.8, the S&P 500 gained 4.73 points, or 0.17 percent, to 2,767.32 and the Nasdaq Composite added 55.93 points, or 0.72 percent, to 7,781.52.

2.Hong Kong Equities

Hong Kong stocks tracked Asian shares to end higher on Wednesday, rebounding after the previous session's rout, as the surge in ZTE Corp helped sooth immediate panic over a Sino-U.S. trade war. The Hang Seng index ended 228.02 points or 0.77 percent higher at 29,696.17, while the China Enterprises Index closed 0.11 percent higher at 11,505.74 points. ZTE Corp closed 20 percent higher.

3. China Equities

China stocks closed higher Wednesday, on technical rebound boosted by steel and pharmaceutical names. But the downward momentum sustains with limited room for rebounding due to U.S.-China trade friction. The Shanghai Composite Index finished the session up 7.91 points or 0.27 percent at 2,915.73 points, after hitting as low as 2,872.16. The turnover of Shanghai A shares slumped to 153.2 billion yuan from previous session’s 240.9 billion yuan. The blue chip CSI300 index rose 0.40 percent to 3,635.44.