I. Yesterday's News
International News
1. U.S. Federal Reserve Chair Janet Yellen said on Tuesday that she does not believe that there will be another financial crisis for at least as long as she lives, thanks largely to reforms of the banking system since the 2007-09 crash. "Would I say there will never, ever be another financial crisis?" Yellen said at a question-and-answer event in London. "You know probably that would be going too far but I do think we're much safer and I hope that it will not be in our lifetimes and I don't believe it will be," she said. She also reiterated her view that the U.S. central bank would continue to raise interest rates only gradually.

2. The International Monetary Fund on Tuesday cut its growth forecasts for the U.S. economy to 2.1 percent for both 2017 and 2018, dropping its assumption that President Donald Trump's tax cut and fiscal spending plans would boost growth. The IMF, after a review of U.S. economic policy, said the Trump administration was unlikely to achieve its goal of annual GDP growth of 3 percent over a sustained period, partly because the labor market is at a level consistent with full employment. The U.S. economy grew 1.6 percent last year. The assumed stimulus from expected tax cuts and new federal spending spurred the IMF earlier this year to bump up its U.S. growth forecasts to 2.3 percent in 2017 and 2.5 percent in 2018.

3. A major global cyber attack on Tuesday disrupted computers at Russia's biggest oil company, Ukrainian banks and multinational firms with a virus similar to the ransomware that last month infected more than 300,000 computers. The ransomware virus crippled computers running Microsoft Corp's Windows by encrypting hard drives and overwriting files, then demanded $300 in bitcoin payments to restore access. More than 30 victims paid into the bitcoin account associated with the attack, according to a public ledger of transactions listed on blockchain.info. Security experts said they expected the impact to be smaller than WannaCry since many computers had been patched with Windows updates in the wake of WannaCry last month.

4. EU antitrust regulators hit Google with a record 2.4-billion-euro fine for favouring its own shopping service. European Union on Tuesday gave Google 90 days to stop favouring its own shopping service in internet searches or face a further daily penalty of up to 5 percent of parent company Alphabet's average daily global revenue. It is the biggest fine the European Commission has ever imposed on a single company in an antitrust case, exceeding a 1.06-billion-euro sanction handed down against U.S. chipmaker Intel in 2009.

5. The Bank of England plans to increase capital requirements for U.K. lenders by 11.4 billion pounds to tackle risks posed by the recent rapid growth in consumer credit. The BOE set the countercyclical capital buffer at 0.5 percent of risk-weighted assets for U.K. loans, and plans to increase the level again to 1 percent in November. Each increase of 0.5 percent will swell banks' cushion of common equity Tier 1, the highest-quality capital, by 5.7 billion pounds. However, many British banks have enough capital to meet the new requirements.

Domestic News
6. “Short-term and small fluctuations of economic indicators are unavoidable but the long-term steady trend will not change", China's Premier Li Keqiang said. "China's economy in the second-quarter maintained the first-quarter's steady and improving momentum. We are fully capable of achieving the main economic targets for the full year," Li said, adding that maintaining medium to high-speed long-term growth needs stable macro policy.

7. Echoing President Xi Jinping's speech at the 36th meeting of the Central Leading Group for Comprehensively Deepening Reform, Xinhua News Agency said in an article that more coordinated efforts are needed to implement the reform agenda as each reform will impose significant impact on other reforms.

8. China's insurance companies has invested 174.358 billion yuan in Hong Kong stocks via Shanghai-Hong Kong Stock Connect by now, of which 111,746 billion yuan is direct investment and 62.612 billion yuan is invested via insurance asset management products, said sources in the CIRC familiar with the matter.

9. China's Ministry of Finance will continue to auction three-year bonds on Wednesday. But the yields dropped sharply in the secondary market as cash bonds firmed. The auction yield is expected to come in below benchmark secondary market yield at around 3.42 percent if market morale fails to improve.

10. China's central bank said it will skip open market operations on Wednesday, for the third consecutive day, as liquidity levels in the banking system were "relatively high". "Fiscal expenditure was increasing toward the month-end, countering maturing reverse repos, with liquidity in the banking system staying at a relatively high level," the People's Bank of China said in an online statement. Maturing reverse repos will drain a net 10 billion yuan from the market for the day.

II. Market Overview
FX
1. Global Market
The dollar slid to 10-month lows against the euro on Tuesday after the head of the European Central Bank opened the door to steps that might begin to reduce the central bank's stimulus and after a vote on U.S. healthcare legislation was delayed. The euro surged against the greenback to $1.1349, its highest since late August 2016. The dollar eased from a more than one-month high against the Japanese currency of 112.46 yen, touched earlier in the session, and was last just 0.3 percent higher at 112.12 yen. The dollar index, which measures the greenback against a basket of six major rivals, touched a 13-day low of 96.344 . The dollar touched a more than seven-month trough against the Swiss franc of 0.9593 franc.

2. Home Market
China's yuan surged on Tuesday, hitting a one-week high of 6.8113 against the dollar. Offshore CNH followed, jumping almost 350 bps to 6.8248, regaining the ground lost in the past three days.

Precious Metals
Gold rose on Tuesday after hitting a six-week low in the previous session as bargain hunting set in and the dollar slid sharply after the U.S. Senate postponed a planned healthcare vote. Spot gold rose to $1,246.97 per ounce. It slumped to a six-week low of $1,236.46 on Monday. U.S. gold futures for August settled up 0.04 percent at $1,246.90.

Commodities
1.Crude Oil
Oil prices rose nearly 2 percent and hit a one-week high on Tuesday, boosted by a weaker dollar, short covering and expectations that crude inventories in the United States may decline for a third consecutive week. Brent crude futures, the international benchmark for oil prices, gained 82 cents, or 1.79 percent, to settle at $46.65 per barrel. U.S. crude futures ended the session up 86 cents, or about 1.98 percent, at $44.24 per barrel.

2.Base Metals
Zinc and copper prices touched a near three-month high on Tuesday as the dollar lost its lustre, while zinc also benefited from a decline in exchange stockpiles. Benchmark zinc on the London Metal Exchange closed 1 percent higher at $2,747 per tonne while copper ended up 1.1 percent at $5,858. Both metals earlier touched their highest since April 7. LME nickel ended up 2.5 percent at $9,260, its highest daily percentage jump in nearly three months.

U.S. Treasuries
1. U.S. Bonds
U.S. Treasury yields rose on Tuesday in sympathy with European government debt weakness after European Central Bank President Mario Draghi fueled expectations that the ECB is closer to announcing a reduction of stimulus. Benchmark 10-year notes dropped 18/32 in price to yield 2.20 percent, up from 2.14 percent late on Monday. The Treasury yield curve between five-year notes and 30-year bonds steepened after earlier falling to 92.70 basis points, the flattest level since late 2007. The difference between yields on two-year and 10-year notes also got as low as 76.80 basis points, its lowest level since Sept. 2.

2. Chinese bonds
China's interbank bond market firmed on loose liquidity on Tuesday with yields of cash bonds and IRS edging down. Yields of 10-year T-bonds was drawing near to the two-month trough hit last Tuesday. Upbeat report on industrial firms' profit in May was muted.

Stock Market
1. U.S. Equities
The tech-heavy Nasdaq led a broad Wall Street decline on Tuesday with stocks falling more sharply after a healthcare bill was delayed in the U.S. Senate, raising fresh questions about President Trump's domestic agenda. The benchmark S&P 500 posted its biggest one-day drop in about six weeks and closed at its lowest point since May 31. The Dow Jones Industrial Average fell 98.89 points, or 0.46 percent, to 21,310.66, the S&P 500 lost 19.69 points, or 0.81 percent, to 2,419.38 and the Nasdaq Composite dropped 100.53 points, or 1.61 percent, to 6,146.62.

2. Hong Kong Equities
Hong Kong stocks dipped on Tuesday, as any optimism from solid China industrial profit data was offset by the sour mood from a tumble in the growth enterprise market (GEM) for start-ups due to worries over potential policy changes. The Hang Seng index fell 0.1 percent, to 25,839.99, while the China Enterprises Index lost 0.3 percent, to 10,498.07 points.

3. China Equities
China's stocks closed slightly higher on Tuesday, hitting an over two-month high. Major stock indexes rose in a tight range, led by heavyweights, but with much lower trading volume. Some Hong Kong stocks tumbled, but posing limited impact on China's shares. The market is expected to remain rangebound, led by top winner coal sector. The Shanghai Composite Index closed at 3,191.20, up 5.76 points or 0.18 percent, not far from the 3,196.71 touched on April 18. The trading volume of Shanghai A shares fell to 167.4 billion yuan from 200.2 billion yuan.