I. Yesterday’s News
International News

1. U.S. President Donald Trump will meet with his trade advisers on Tuesday to discuss an offer by China to import an extra $70 billion of American goods over a year. Two sources with direct knowledge of the talks told Reuters there have been no discussions on what Washington would have to do in return. They said the Chinese offer included increased imports of agricultural and energy commodities as well as some manufactured goods. It was not clear whether Washington would accept the offer and whether it would be enough to avert a trade war.

2. ZTE Corp has signed an agreement in principle that would lift a U.S. Commerce Department ban on buying from U.S. suppliers, allowing China's No. 2 telecommunications equipment maker to get back into business, according to sources familiar with the matter. The preliminary deal includes a $1 billion fine against ZTE plus $400 million in escrow to cover any future violations, sources said. , adding that the terms were in line with Reuters reporting on the U.S. demands on Friday. A Commerce Department spokesman James Rockas said on Tuesday that "no definitive agreement has been signed by both parties."

3. Italy's new prime minister promised on Tuesday to bring radical change to the country, including more generous welfare and a crackdown on immigration, as the two party bosses nodded their approval. Conte said delivered his maiden speech in the upper house Senate, before winning a vote of confidence by 171-117 for his policy programme. "We have to reiterate it - leaving the euro has never been considered and it is not being considered," he said. Italian government bonds sold off on his remarks, which confirmed much of the coalition's budget-busting agenda.

4. The summit between U.S. President Donald Trump and North Korean leader Kim Jong Un will be on Singapore’s southern island of Sentosa, the White House said on Tuesday as preparations accelerated for next week’s event. White House spokeswoman Sarah Sanders said in a Twitter post that the venue would be the Capella Hotel on Sentosa and thanked Singaporeans for their hospitality.

5. The United States government has unofficially asked Saudi Arabia and some other OPEC producers to raise oil output, but it has not requested a specific figure, three OPEC and industry sources said on Tuesday. The U.S. request to raise output has been made unofficially from Washington to each of the oil producers rather than to the Organization of the Petroleum Exporting Countries as a group, the sources said.

6. U.S. services sector activity accelerated in May, pointing to robust economic growth in the second quarter, but trade tariffs and a shortage of workers posed a threat to the outlook. The Institute for Supply Management (ISM) said its non-manufacturing activity index jumped 1.8 points to 58.6, ending three straight monthly declines. The Labor Department's monthly Job Openings and Labor Turnover Survey, or JOLTS report showed job openings rising to a record high in April, far outpacing hiring. Strengthening economic growth and tightening labor market conditions likely seal the case for a Federal Reserve interest rate increase next week and raise the probability of two more hikes later in the year.

7. Mexico put tariffs on American products ranging from steel to pork and bourbon on Tuesday, retaliating against import duties on metals imposed by President Donald Trump and taking aim at Republican strongholds ahead of U.S. congressional elections in November. Mexico's response further raises trade tensions between the two countries and adds a new complication to efforts to renegotiate the NAFTA trade deal between Canada, the United States and Mexico. Meanwhile, Trump advisor Larry Kudlow revived the possibility on Tuesday that the president will seek to replace the trillion dollar North American Trade Agreement (NAFTA) with bilateral deals with Canada and Mexico, a move that both countries say they oppose.

Domestic News

8. The U.S. is reportedly considering sending warships through the Taiwan Strait, a move likely to stir outrage in Beijing at a particularly tense time in U.S.-China relations and in a sensitive moment of incoming Trump-Kim summit on nuclear issue.

9. The Chinese Ministry of Foreign Affairs (MOFA) said Monday Beijing will keep its door open for trade talks with the U.S.. "If the United States introduces trade sanctions including tariffs, all the economic and trade achievements negotiated by the two parties will be void," said a statement on Sunday.

10. The Caixin China Service PMI data and Composite PMI data were little changed in May with the previous month, indicating that growth of Chinese business activity remained modest in May. The sub-index of input and factory gate prices continued to rise to a two-month and five-month high respectively. The funding pressure faced by middle and small enterprises shall be closely watched.

11. As property prices rocket across China, Chinese government has appealed to the country’s banks and insurers to help accelerate the development of rental markets as a way of making homes more affordable – and rein in speculative sale markets.

12. China's Ministry of Ecology and Environment Monday held talks with party officials or government leaders from three regions for not doing enough to solve their environmental problems. The ministry named and shamed Shizhu county in Chongqing Municipality, Yulin City in Guangxi Zhuang Autonomous Region and Yichun in Jiangxi Province for seriously violating environmental regulations.

II. Market Overview
FX
1. Global Market

The dollar fell on Tuesday, reversing gains to a near six-month high, as the euro rallied after Italian Prime Minister Giuseppe Conte said the government had never considered leaving the euro zone. The euro also benefited as a media reported that the European Central Bank could conclude its next policy meeting this month with a public announcement on when its quantitative easing program would end, analysts said. The euro rose 0.1 percent against the dollar to $1.1712 , which pushed the dollar index, also 0.1 percent lower to 93.894. The peso and Canadian dollar fell to a more than one-year low against the dollar due to escalated trade tensions with U.S..

2. Home Market

China's yuan edged up against the dollar in the morning session, the midpoint rate inched up 51 bps off a 4-1/2-month low. The euro steadied as Italy’s political dysfunction eased, safe-haven sentiment cooled, while the dollar index were consolidating around 94, traders said. Yuan is expected to remain rangebound between 6.4-6.45 per dollar.

Precious Metals

Gold prices increased on Tuesday as the dollar retreated slightly from close to a six-month high even as strong U.S. economic data sealed the case for the U.S. Federal Reserve to increase interest rates. Spot gold closed at $1,295.73 per ounce. U.S. gold futures for August delivery settled up $4.90, or 0.4 percent, at $1,302.20 per ounce.

Commodities
Crude Oil

Brent crude reversed losses on Tuesday, after hitting its lowest price in nearly a month following a report the U.S. government asked Saudi Arabia and other major exporters to increase oil output. Brent crude futures rose 9 cents to settle at $75.38 a barrel, a 0.12 percent gain. It touched a low of $73.81, its lowest since May 8. U.S. West Texas Intermediate (WTI) crude futures rose 77 cents to settle at $65.52 a barrel, a 1.2 percent gain. Earlier, WTI hit a session low of $64.22, the lowest since April 10.

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

U.S. Treasury yields fell on Tuesday as traders piled back into lower-risk government debt after Italy's new prime minister vowed to enact economic policies that could balloon the nation's already-heavy debt load. Tuesday's buying of Treasuries was tempered ahead of the Treasury Department's announcement of next week's government debt auctions and the Federal Reserve's two-day policy meeting, analysts said. The yield on benchmark 10-year Treasury notes was 2.915 percent, down 2 basis points from late on Monday.

2. Chinese bonds

Bonds under custody rose 495.2 billion yuan to 5.23181 trillion yuan by the end of May, China Central Depository & Clearing Co,. Ltd. Said. But the growth was lower than April’s 666.4 billion yuan due to the lower net auction of book-entry treasury bonds. No pick-up was seen in the issuance of local bonds.

Stock Market
1. U.S. Equities

The Nasdaq closed at a record high for the second day in a row with help from the technology and consumer discretionary sectors, while the S&P 500 edged higher as investors eyed solid U.S. economic data. The Dow Jones Industrial Average fell 13.71 points, or 0.06 percent, to 24,799.98, the S&P 500 gained 1.93 points, or 0.07 percent, to 2,748.8 and the Nasdaq Composite added 31.40 points, or 0.41 percent, to 7,637.86.

2.Hong Kong Equities

Hong Kong shares rose slightly on Tuesday, with sentiment aided by a private survey showing China's services sector expanded at a steady pace in May. The Hang Seng index rose 95.47 points or 0.31 percent, to 31,093.45, while the China Enterprises Index gained 0.08 percent, to 12,259.32 points.

3. China Equities

China stocks extended gains for two straight days on Tuesday, boosted by tech names. Electric and computer sector led the rally due to investor bets on its annual developers conference. Market is expected to remain rangebound due to lackluster volume and momentum.