I. Yesterday’s News
International News

1. New applications for U.S. jobless benefits unexpectedly fell last week while producer prices rebounded strongly in April, pointing to a tightening labor market and rising inflation that could spur the Federal Reserve to raise interest rates in June. Initial claims for state unemployment benefits fell 2,000 to a seasonally adjusted 236,000 for the week ended May 6, the Labor Department said on Thursday, confounding economists' expectations for a rise to 245,000. The number of people still receiving benefits after an initial week of aid tumbled 61,000 to 1.92 million in the week ended April 29, the lowest level since November 1988. The labor market is close to full employment, with the unemployment rate at a 10-year low of 4.4 percent. Prices for U.S. Treasuries briefly fell on the data, with the yield on the interest rate sensitive two-year note rising to a near two-month high. Stocks on Wall Street declined, and the dollar was little changed against a basket of currencies.

2. Britain should enjoy solid growth if Brexit goes smoothly, but in the short run households are likely to be hit by inflation prompted by the decision to leave the European Union, the Bank of England said on Thursday. Governor Mark Carney, speaking a month before a national election, said the economy was still growing and employing a record number of people, playing down recent signs of weakness. The BoE also said on Thursday that its Monetary Policy Committee (MPC) voted 7-1 in favour of keeping rates on hold at their record low 0.25 percent, as expected in a Reuters poll. Sterling slipped after the Bank's announcement, which some investors had expected to show a deeper split among policymakers about the need for higher interest rates now.

3. OPEC on Thursday sharply raised its forecast for oil supply from non-member countries in 2017 as higher prices encourage U.S. shale drillers to pump more, hampering OPEC efforts to clear a glut and support prices by cutting its output. In a monthly report, the Organization of the Petroleum Exporting Countries revised up its estimate of oil supply growth from producers outside the group this year to 950,000 barrels per day (bpd), up from a previous forecast of 580,000 bpd. Oil prices pared gains on Thursday after the report was released to trade at $50.77 a barrel, below the $60 level that top OPEC producer Saudi Arabia would like to see. Prices are still up from about $48 a year ago.

4. Trade protectionism is a "dead end" that may score political points but will ultimately hurt the U.S. economy, one of the most influential Federal Reserve officials said on Thursday in the central bank's strongest defense yet of open borders in the face of a skeptical Trump administration. William Dudley, head of the New York Fed, did not mention U.S. President Donald Trump by name in a speech. But he gave a full-throated economic and even political argument for resisting trade barriers that he said would hurt growth and living standards in both the United States and around the world.

5. Japan's current account balance posted a stronger-than-expected surplus in March on solid income from overseas investments. The surplus of 2.91 trillion yen ($25.45 billion) marked the 33rd straight month in the black, finance ministry data showed on Thursday, and beat the median forecast for a surplus of 2.643 trillion yen in a Reuters poll of economists. Export-reliant Japan's persistent current account surpluses could elevate the thorny issue of trade imbalances with U.S. President Donald Trump's administration, which has pledged to rework the United States' current agreements with its major trading partners.

Domestic News

6. Xu Weigang, an official with the State Administration of Foreign Exchange (SAFE), said in an article that forex management will continue to push forward reform in key areas, better communicate with market to further facilitate trade investment. In the meanwhile, China will enhance warning mechanism on cross-border capital flow monitoring to support self-discipline, authenticity and compliance in banking sector and to crack down illegal activities.

7.Zhou Jingsong, an official in the Ministry of Finance said PPP legislation is underway in an orderly manner as expected, and regulators will solicit social advice on the provisions in the next one or two months.
 
8.Hebei executive vice governor, party secretary of Xiong’an New Area Yuan Tongli said Xiong’an will resolutely implement the "the house was used to live, not to stir”, take control of the new district and the surrounding counties and land prices to let low housing prices become the core competitiveness of the New District.

9. The Ministry of Finance said China is seriously concerned by the United States putting it on an intellectual property watchlist.

II. Market Overview
FX
1. Global Market

The dollar fell for the first time in five days against the yen on Thursday, as investors consolidated recent gains, with concerns related to the fallout of U.S. President Donald Trump's unexpected dismissal of Federal Bureau of Investigation chief James Comey also undermining the currency. Still, the outlook for the greenback is bright, especially after upbeat U.S. data on Thursday solidified expectations of an interest-rate hike by the Federal Reserve next month.

2. Home Market

China's yuan slipped against the dollar in the morning session with the midpoint rates off a seven-week low temporarily. Big banks continued to provide liquidity in the dollar amid demand for forex. Proprietary institutions preferred large turnover to building long positions in the dollar. Forex prices are expected to keep consolidating in the near term.

Precious Metals

Gold rose on Thursday as U.S. and European stock markets retreated, though it pared gains after data showing a tightening jobs market and accelerating inflation briefly lifted the dollar and pulled U.S. bond yields from earlier lows. Spot gold was up at $1,224.35, following eight sessions in which prices have been flat or fallen. Earlier it climbed as high as $1,227.70. U.S. gold futures settled up 0.4 percent at $1,224.20.

Commodities
1.Crude Oil

Oil prices rose for a second day on Thursday, closing more than 1 percent higher as support grew for OPEC output cuts a day after the U.S. government reported a big draw in crude inventories, boosting confidence that a global glut might diminish. U.S. light crude oil ended the day up 50 cents, or 1.6 percent, at $47.83. Brent settled at $50.77, up 55 cents or 1.1 percent. It was the highest closing price in a week for both benchmarks.

2.Base Metals

Copper prices rose on Thursday as funds cut bearish bets, but the sustainability of gains will depend on industrial activity and investment data from top consumer China next week. Benchmark copper on the London Metal Exchange finished up 0.8 percent at $5,543 a tonne after touching $5,627.50, its highest since May 3, earlier in the session. Nickel closed up 2.1 percent at $9,310 a tonne after an earlier one-week high at $9,385. Traders said nickel was also up on short-covering.

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

U.S. Treasury yields were little changed for a second day on Thursday after hitting their highest levels since March as losses in Wall Street stocks offset an April jump in producer prices and a poorly received 30-year bond auction. In tight, choppy trading, benchmark 10-year Treasury yield was down 1 basis point at 2.408 percent. The two-year Treasury yield, which is sensitive to traders' view on Fed policy, hit a near eight-week peak at 1.367 percent before subsiding to 1.347 percent, down 1 basis point on the day.

2. Chinese bonds

China’s government debt futures expanded gains in the afternoon boosted by MLF by the central bank. The benchmark 10-year bond futures CFTU7 closed up 0.76 percent, posting the largest one-day gain in two months. The yields of 10-year interbank government debt and CDB bonds eased sharply.

Stock Market
1. U.S. Equities

U.S. stocks fell on Thursday after worse-than-expected sales drops at Macy's and Kohl's sparked a selloff in shares of department stores and stirred fears that consumers are not spending enough to drive strong economic growth. The Dow Jones Industrial Average fell 23.69 points or 0.11 percent to end at 20,919.42 points and the S&P 500 lost 5.19 points or 0.22 percent to 2,394.44. The Nasdaq Composite dropped 13.18 points or 0.22 percent to 6,115.96.

2. Hong Kong Equities

The Hang Seng index added 0.4 percent, to 25,125.55 points. The Hong Kong China Enterprises Index gained 0.3 percent, to 10,257.63.

3. China Equities

The Shanghai Composite Index reversed the losing course, off the 7-month low hit during the session. Stocks continued to test bottoms in the morning, and closed in the positive territory with support at 3,000. Boosted by news of MLF operations by the central bank tomorrow, blue chips firmed, while mid and small caps with high value were weak.