I. Yesterday’s News
International News

1. Washington and Beijing both claimed victory on Monday as the world's two largest economies stepped back from the brink of a global trade war and agreed to hold further talks to boost U.S. exports to China. The biggest immediate beneficiary appeared to be China, which won a reprieve from threatened tariffs on $50 billion of its exports to the United States as well as a lifeline for ZTE Corp. The United States, meanwhile, appeared to have won promises of more imports by China, although there were no specifics. U.S. Commerce Secretary Wilbur Ross will travel to China next week to help finalize a trade agreement, Mnuchin said on Monday. The U.S. Commerce Department on Tuesday slapped steep import duties on steel products from Vietnam that originated in China after finding they evaded U.S. anti-dumping and anti-subsidy orders.

2. The United States on Monday demanded Iran make sweeping changes — from dropping its nuclear program to pulling out of the Syrian civil war — or face severe economic sanctions as the Trump administration hardened its approach to Tehran. Iran dismissed Washington’s ultimatum and one senior Iranian official said it showed the United States is seeking “regime change” in Iran. U.S. Secretary of State Mike Pompeo demanded sweeping changes that would force Iran effectively to reverse the recent spread of its military and political influence through the Middle East to the shores of the Mediterranean Sea. The speech added to the tension between the two countries. If Washington sees tangible shifts in Iran’s policies, it is prepared to lift sanctions, Pompeo said. The European Union largely dismissed Pompeo’s speech and said it remained committed to the full implementation of the nuclear deal.

3. Rising inflation means the Federal Reserve should hike interest rates two or possibly three more times this year, and could move as soon as next month, Philadelphia Fed President Patrick Harker said. Harker, a centrist at the U.S. central bank, said that while he currently sees two more rate rises this year, after an initial policy-tightening in March, “it is possible that we see an acceleration of inflation that I could be supportive of a third” rise. “That could be as early as June, I don’t know,” added Harker, who in February penciled in only two total rate hikes in 2018.

4. The German economy is in a strong upswing despite data showing growth in Europe's largest economy was weaker in early 2018 than in late 2017, the finance ministry said on Tuesday. Economic output grew by 0.3 percent in the first quarter after expanding by 0.6 percent in the last three months of 2017. The finance ministry said the slowdown was due to temporary factors like sickness and strikes hitting industrial production and an above-average number of public holidays for the quarter. "The German economy is in a strong economic upturn," the finance ministry wrote in its monthly report.

5.Italy's anti-establishment 5-Star Movement and the far-right League on Monday proposed Giuseppe Conte, a little-known law professor, as prime minister to lead their big-spending coalition government. But instead of immediately endorsing their choice, President Sergio Mattarella played for time, seeking further consultations over the appointment of a political novice to head a mooted administration. The leaders of 5-Star and the League have drawn up a coalition pact aimed at ending months of deadlock after inconclusive elections on March 4.

Domestic News

6. Economic and trade cooperation is the "cornerstone" and "propeller" of China-U.S. relations, and the healthy China-US economic and trade ties are in line with the historical trend, said the People’s Daily in an article. The consensus between the world’s two largest economies is not against China’s target to expend opening-up.

7. China’s economy will likely expand around 6.7 percent in the second quarter this year due to such measures as tax break, tariff cut and RRR cut, gradually took effect, the State Information Center (SIC) said in an article.

8. German Chancellor Angela Merkel said she would address trade issues such as reciprocal market access and intellectual property protections during her visit to China next week. The four-term German leader said both countries recognised the rules of the World Trade Organisation (WTO) and would push for increased multilateralism at a time of rising global concern about protectionist trade measures undermining growth.

9. China will "actively and steadily" deleverage and tackle financial risks in the short- and medium-term, two sources said on Monday, citing the country's five-year plan (2016-2020) for the financial sector. China will significantly boost the share of direct financing in its financial system, adding that regulators will increase oversight of the shadow banking sector and various online financial businesses.

II. Market Overview
FX
1. Global Market

The dollar advanced to a five-month high against a basket of currencies on Monday, as news of a truce between the United States and China on trade tariffs prompted investors to pare back short positions on the greenback. In late trading, the dollar index rose 0.1 percent to 93.681 after earlier hitting a five-month high above 94. This week, the dollar's fate rests on the Fed, with several of its officials speaking and the minutes of the U.S. central bank's last monetary policy meeting due to be released on Wednesday. In other currency pairs, the dollar rose to a four-month high against the yen at 111.39 and was last at 111.10, up 0.3 percent.

2. Home Market
China's yuan eased to a near four-month low against the U.S. dollar on Monday, due to a firmer dollar. But foreign exchange purchase eased yuan’s losses. Yuan is expected to pull back to the support of $6.4 as trade tensions between the world's two largest economic powers eased.

Precious Metals
Gold on Monday marked a new low for the year to date after U.S. Treasury Secretary Steven Mnuchin's declaration that a trade war between China and the United States was "on hold" helped boost appetite for higher-risk assets, such as stocks. Buoyancy in U.S. Treasury yields also weighed on appetite for non-interest-bearing assets, like bullion, analysts said. Spot gold fell to its lowest since late December at $1,281.76 an ounce, and was down at $1,292.29 per ounce. U.S. gold futures for June delivery settled down 40 cents, or 0.03 percent, at $1,290.90 per ounce.

Commodities
Crude Oil

U.S. crude hit its highest level since 2014 on Monday amid rising concerns that Venezuela's oil output could fall further following the country's presidential election and potential sanctions on the OPEC-member nation. U.S. crude futures settled 96 cents, or 1.4 percent, firmer at $72.24 a barrel, after touching $72.33, the highest since November 2014. In post-settlement trade, the benchmark hit a fresh 3-1/2 year high at 72.41. Brent crude futures gained 71 cents, or 0.9 percent, to settle at $79.22 a barrel.

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

U.S. Treasuries were steady on Monday as investors evaluated whether last week’s selloff that sent benchmark yields to almost 7-year highs was overdone, and before demand for U.S. debt will be tested by new supply. Two-year note yields, which are the most sensitive to rate hikes, rose as high as 2.598 percent on Thursday, the highest since August 2008, before falling back to 2.569 percent on Monday. Benchmark 10-year note yields rose to 3.128 percent on Friday, the highest since July 2011, before falling back to 3.069 percent on Monday. The Fed will release minutes from its May meeting on Wednesday, which will be further evaluated for indications of how many rate hikes are likely this year.

2. Chinese bonds

China’s cash bonds in the inter-bank market slid around 2 bps on Monday as Treasury bonds rose. Market sentiment was quiet on eased liquidity and as trade tensions between the world's two largest economic powers eased.

Stock Market
1. U.S. Equities

U.S. stocks rose on Monday and gains in industrials helped propel the Dow to a more than two-month closing high, after a truce between the United States and China calmed fears that a trade war might be imminent. The Dow Jones Industrial Average rose 298.2 points, or 1.21 percent, to 25,013.29, the S&P 500 gained 20.04 points, or 0.74 percent, to 2,733.01, and the Nasdaq Composite added 39.70 points, or 0.54 percent, to 7,394.04.

2. Hong Kong Equities

Hong Kong stocks rose on Monday, after U.S. Treasury Secretary Steven Mnuchin said Washington's trade war with Beijing was put "on hold", easing trade tensions that had damped risk appetite. The Hang Seng index rose 186.44 points or 0.6 percent, to 31,234.35, while the China Enterprises Index fell 0.04 percent to 12,349.61 points.

3. China Equities

China stocks hit a two-month peak on Monday, boosted by a U.S.-China trade war truce. The Shanghai Composite Index crossed above the key mark of 3,200 in a choppy trading after opening higher. But overbought in the near-term technical indicators and some technical pressure pared some gains late in the session. Consolidation is expected around 3,200.