I. Yesterday’s News
International News

1. Saudi Arabia and Russia are prepared to ease oil production cuts to calm consumers' worries they get adequate supply, the energy ministers for both countries said. Saudi Energy Minister Khalid al Falih said the easing of restrictions would be gradual in order not to shock the market. Russian minister Alexander Novak said current cuts were in reality 2.7 million barrels per day due to a drop in Venezuelan production - somewhere around one million barrels per day higher than the initially agreed cuts of 1.8 million bpd. He declined to say however whether OPEC and Russia could decide to boost output by one million bpd at their meeting on June 22.

2. Italian Prime Minister-designate Giuseppe Conte is still trying to assemble a cabinet team and has not yet decided whether to include the eurosceptic economist Paola Savona, a source from the anti-establishment 5-Star Movement said on Friday.

3. Falling business investment and the weakest household spending growth in more than three years marked a bad start to 2018 for Britain's economy, as official data on Friday confirmed it almost stagnated. Despite the Bank of England's doubts, the Office for National Statistics (ONS) stuck to its view that bad weather alone could not explain why the economy grew just 0.1 percent between January and March, its weakest performance since 2012.

4. The foreign ministers of the United States and South Korea agreed to continue working toward creating the right conditions for the United States and North Korea to talk, the South's foreign ministry said in a statement on Friday. South Korean Foreign Minister Kang Kyung-wha and U.S. Secretary of State Mike Pompeo held a phone call and made the remarks after U.S. President Donald Trump called off a June summit with North Korea, the statement said.

Domestic News

5. US Commerce Secretary Wilbur Ross will visit China from June 2 to June 4 for another round of talks, according to a report by Xinhua News Agency on Friday. The report says that Chinese Vice Premier Liu He—also the country’s chief negotiator in trade talks with the US—had spoken with Ross over the phone. The United States has not made a final decision on changes to its ban on ZTE , but any alternative remedy could include installing U.S. compliance officers at the Chinese telecoms company, Ross said on Thursday.

6. The Trump administration told lawmakers the U.S. government has reached a deal to put Chinese telecommunications company ZTE Corp back in business after it pays a substantial fine, places U.S. compliance officers at the company and changes its management team. The Commerce Department would then lift an order issued in April preventing ZTE from buying U.S. products.

7. China's foreign exchange regulator has started to allow non-banking institutions in the southern boomtown of Shenzhen to sell soured assets to global investors, two sources with direct knowledge of the matter told Reuters on Friday. Previously, only banks were allowed to sell bad loans to overseas institutions under a scheme that was launched in Shenzhen in mid-2017. The Shenzhen branch of the State Administration of Foreign Exchange (SAFE) has also simplified applications for such sales and cross-border funding transactions, one of the sources said.

8. China's banking and insurance regulator issued revised guidelines on Friday for commercial banks' liquidity risk management, part of efforts to improve supervision and risk control in the country's financial sector. The regulator said the revised guidelines will take effect from July 1, 2018.

II. Market Overview
FX
1. Global Market

The dollar rose against a basket of peers on Friday and was on pace to finish the week at its strongest since mid-November, as commodity-linked currencies fell following a slump in oil prices and as political concerns in Italy and Spain hurt the euro. The dollar index, which measures the greenback against a basket of six currencies, was up 0.44 percent at 94.166, after hitting a high of 94.249, its strongest since mid-November. The index was up 0.6 percent for the week. The U.S. dollar was 0.75 percent higher against the Canadian dollar, a more than two-week high. The Australian dollar was 0.37 percent lower against the greenback.

2. Home Market

China's yuan eased against the U.S. dollar on Friday as the central bank lowered its midpoint. Risk appetite improved on Friday morning and the dollar edged up against its major trading partners after U.S. President Donald Trump called off a June summit with North Korean leader Kim Jong Un.

Precious Metals

Gold prices dropped slightly on Friday, but still remained above $1,300 per ounce as investors digested news of U.S. President Donald Trump saying a meeting with North Korea's leader could still go ahead. Spot gold lost 0.1 percent at $1,303.34 per ounce, yet was on track for a weekly gain of 0.9 percent, its biggest since March. Spot gold earlier hit a 10-day high at $1,307.80. U.S. gold futures for June delivery settled down 70 cents, or 0.1 percent, at $1,303.70 per ounce.

Commodities
Crude Oil

Oil prices fell more than $2 per barrel on Friday as Saudi Arabia and Russia discussed easing production cuts that have helped push crude prices to their highest since 2014. Brent crude futures fell $2.35, or 3 percent, to settle at $76.44 a barrel. The global benchmark lost about 2.7 percent this week, its largest weekly drop since early April. U.S. West Texas Intermediate (WTI) crude slumped $2.83, or 4 percent, to finish at $67.88 a barrel. For the week, WTI tumbled about 4.9 percent, its biggest loss since early February, a sharp course reversal after six weeks of gains. The premium of Brent to WTI hit $8.60 per barrel, its widest in almost three years.

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

U.S. Treasury yields fell to their lowest level in three weeks on Friday as concerns about Italy’s new government and a leadership challenge in Spain boosted demand for low-risk debt. Month-end demand was also seen as boosting bonds. The 10-year notes gained 13/32 in price to yield 2.93 percent, down from 2.98 percent on Thursday.

2. Chinese bonds

China’s cash bonds in the inter-bank market were traded in a tight range on Friday, while Treasury bonds rebounded after dipping lower. The market was consolidating with unclear outlook, and investors were turning to China’s central bank’s moves after the Federal Reserve’s policy meeting in June, and the latest economic data, traders said. Market morale remained high as U.S. Treasury bonds went sour and liquidity eased at home.

Stock Market
1. U.S. Equities

The S&P 500 and the Dow eased on Friday after a steep drop in oil prices pressured energy stocks, but losses were limited by gains in chipmakers and retail stocks. The Dow Jones Industrial Average fell 58.67 points, or 0.24 percent, to 24,753.09, the S&P 500 lost 6.43 points, or 0.24 percent, to 2,721.33 and the Nasdaq Composite added 9.43 points, or 0.13 percent, to 7,433.85. For the week, the Dow was up 0.15 percent, the S&P 500 was up 0.31 percent and the Nasdaq gained 1.08 percent.

2.Hong Kong Equities

Hong Kong shares fell on Friday, amid renewed geopolitical worries after U.S. President Donald Trump called off a planned June meeting with North Korean leader Kim Jong Un. The Hang Seng index fell 172.37 points or 0.56 percent, to 30,588.04, while the China Enterprises Index lost 0.86 percent, to 12,047.75 points.

3. China Equities

China's major stock indexes fell to an over half-month-low on Friday, extending its losses to the third day, dampened by uncertainties in the near term and unexpected factors, and as debt risks of listed companies rose, analysts said. Investors were staying on the sidelines, awaiting the official launch of the MSCI index. The Shanghai Composite Index ended down 13.35 points or 0.42 percent at 3,141.30 points, within distance of previous low at 3,136.64 hit on May 7, while blue-chip CSI300 index fell 0.28 percent to 3,816.50 points.