I. Yesterday’s News
International News

1. China lashed out on Wednesday at renewed threats from the White House on trade, warning that it was ready to fight back if Washington was looking for a trade war. In an unexpected change in tone, the United States said on Tuesday that it still held the threat of imposing tariffs on $50 billion of imports from China unless it addressed the issue of theft of American intellectual property. Ross is expected to try to get China to agree to firm numbers to buy more U.S. goods during a June 2-4 visit to the Chinese capital.

2. A senior North Korean official made a rare visit to the United States on Wednesday for talks about a possible summit between the leaders of the two countries but the sides appeared far apart on the central issue of Pyongyang's nuclear weapons. Kim Yong Chol arrived at New York's John F. Kennedy airport on a flight from Beijing. He was later seen entering a hotel in midtown Manhattan. Kim Yong Chol is due to meet with U.S. Secretary of State Mike Pompeo on Wednesday and Thursday to discuss whether to go ahead with an unprecedented meeting between U.S. President Donald Trump and North Korean leader Kim.

3. The European Central Bank is watching the political crisis in Italy but is unlikely to intervene at the moment, according to sources. Three sources at the ECB told Reuters that the central bank would not take any action because indicators are not yet showing signs of stress among banks. They also said they did not have the tools or mandate to solve what is essentially a political crisis. Market speculation about an ECB intervention has mounted as political parties in Italy repeatedly failed to form a government and the notion of a euro exit began to swirl, sending borrowing costs for the euro zone’s largest debtor soaring.

4. U.S. economic growth slowed slightly more than initially thought in the first quarter as consumer spending rose at its weakest pace in nearly five years, but activity is already picking up against the backdrop of a tightening labor market and tax cuts. Gross domestic product increased at a 2.2 percent annual rate, the Commerce Department said on Wednesday in its second estimate of first-quarter GDP, instead of the previously reported 2.3 percent pace. Separately, the ADP national employment report on Wednesday showed private sector payrolls increased by 178,000 jobs in May after rising 163,000 in April.

5. Saudi Arabia, other OPEC states and non-OPEC allies aim to stick to a global pact on cutting oil supplies until the end of 2018 but are ready to make gradual adjustments to offset any supply shortage, a Gulf source familiar with Saudi thinking said. The deal could be extended to achieve its objectives of keeping a balanced oil market, the source said, adding that, when needed, any rise in output would be "in a gradual and deliberate fashion."

Domestic News

6. Foreign Ministry spokeswoman Hua Chunying said at a briefing Wednesday. “China is committed to properly resolving relevant trade issues in a constructive manner through equal dialogue, which is in the fundamental long-term interests of the two countries and the two peoples.”

7. The Chinese manufacturing PMI was forecast to dip to 51.3 in May, suggesting China’s economy remains stable even as trade tensions build, according to a poll of economists by Reuters.

8. The International Monetary Fund (IMF) kept its 2018 forecast for China's economic growth unchanged at 6.6 percent, according to a statement released on Wednesday following a visit by an IMF team to the world's second-biggest economy this month.

9. The U.S. government plans to shorten the length of visas issued to some Chinese citizens, starting from June 11, a White House official said.

10. China will accelerate the formulation of measures to provide more financial support to small and micro businesses, central bank governor Yi Gang said. Small and micro businesses have played a crucial role in promoting innovation and entrepreneurship as well as improving employment and people's livelihoods. To ease the credit strain and high financing costs on small and micro enterprises, the People's Bank of China (PBOC) will work with other authorities to accelerate the formulation of relevant policies, Yi said.

II. Market Overview
FX
1. Global Market

The euro on Wednesday recorded its second-biggest daily rise against the dollar this year following reports that Italy's biggest party would make a renewed attempt to form a coalition government and end months of political turmoil. The euro rose 1.2 percent to a session high of $1.1676 on Wednesday. It remains down 4 percent this month against the dollar. The dollar index, which tracks the greenback against a basket of six currencies, fell 0.8 percent to a session low of 94.038. Against the greenback, the Canadian dollar strengthened as much as 1.4 percent on Wednesday after the country's central bank held interest rates steady but suggested that it could raise rates soon, possibly as early as July.

2. Home Market

China's yuan stumbled to its weakest in more than four months in the morning session, approaching the key mark of 6.43 during the session. Political turmoil in Italy and renewed U.S.-China trade war fears pushed the dollar higher, weighing on yuan. Yuan is expected to extend losses despite of demand of forex-selling at highs.

Precious Metals

Gold prices edged higher on Wednesday as the dollar wilted after U.S. data showed the U.S. economy slowed slightly more than initially expected in the first quarter while political uncertainty lingered in Italy. Spot gold closed at $1,301.03 per ounce, while U.S. gold futures for June delivery settled up $2.50, or 0.2 percent, at $1,301.50 per ounce.

Commodities
Crude Oil

Oil prices surged on Wednesday, shrugging off an unexpected build in U.S. crude stockpiles and rebounding from a four-day slump as Russia's central bank expressed caution on plans to boost oil supply. Brent settled up $2.11, or 2.8 percent, at $77.50 a barrel. U.S. crude gained $1.48, or 2.2 percent, to $68.21.

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

U.S. Treasury yields rose on Wednesday, reversing sharp losses the previous session fueled by the Italian political crisis, as financial markets stabilized after Italy sought to end its turmoil with a plan for a new government. In afternoon trading, U.S. 10-year yields rose to 2.842 percent, from Tuesday's 2.768 percent. U.S. 30-year yields were last at 3.014 percent, up from 2.967 percent late on Tuesday. On the short-end of the curve, U.S. 2-year yields were up at 2.415 percent, from Tuesday's 2.319 percent.

2. Chinese bonds

China’s cash bonds in the inter-bank market gaped down, while Treasury bonds rallied after opening higher as U.S. announced to impose tariff on imports from China,  renewing fears over a Sino-U.S. trade war. But losses in cash bond yields were largely pared as investors cash in profits.

Stock Market
1. U.S. Equities

U.S. stocks ended higher on Wednesday, and the S&P 500 and Dow registered their biggest daily percentage gains since May 4, on signs of easing political turmoil in Italy and as a surge in oil prices boosted energy stocks. The Dow Jones Industrial Average rose 306.33 points, or 1.26 percent, to 24,667.78, the S&P 500 gained 34.15 points, or 1.27 percent, to 2,724.01, and the Nasdaq Composite added 65.86 points, or 0.89 percent, to 7,462.45.

2.Hong Kong Equities

Hong Kong stocks fell to a three-week closing low on Wednesday, with investor sentiment dampened by the political crisis in Italy and renewed fears over a Sino-U.S. trade war. The Hang Seng index fell 1.4 percent, to 30,056.79, while the China Enterprises Index lost 1.59 percent, to 11,769.16 points.

3. China Equities

China's Shanghai Composite Index tumbled 2.5 percent, hitting a 19-month closing low, amid mounting panic provoked by political crisis in Italy, renewed U.S.-China trade war fears, and global selloff overnight. A slight rebound during the session failed to lift the across-the-board sellof. Further decline is quite likely in the coming sessions.