I. Yesterday’s News
International News

1. The Federal Reserve held interest rates steady on Wednesday and expressed confidence that a recent rise in inflation to near the U.S. central bank's 2 percent target would be sustained, leaving it on track to raise borrowing costs in June. The Fed's rate-setting committee also downplayed a recent slowdown in economic and job growth, saying activity had been expanding at a moderate rate and job gains, on average, had been strong in recent months. It said inflation had "moved close" to its target and currently forecasts another two increases this year. The Fed's policy statement made no mention of the economic risks posed by mounting trade tensions between the United States and other nations, particularly China. After the release of the Fed's statement, U.S. stocks and Treasury yields remained stable.

2. The Trump administration is considering issuing an executive order that would restrict some Chinese companies' ability to sell telecommunications equipment in the United States, two industry officials said, an action likely aimed at Huawei Technologies Co Ltd and ZTE Corp. A White House National Security Council spokesman said "While we have no comment on individual actions, protecting critical infrastructure, including the supply chains associated with such infrastructure, is a critical part of protecting America’s national security and public safety." Representatives of Huawei and ZTE could not be reached immediately for comment on the possible executive action, though both have denied allegations their products are used to spy.

3. U.S. President Donald Trump has all but decided to withdraw from the 2015 Iran nuclear accord by May 12 but exactly how he will do so remains unclear, two White House officials and a source familiar with the administration's internal debate said on Wednesday. "A decision by Trump to end U.S. sanctions relief would all but sink the agreement and could trigger a backlash by Iran, which could resume its nuclear arms program or “punish” U.S. allies in Syria, Iraq, Yemen and Lebanon, diplomats said."

4. North Korea's state media said on Thursday that China's state councillor Wang Yi met with the North's Foreign Minister Ri Yong Ho in Pyongyang where they discussed bilateral ties and issues regarding the Korean Peninsula. The report from state news agency KCNA did not go into detail on the issues discussed.

5. U.S. soybean sales to China ground to a halt after Beijing threatened tariffs on imports, the CEO of agricultural trader Bunge Ltd Soren Schroder said on Wednesday, the latest sign of mounting trade tensions upsetting the global flow of commodities.

Domestic News

6. China’s Xinhua News Agency reported that a U.S. delegation led by Treasury Secretary Steven Mnuchin, visiting as US President Donald Trump's special envoy, will exchange views on China-US economic and trade issues with Vice-Premier Liu He on Thursday and Friday.

7. The U.S. and China will hold talks on Thursday and Friday in Beijing over trade disputes. It seems that Washington is urgently and seriously wanting to resolve trade issues through talks. “But a dialogue will hardly work if the U.S. persists in pressing China to accept its conditions, and the U.S. delegation has to come with sincerity," said a Global Times editorial.

8. The Caixin China General Manufacturing PMI stood at 51.1 in April, higher than the previous month's figure of 51.0, marking strengthening of operating conditions. Despite of fast growth in output, new export orders further slipped below the key mark of 50 to 48.9, suggesting deteriorated external environment for manufacturers.

9. South Korea's finance minister Kim Dong-yeol said on Wednesday that there was a rise in the number of Chinese tourists in March although the service sector has not yet recovered from a drop in such visitors due to tensions between the two countries.

10. U.S. President Donald Trump's chief trade negotiator said on Tuesday he was not looking to negotiate changes to China's state-driven economic system in trade talks in Beijing this week but would seek to expose it to more foreign competition.

II. Market Overview
FX
1. Global Market

The U.S. dollar fell from 2018 highs set earlier on Wednesday after the Federal Reserve indicated it may allow inflation to run above its 2 percent target, raising concerns that monetary accommodation will stay loose even as they hike rates. The dollar index turned negative on the day, falling 0.10 percent to 92.358.

2. Home Market

China's yuan pared some losses after easing 200 bps to its weakest level in nearly 2-1/2 months against the U.S. dollar on Wednesday after the central bank set its yuan midpoint 277 bps lower to a three-month trough, reflecting the dollar's strength during the Labor Day Holiday. Yuan is expected to show further losses as the dollar’s strength would keep weighing on it.

Precious Metals

Gold prices extended gains on Wednesday after the U.S. Federal Reserve's dovish remarks weakened the dollar against a basket of currencies, yet bullion remained vulnerable to a possible rising greenback and weak investment demand. Spot gold was up 0.7 percent at $1,312.14 per ounce, while U.S. gold futures for June delivery settled down $1.20, or 0.1 percent, at $1,305.60.

Commodities
1.Crude Oil

Oil prices strengthened slightly ahead of the settlement Wednesday as the Federal Reserve held interest rates steady and expressed confidence that a recent rise in inflation would be sustained. July Brent futures settled up 23 cents at $73.36 a barrel. U.S. West Texas Intermediate crude futures settled up 68 cents at $67.93.

2.Base Metals

Copper and nickel bounced off multi-week lows on Wednesday as Chinese steel prices soared and a private survey showed growth in China's manufacturing sector unexpectedly picked up in April. Three-month copper on the London Metal Exchange ended up 1.1 percent at $6,820 per tonne. Nickel closed up 2.4 percent at $13,980, after hitting its lowest since April 12 on Tuesday.

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

U.S. Treasury yields for most maturities fell on Wednesday as a quarterly refunding program that aims to finance the country's massive fiscal deficit came in short of expectations, reducing the pressure on prices caused by the increase in debt supply. Yields, however, came off their lows after the Federal Reserve held interest rates steady at its monetary policy meeting, and said inflation was close to its 2 percent target. In afternoon trading, U.S. 10-year yields were at 2.970 percent, down from 2.976 percent late on Tuesday. U.S. 30-year yields, however, fell to 3.136 percent , from Tuesday's 3.137 percent. On the front end of the curve, U.S. two-year yields hit a 9-1/2-year high of 2.521 percent. They were last at 2.5012 percent.

2. Chinese bonds

Major cash bonds in China’s inter-bank market weakened on Wednesday amid lackluster buying demand despite of eased liquidity. 10-year CDB and government debt yields rose 3-4 bps, while benchmark T-bonds fell across the board earlier in the session.

Stock Market
1. U.S. Equities

U.S. stocks fell on Wednesday as potential U.S. restrictions on Chinese telecom companies reinforced investor concerns about worsening trade relations between the United States and China. The Dow Jones Industrial Average fell 174.07 points, or 0.72 percent, to 23,924.98, the S&P 500 lost 19.13 points, or 0.72 percent, to 2,635.67 and the Nasdaq Composite dropped 29.81 points, or 0.42 percent, to 7,100.90.

2. Hong Kong Equities

Hong Kong stocks fell on Wednesday, as investors braced for trade talks between U.S. and Chinese officials, and awaited the U.S. Federal Reserve's upcoming policy statement. The Hang Seng index fell 84.57 points or 0.27 percent to 30,723.88, while the China Enterprises Index lost 1.12 percent to 12,193.59 points. The Hang Seng index rose 2.69 percent, and the China Enterprises Index rallied 4.1 percent year to end.

3. China Equities

China stocks ended Wednesday slightly lower in a choppy trading as investors returning from the Labour Day holiday, and after new regulations on outbound investment were issued before the holiday. Individual stocks with disappointing earning results led the decline. The benchmark Shanghai Composite Index fell 1.05 points or 0.03 percent to 3,081.18. The turnover of Shanghai A shares fell to 168.1 billion yuan from Tuesday’s 179.4 billion yuan. The Hushen 300 Index ended at 3,763.65, up 0.18 percent.