I. Yesterday’s News
International News

1. The Trump administration on Tuesday said it will use a Great Depression-era program to pay up to $12 billion to help U.S. farmers weather a growing trade war with China, the European Union and others that the president began. It is a clear signal the U.S. President Donald Trump is determined to stick with tariffs as his weapon of choice in the conflict. The president reaffirmed his support for tariffs and pledged that "farmers will be the biggest beneficiary." The news lifted shares of farm equipment companies on the prospect that farmers will have more money to spend on tractors and other farm gear. Soybean future rose 1.2 percent and hit their highest in two weeks as traders bet farm aid would improve demand, reducing a current surplus supply.

2. The International Monetary Fund said on Tuesday that the U.S. dollar is over-valued, China's yuan is in line with fundamentals and nearly half of global current account balances are now excessive, adding to growth risks and trade tensions. The IMF, in its annual External Sector Report also said current account surpluses and deficits are becoming increasingly concentrated in advanced economies. The IMF said its staff estimated China's current account surplus grew slightly last year to 1.7 percent of gross domestic product and listed China among countries with excessive balances. Other excessive surplus countries cited by the IMF included Germany, South Korea, the Netherlands, Sweden and Singapore.

3. Chinese President Xi Jinping promised $14.7 billion of investment on Tuesday during a state visit to South Africa, South Africa President Cyril Ramaphosa said. Xi said China would take "active measures" to expand imports from Africa's most industrialised economy. The rand firmed more than one percent after Ramaphosa announced China's investment pledge. China’s inflation remained steady, the country's state planner said. Inflation is expected to slow in the second half of the year, with full-year consumer inflation to be around 1.8 percent and the producer price index to be about 3.5 percent, the National Development and Reform Commission said.

4. Dutch group Philips and three other consumer electronics companies were fined by EU antitrust regulators on Tuesday for imposing fixed or minimum online prices for their products. The ruling against the three firms followed a 17-month investigation by the European Commisssion as part of its crackdown on online sales practices such as price restrictions based on a customer's location or nationality. EU declined to comment.

5. Turkey's central bank left interest rates on hold on Tuesday, confounding market expectations of a rise and sending the lira sharply weaker, in its first policy decision since President Tayyip Erdogan was re-elected with new executive powers. The bank, already the focus of investors' concern over its perceived lack of independence from Erdogan, cited signs of weakening domestic demand as the reason for keeping the benchmark rate at 17.75 percent. Banks shares were also hammered while dollar bond yields rose, as did the cost of insuring Turkish debt against default.

Domestic News

6. China will continue with stable macro policies and adopt a combination of fiscal and financial measures in an effort to boost domestic demand and bolster support for real economy, the State Council's executive meeting chaired by Premier Li Keqiang decided on Monday. Prudent monetary policy will be neither too tight nor too loose, and aggregate financing and liquidity will remain sufficient, the meeting announced, adding that it will firmly refrain from resorting to a deluge of strong stimulus policies.

7. Profit growth in China's State-owned enterprises (SOEs) accelerated in the first half of the year, official data showed. Combined profits were up 21.1 percent year-on-year for the January-June period, according to the Ministry of Finance, which are 10.9 percentage points higher than revenue increases. SOEs in sectors including iron steel, oil, petrochemicals and non-ferrous metals posted dramatic profit increases, which are higher than revenue increases.

8. The impact of Sino-U.S. trade friction on China's industry was limited in the first half of the year, said Huang Libin, spokesperson of the Ministry of Industry and Information Technology. The U.S. tariffs may have a greater impact on the coastal provinces, machinery and electronics industries, and exporting companies, but will not affect the fundamentals of industrial development in China.

II. Market Overview
FX
1. Global Market

The euro ceded its gains on Tuesday as robust but lower-than-expected business growth data did not alter market expectations that rates in the United States and the euro zone will continue to diverge. The euro was trading 0.06 percent lower at $1.1684 after hitting an intraday high of $1.1717. Against the Japanese currency, the greenback fell 0.14 percent to 111.18 yen. Sterling was up 0.36 percent against the dollar at $1.315.

2. Home Market

Expectations of further loosening in monetary conditions drove the yuan down 266 bps to an over 1-year low of 6.81 per dollar. Earlier in the session, the China’s currency slumped 461 bps, nearing 6.83 per dollar amid mounting short bets. Major banks’ intervention helped yuan recoup some losses.

Precious Metals

Gold inched higher on Tuesday as the U.S. dollar slipped and market watchers anticipated U.S. economic growth data on Friday. Spot gold closed at $1,224.15 per ounce, while U.S. gold futures for August delivery settled down 10 cents, or 0.01 percent, at $1,225.50 per ounce.

Commodities
1.Crude Oil

Oil prices rose on Tuesday as the market shifted focus to the possibility of increased Chinese demand, drawing attention away from oversupply worries and trade tensions between China and the United States. Brent crude settled 38 cents higher at $73.44 a barrel, after it reached a session high of $74. U.S. West Texas Intermediate (WTI) settled up 63 cents, or nearly 1 percent, to settle at $68.52. Earlier in the day, WTI reached a high of $69.05.

2.Base Metals

Aluminium hit a two-week high on Tuesday as funds cut bets on lower prices placed in anticipation of sanctions on Rusal being lifted, with the market also factoring in an expected drop in supplies from China. Benchmark aluminium ended up 0.7 percent at $2,084.5 a tonne. The copper price closed up 2.7 percent at $6,295 from an earlier $6,328, matching the high on July 11.

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

The highest short-term yields in a decade helped the government sell $35 billion in two-year notes on Tuesday, bringing the yield curve down from its steepest levels in three weeks. The yield curve between two-year and 10-year notes flattened to 31 basis points after the auction, from 33 basis points earlier in the day, but above the 23 basis point area reached last week, which was the flattest level in a decade.

2. Chinese bonds

Chinese bond market diverged as expectations of further loosening in monetary conditions drove risk appetite up. The longer-dated bond yields in interbank bond market surged with the 10-year CDB active bonds up around 9 bps. Loose liquidity boosted the mid- and shorter-dated bonds, while credit bonds extended recent strength. CFFEX Treasury bonds weakened.

Stock Market
1. U.S. Equities

The S&P 500 on Tuesday closed at its highest level since Feb. 1 as Alphabet's blowout results bolstered expectations of a robust earnings season.
Alphabet Inc shares touched a record high of $1,275.00. The Dow Jones Industrial Average rose 197.65 points, or 0.79 percent, to 25,241.94, while the S&P 500 gained 13.42 points, or 0.48 percent, to 2,820.4. The Nasdaq Composite dropped 1.11 points, or 0.01 percent, to 7,840.77. It reversed course after having hit a record high earlier in the session.

2. Hong Kong Equities

Hong Kong stocks advanced Tuesday, tracking Chinese shares, as China’s property and banking sector led the market after the State Council's executive meeting send signs of more easing. The benchmark Hang Seng Index jumped 1.44 percent, or 406.45 points, at 28,662.57 points, while the China Enterprises Index, the H-share gauge, soared 2.26 percent, or 242.56 points, at 10,973.92.

3. China Equities

China stocks rose over 1.6 percent to one-month highs boosted by infrastructure sector on promises of more stimulus from Beijing. Technically, signs of overbought emerged in the short-term indicators after a three-day winning steak, suggesting a possible pullback. The Shanghai Composite Index closed up 46.02 points or 1.614 percent at 2,905.56 points.