I. Yesterday’s News
International News

1. The U.S. ambassador to Germany has told German car bosses that President Donald Trump would suspend threats to impose tariffs on cars imported from the European Union if the bloc lifted duties on U.S. cars, a German newspaper reported on Wednesday. Handelsblatt said Ambassador Richard Grenell told executives from Daimler, Volkswagen and BMW during a meeting that in exchange Trump wanted the EU to annul duties on U.S. cars imported to the bloc. A European Commission spokeswoman declined to comment on the report. She said Commission President Jean-Claude Juncker would discuss trade during talks with Trump in Washington later this month.

2. Iran could reduce its co-operation with the U.N. nuclear watchdog, President Hassan Rouhani told the body's head on Wednesday, after he warned U.S. President Donald Trump of "consequences" of fresh sanctions against Iranian oil sales. Rouhani said earlier in the day Tehran would stand firm against U.S. threats to cut Iranian oil sales. On Tuesday, Rouhani hinted at a threat to disrupt oil shipments from neighboring countries if Washington tries to cut its exports. He did not elaborate, but an Iranian Revolutionary Guards commander explicitly said on Wednesday Iran would block any exports of crude for the Gulf in retaliation for hostile U.S. action.

3. Trade barriers being erected by major economies could jeopardise the global economic recovery and their effects are already starting to show, the World Trade Organization said on Wednesday in a report on trade restrictions among G20 nations. "This continued escalation poses a serious threat to growth and recovery in all countries, and we are beginning to see this reflected in some forward-looking indicators," WTO Director General Roberto Azevedo said in a statement. He did not elaborate. "At a juncture where the global economy is finally beginning to generate sustained economic momentum following the global financial crisis, the uncertainty created by a proliferation of trade restrictive actions could place economic recovery in jeopardy," the WTO report said. It added that the world trading system was built to resolve such problems but the escalating tensions were a threat to the system itself, and G20 economies needed to use all means at their disposal to de-escalate the situation and promote further trade recovery.

4. Euro zone business growth accelerated in June, offering encouragement to the European Central Bank to tighten policy, but optimism among purchasing managers was at its lowest ebb since late 2016, a survey found. IHS Markit's Final Composite Purchasing Managers' Index for the euro zone, seen as a good overall indicator of growth, rose to 54.9 in June from May's 54.1, comfortably above the 50 mark separating growth from contraction. The future output index, which tracks business optimism, fell to 63.4 from 63.7 -- its lowest since November 2016.

5. Growth in Germany's services sector accelerated to the highest level in four months in June, a survey showed on Wednesday, adding to signs that consumption is fuelling an upswing in Europe's largest economy as exports weaken. Markit's final services Purchasing Managers' Index (PMI) rose to 54.5 from 52.1 in May, which was still below a near-seven-year high in January.

Domestic News

6. China will not implement additional tariffs ahead of the United States' tariff move, an official of the Customs Tariff Commission of the State Council said Wednesday. "The Chinese government has reiterated its stance that it will not fire the first shot and will not preempt the United States' move of imposing additional tariffs," the official said in response to a report of Japanese newspaper Asahi Shimbun. Both countries said that ehy will impose an additional tariff on imports worth about $34 billion on July 6.

7. Growth in China's service and composite PMI index accelerated in June, suggesting a sustained increase in services sector and overall economy. But input costs rose more than prices charged, putting pressure on firms‘ profit and confidence. The index of expectations regarding future output fell, suggesting less optimism across the manufacturing and service sectors.

8. A three-year plan for financial risk prevention and macro regulation is facing challenges as a trade dispute with the US, weaker-than-expected economic data, the sliding equities and yuan bruise sentiment. Chinese regulators have been trying to calm the volatile Chinese market by sending two clear signals: structural deleveraging has been steadily advancing in a well-ordered manner, and the strength and rhythm of structural deleveraging will be controlled.

9. Sun Guofeng, head of the central bank’s financial research institute, said "The prudent monetary policy remains neutral, it should neither be tight nor too loose," meaning that China will implement more cautious, more preemptive and more neutral monetary policy to balance banks’ credit and liquidity growth with economic growth and prices rise.

II. Market Overview
FX
1. Global Market

The euro fell on Wednesday as weaker confidence in the euro zone overshadowed better-than-expected data on business activity, while concern about Washington's end-of-week deadline to impose tariffs on Chinese imports crimped trading. Major currencies largely traded within ranges, however, with Independence Day celebrations in the United States discouraging traders from taking big positions, at least until it's clearer where the escalating U.S.-China trade war is heading and the extent to which Europe will become embroiled. The euro fell 0.1 percent to $1.1647. The dollar slipped against a basket of six major currencies to 94.600, remaining near 11-month highs. The Australian dollar took heart from solid domestic retail sales data and edged up before pausing at $0.7383. The British pound strengthened against both the dollar and the euro after better-than-expected service sector data.

2. Home Market

China's yuan rose above the mark of 6.62 against the dollar a day after the central bank assured markets, while the central midpoint rates continued to fall to around 6.66 per dollar. Cautious sentiment is expected to keep yuan in check as the day for China and the U.S. to impose additional tariff is coming.

Precious Metals

Gold rose to a one-week high on Wednesday, extending the prior session's rebound from a seven-month low, helped by a softer U.S. dollar and smoldering trade policy tensions, though the prospect of the Federal Reserve raising interest rates further may limit gains. Spot gold was up 0.3 percent at $1,256.20 an ounce after touching $1,261.10, a one-week high. U.S. gold futures for August delivery rose 0.4 percent to $1,258.10 in a shortened session and will not have a settlement price due to the U.S. Independence Day holiday on Wednesday.

Commodities
Crude Oil

Brent oil rose on Wednesday, driven higher by a threat from an Iranian commander and a drop in U.S. crude inventories for the second week in a row. The price rose above $78 a barrel after an Iranian Revolutionary Guards commander said he was ready to prevent regional crude exports if Iranian oil sales were banned by the United States. The most-active Brent futures contract for September delivery settled up 48 cents at $78.24 per barrel. U.S. crude futures were up 19 cents at $74.33 a barrel, within sight of Tuesday's 3-1/2-year high above $75 a barrel. The U.S. market will not have a settlement price due to the U.S. Independence Day holiday.

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

The U.S. bond market was closed for the Independence Day holiday.

2. Chinese bonds

The number of Chinese bonds under custody increased 808.5 billion yuan to 53.1265 trillion yuan by the end of June, as institutions built their holdings of growing local bonds, according to the latest data released by China Central Depository and Clearing Company (CCDC).

Stock Market
1. U.S. Equities

Wall Street was closed for the Independence Day holiday.

2.Hong Kong Equities

The Hang Seng index closed down 1.1 percent at 28,241.67

3. China Equities

Chinese stocks reversed a 2 percent decline to close in the positive territory on Wednesday, lifted by insurance and broker names. But yuan’s losses against the greenback picked up, battering market morale, before PBOC governor’s remarks calmed panic investors. GEM board rose across the board. The Shanghai Composite Index rose 11.33 points or 0.41 percent to close at 2786.89 points after hitting as low as 2,722.45.