I. Yesterday’s News
International News

1. China and the United States plunged deeper into a trade war on Tuesday after Beijing added $60 billion of U.S. products to its import tariff list in retaliation for President Donald Trump's planned levies on $200 billion worth of Chinese goods. Beijing will impose levies on a total of 5,207 U.S. products - ranging from liquefied natural gas to certain types of aircraft as well as cocoa powder and frozen vegetables - at 5 and 10 percent, instead of previously proposed rates of 5, 10, 20 and 25 percent, the finance ministry said. Both countries' tariffs come into force on Sept. 24. China's yuan currency slipped against the dollar on Tuesday after news of the U.S. measures. It has weakened by about 6.0 percent since mid-June, offsetting the 10 percent tariff rate by a considerable margin. President Donald Trump on Tuesday left the door open for China to negotiate an end to the current trade war. Speaking to reporters, Trump said that the United States may make a deal at some point with China and that his country is always open to talking. U.S. Commerce Secretary Wilbur Ross said on Tuesday the next step on holding "constructive negotiations" was up to China. The Wall Street Journal reported that Beijing was considering sending Vice Commerce Minister Wang Shouwen to trade talks this month but not Vice Premier Liu He.

2. The United Kingdom and the European Union are close to agreeing an orderly Brexit, British Prime Minister Theresa May wrote in a German newspaper on Wednesday, urging the European Commission to evolve its position for the sake of a deal. EU leaders are due to meet in Salzburg in Austria on Wednesday and Thursday for talks that U.K. Brexit minister Dominic Raab has said would be an "important milestone". Raab said the government is sticking to its proposal for a post-Brexit border between its province of Northern Ireland and EU member Ireland, one of the major obstacles to an agreement. May wrote in Die Welt that a hard border either between Northern Ireland and the Republic of Ireland or between Northern Ireland and the rest of the U.K. would threaten peace and stability on the island. "So that frictionless movement is at the heart of the new proposals we put forward this summer," she added.

3. Russian Energy Minister Alexander Novak said on Tuesday that current high oil prices of between $70 and $80 per barrel were temporary and were mainly driven by sanctions, adding that the long-term price would stand at around $50 per barrel. He said the $50 per barrel forecast was based on estimates by analysts and oil companies. Novak also said he expected Russia's oil production in 2018 to total 553 million tonnes (11.105 million barrels per day), and that production would peak at 570 million tonnes in 2021.

4. Leaders of South and North Korea plan to announce steps aimed at rekindling stalled nuclear talks and deepening bilateral ties after they meet for a second day of summit talks on Wednesday in the North's capital Pyongyang. A joint statement expected from the two leaders at the conclusion of their talks on Wednesday will provide clues to whether negotiations between North Korea and the United States over dismantling Pyongyang's nuclear programmes could regain momentum.

5. Pay growth in Britain is accelerating "quite slowly", despite the unemployment rate falling to a more than four-decade low, Bank of England rate-setter Gertjan Vlieghe said in a newspaper interview published on Wednesday. A number of indicators showed employers were finding it increasingly hard to hire or keep the workers they need, putting some pressure on pay, Vlieghe told the Journal newspaper. Still, Vlieghe told the newspaper that progress towards faster pay growth had been sluggish. He cited the fact that many people are still classed as under-employed -- meaning there remains a pool of workers who would be happy to take on more hours -- as another reason for a slow pickup in pay growth, the Journal reported.

Domestic News

6. China said on Tuesday that it had no choice but to retaliate against new U.S. trade tariffs, raising the risk that U.S. President Donald Trump could soon impose duties on virtually all of the Chinese goods that America buys. A senior Chinese securities market official said U.S. trade actions will not work as China has ample fiscal and monetary policy tools to cope with the impact.

7. China's vice premier Hu Chunhua said the country's employment rate remained stable but could not be blindly optimistic about the labor market. He said China need to highlight key problems to make early preparations and enhance security, thus boosting confidence of the enterprises and the society as a whole.

8. China will work harder to promote infrastructure investment with a focus on areas that can efficiently boost productivity and address weak links as slowing infrastructure investment growth and sharply declining investment in new start projects showed lackluster investment growth, promote high-quality growth, according to the nation's top economic regulator, said Liu Shihu from the National Development and Reform Commission.

II. Market Overview
FX
1. Global Market

The dollar rose to a two-month high against the safe-haven Japanese yen and advanced modestly against the euro on Tuesday as investors appeared to discount rising trade-related tensions between the United States and China. The dollar, which initially slipped to a three-week low against the euro, recovered to trade up about 0.15 percent. Against the yen, the dollar was 0.46 percent higher. The Australian dollar rose 0.53 percent. Sterling fell from six-week highs as traders booked profits and investors struck a more cautious note about progress towards a Brexit deal ahead of a European Union summit this week.

2. Home Market

China's yuan currency inched higher against the dollar on Tuesday, while the guidance midpoints rates slipped to an over three-week low. The impact of Washington’s imposing duties on an extra $200 billion worth of Chinese imports was short-lived, pulling down the dollar index, while pushing up yuan. Yuan’s resilience surprised market participants, suggesting range-bound in the near term.

Precious Metals

Gold prices turned negative on Tuesday as the dollar strengthened following news that China would retaliate against a new round of U.S. tariffs on its goods. U.S. Treasuries also rose, helping boost the dollar but pressuring gold. Spot gold dropped to $1,197.61 per ounce in choppy trade. U.S. gold futures for December delivery fell 0.3 percent, at $1,202.90.

Commodities
1.Crude Oil

Oil futures rose more than 1 percent on Tuesday on signs that OPEC would not be prepared to raise output to address shrinking supplies from Iran, and as Saudi Arabia signaled an informal target near current levels. Brent crude futures rose 98 cents, or 1.3 percent, to settle at $79.03 a barrel. U.S. West Texas Intermediate (WTI) crude gained 94 cents to settle at $69.85 a barrel, a 1.4 percent increase.

2.Base Metals

Copper prices rallied on Tuesday as investors shrugged off new tit-for-tat tariffs by China and the United States to send stock markets higher and the dollar lower. Benchmark copper on the London Metal Exchange closed up 2.4 percent at $6,087 a tonne. LME zinc closed up 1.3 percent at $2,349 a tonne.

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

U.S. Treasury yields rose on Tuesday, as investors continued to price in more interest rate increases by the Federal Reserve this year and next and amid a heavy corporate bond schedule this week. In afternoon trading, U.S. 10-year yields were last at 3.044 percent. U.S. 30-year yields were at 3.193 percent, from Monday's 3.137 percent. U.S. 2-year yields, meanwhile, last traded at 2.798 percent, up from 2.786 percent on Monday.

2. Chinese bonds

Yields of China’s cash bonds inched up, while Treasury bond futures slipped underwater. Traders said both futures and cash bonds recovered in the morning session on escalating trade disputes between China and U.S.. But the former reverse the course and turned lower, while cash bond yields rose boosted by the news of government support to infrastructure investment and surging A shares.

Stock Market
1. U.S. Equities

Wall Street rebounded on Tuesday in a broad-based rally as investors brushed aside intensifying trade rhetoric between the United States and China. The Dow Jones Industrial Average rose 184.84 points, or 0.71 percent, to 26,246.96, the S&P 500 gained 15.51 points, or 0.54 percent, to 2,904.31 and the Nasdaq Composite added 60.32 points, or 0.76 percent, to 7,956.11.

2. Hong Kong Equities

Hong Kong shares rose on Tuesday, following a rise in China’s shares. The Hang Seng index rose 0.56 percent, or 151.81 points, to close at 27,084.66. The Hang Seng China Enterprises index closed 0.91 percent higher at 10,556.98. The Hang Seng Index declined 9.47 percent, and the Hang Seng China Enterprises index lost 9.8 percent since the start of this year.

3. China Equities

China's main Shanghai Composite index jumped 1.8 percent, posting the largest one-day increase in over three weeks. Market was muted to Washington’s plan of  imposing duties Chinese imports, and surged after the noon bell lifted by infrastructure sector. Major indexes are expected to steady in the near term as market value is bottoming. The Shanghai Composite index rose 48.16 points or 1.82 percent to 2,699.95 points. The trading volume rallied almost 30 percent to 112.9 billion yuan from previous session’s 86.9 billion yuan.