I. Yesterday’s News
International News

1. Germany and China signed a raft of commercial accords worth some 20 billion euros ($23.5 billion) on Monday, with their leaders reiterating commitments to a multilateral global trade order despite a looming trade war with the United States. The deals involved German industrial giants including Siemens, Volkswagen and BASF. German Finance Minister Olaf Scholz agreed with Chinese central bank chief Yi Gang that German banks would promptly get market access in the financial sector in China, newspaper Handelsblatt cited sources involved in their meeting as saying. Handelsblatt also cited the sources as saying China's government had said that German companies and institutions would soon be able to issue bonds in renminbi in China.

2. Major Chinese ports have started clearing goods from the United States on Monday, as new tariffs on U.S. imports have gone into effect, three sources told Reuters. Local customs at the port of Qingdao have let through American products they held up on Friday, and imposed higher tariffs on the goods, according to a trader briefed by a customs official at the port. Shanghai customs has also started collecting new tariffs as of Monday on imported fruits and wine. Customs at the port of Dalian have updated their tariffs for the U.S. goods on Beijing's list to the higher levels, according to a soymeal buyer briefed by a customs official at the port.

3. Prime Minister Theresa May's foreign minister and Brexit negotiator quit on Monday in protest at her plans to keep close trade ties with the European Union after Britain leaves the bloc, stirring rebellion in her party's ranks. Foreign Secretary Boris Johnson resigned just hours after Brexit minister David Davis, emboldening some in her Conservative Party to mull a plot to unseat her less than nine months before Britain exits in March. The pound fell to trade as low as US$1.3259, down $0.005 the day, after Johnson’s resignation was announced. In response, May appointed in his place Jeremy Hunt.

4. The economic boost from U.S. President Donald Trump's $1.5 trillion tax cut will probably fall well short of most analysts' "overly optimistic" expectations, two economists wrote Monday in the San Francisco Federal Reserve Bank's latest Economic Letter. They wrote, "the true boost is more likely to be less than 1 percentage point," with some studies pointing to as little as zero. That is because fiscal stimulus has a large effect on economic activity when unemployment is high and personal finances are constrained, but it delivers much less of a jolt when the economy is strong, they wrote.

5. Rescuers in Japan dug through mud and rubble on Monday, racing to find survivors after torrential rain unleashed floods and landslides that killed at least 112 people, with dozens missing. Prime Minister Shinzo Abe cancelled an overseas trip to deal with Japan’s worst flood disaster since 1983, with several million people forced from their homes. Officials said the overall economic impact was not clear.

Domestic News

6. China’s economy was under downward pressure in June due to slower industrial production, lower investment, a Reuters survey showed. But consumption bounced off lows, and both CPI and PPI recovered compared with the previous month. 

7. China's state media said unilateral protectionism was a zero-sum game that will only end up harming not just others but also itself. Should U.S. insists on staging a trade war, it will lose the huge market of China, and miss more opportunities brought by China’s new round of reform and opening-up.

8. China’s Xinhua Agency said U.S.’s unilateral trade war imposed the biggest risk for steady development of global financial market, while China’s healthy financial system has rather strong resilience in dealing with difficulties and risks.

9. China will reimburse the buyer for the cost of the 25 percent tariff on soybean imports from the U.S. if the cargoes are for state reserves, according to people familiar with the matter.

10. The overall debt ratio of central SOE assets was decreasing steadily, with its debt structure improving, while the debt level of key SOEs in key sectors was also effectively controlled, making remarkable progress.

II. Market Overview
FX
1. Global Market

The British pound on Monday recorded its largest daily drop against the U.S. dollar in 3-1/2 weeks after two euroskeptic ministers announced their resignation from UK Prime Minister Theresa May's cabinet, leaving the British leader's Brexit plans in chaos. The pound fell 1.3 percent against the dollar to a daily low of $1.319. On the back of sterling's slide, the dollar index rose 0.5 percent against a basket of six major currencies to a daily high of 94.206. Against the euro, the dollar strengthened to $1.173. Investors appear to be ignoring the worsening trade conflict between the United States and China. The yuan rose more than half a percent in offshore markets to 6.614 against the dollar, putting it on course for its biggest one-day rise in more than three months and further away from June's lows.

2. Home Market

The yuan rose sharply in the morning session after the dollar weakened following U.S. payrolls data, despite the central bank lowered midpoint rates. Forex settlement and profit-taking also boosted yuan. In the afternoon session, the dollar’s decline pushed yuan up although forex buying at 6.62 per dollar put a halt to yuan’s upward move for a while.

Precious Metals

Gold rose on Monday, touching its highest in two weeks as the dollar weakened and the Chinese yuan recovered from June's lows, and gold stayed higher even as the dollar bounced up, as some investors bought bullion to cover short positions. Spot gold closed at $1,257.32 per ounce. The session high of 1,265.87 was its highest since June 26. U.S. gold futures for August delivery settled up $3.80, or 0.3 percent, at $1,259.60 per ounce.

Commodities
1.Crude Oil

Oil prices gained on Monday, with U.S. crude ending a choppy session higher on expectations for a Canadian production outage lasting until September, while global benchmark Brent gained on looming sanctions on Iran and falling output in Libya. U.S. light crude futures gained 5 cents to settle at $73.85 a barrel. Brent jumped 96 cents at $78.07.

2.Base Metals

Copper rallied on Monday alongside equities as worries about economic growth receded, but an escalating trade dispute between the United States and China is expected to cap prices. Benchmark copper on the London Metal Exchange ended up 1.7 percent at $6,390 a tonne. Cancelled warrants at 130,600 tonnes or more than 50 percent of lead stocks have created worries about shortages of the battery material on the LME market. Lead gained 0.3 percent to $2,339.

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

Treasuries yields rose on Monday as investors moved into equities and freed up cash for new Treasuries auctions this week, following a strong U.S. jobs report on Friday and a muted response to the start of U.S. tariffs on Chinese imports. The benchmark U.S 10-year note yielded 2.858 percent, up 2.7 basis points from Friday. The yield spread between 2-year and 10-year notes was at 29.50 basis points. Five-year and 30-year Treasuries were 21.50 basis points apart.

2. Chinese bonds

Cash bonds and bond futures were traded range-bound on Monday after the United States and China imposed tariffs on each others' goods and further opening-up of China’s share market pushed A-shares sharply higher. Slightly tighter liquidity ahead of incoming tax season also battered safe-haven sentiment. Market participants were waiting clearer signals from a slew of economic data due this week. The central bank is expected to hedge against any risks in the open market after the tax season.

Stock Market
1. U.S. Equities

U.S. stocks rose on Monday, giving the Dow and S&P 500 their biggest gains in more than a month, as bank shares jumped ahead of earnings reports later this week. The Dow Jones Industrial Average rose 320.11 points, or 1.31 percent, to 24,776.59, the S&P 500 gained 24.35 points, or 0.88 percent, to 2,784.17 and the Nasdaq Composite added 67.81 points, or 0.88 percent, to 7,756.20.

2. Hong Kong Equities

Xiaomi Corp 1810.HK, the first firm in Hong Kong to trade with a controversial dual-class structure weighted voting rights for different sets of shareholders, made a weak debut in Hong Kong on Monday, sliding below its IPO price in early trade on valuation concerns. Xiaomi shares closed the day at HK$16.80, 1.2 percent higher the IPO price.

3. China Equities

The Shanghai Composite Index surged 2.5 percent, its biggest one-day rise since May 2016, boosted by upbeat news on further opening-up of China’s share market. Financial and pharmaceutic sectors led the rally, but failed to lift turnover. Correction is expected due to overbought signs in near-term indicators after a two-day rally. The benchmark Shanghai Composite Index closed at 2,815.11, up 67.88 points or 2.47 percent. The turnover of Shanghai A shares fell to 135.5 billion yuan from Friday’s 148.1 billion yuan.