I. Yesterday's News
International News
1. European Central Bank President Mario Draghi intended to signal tolerance for a period of weaker inflation, not an imminent policy tightening, when his comments sent the euro higher this week, sources familiar with Draghi's thinking said on Wednesday. Draghi's intention was to set up September as the earliest the bank would discuss rolling back stimulus, they said, but stressed it was by no means certain that it would come to a decision then. Draghi's comments on Tuesday, taken as a hawkish swing, sent the euro and bond yields sharply higher. The sources said Draghi wanted to acknowledge the recent, strong economic data and prepare the market for a possible autumn decision on the future of the ECB's bond-buying programme but without making any commitment.

2. A rise in British interest rates is likely to be needed as the economy comes closer to running at full capacity and the Bank of England will debate when to do so "in the coming months", BoE Governor Mark Carney said on Wednesday. In a noticeable shift in emphasis since his last speech on June 20, Carney did not repeat his phrase from then that now was not the time to raise rates. Markets immediately priced in a greater chance of an early rate rise. The pound rose to its highest level since Britain's June 8 election after the BoE released Carney's remarks. Gilt yields jumped as one measure of rate hike expectations rose to its highest since last year's vote to leave the European Union.

3. The Federal Reserve has approved plans from the 34 largest U.S. banks to use extra capital for stock buybacks, dividends and other purposes beyond being a cushion against catastrophe. The Fed said all those lenders had passed the second, tougher part of its annual stress test. The results showed that many have not only built up adequate capital buffers, but improved risk management procedures as well. Bank stocks edged higher after the stress test results. Citigroup and Morgan Stanley rose 2 percent and 1.5 percent respectively, while Bank of America, JPMorgan and Wells Fargo gained 1.8 percent, 0.9 percent and 0.7 percent.

4. An index measuring South Korea's business sentiment showed that manufacturers became a bit more pessimistic about economic conditions for July as worries about domestic demand continued, a central bank survey showed on Thursday. The Bank of Korea's manufacturing business survey index (BSI) for July ticked down to 81 on a seasonally adjusted basis, from 82 for June, the highest level since March 2014. A reading below the neutral 100 level means that more companies see deterioration in business conditions than improvements.

5. Japan's Toshiba Corp faced shareholders at its annual meeting on Wednesday with no deal in hand for the sale of its prized flash memory chip unit and a long list of humiliating setbacks to apologise for. Underscoring tensions between the two business partners, Toshiba CEO Satoshi Tsunakawa lambasted Western Digital at the shareholders meeting, claiming 120 billion yen in damages. Its shares dropped 1.84 percent.

Domestic News
6. China National Petroleum Corp has suspended sales of fuel to North Korea over concerns the state-owned oil company won't get paid, three sources told Reuters. It's unclear how long the suspension will last. 

7. The National Audit Office publicized its auditing results of twenty state-owned enterprises in China, including China National Petroleum Corporation, and China State Shipbuilding Corp, saying poor risk management in some firms' investment and operations. Out of all the 155 overseas transactions done by these enterprises, 61 of them put assets of approximately 38.5 billion RMB at risk. Bad investment decisions, loopholes in management, insufficient research, and untimely risk reduction are the major reasons behind the risks.

8. The National Development and Reform Commission released a guidance to support the construction of a railway system connecting suburban and downtown areas of mega cities and major economic zones within an hour. Districts include Beijing-Tianjin-Hebei circle, the Yangtze River delta, the Pearl River delta, middle reaches of the Yangtze River together with Chengdu and the Chongqing economic regions. 11 were listed as the fist batch of pilot projects, including the Subcenter line (Beijing West Railway Station - Tongzhou) and S5 line (Huangtudian - Huairou North Station) in Beijing, as well as Beijing- Jizhou, Tianjin-Jizhou, Tianjin-Yujiabao, Shanghai Hongqiao Airport - Shanghai Pudong Airport.

9. China's economy continued to improve in the second quarter, with corporate profits rising and hiring up, a private survey showed, but it suggested the Asian giant may have to brace for tougher times ahead even though firms have been able to weather a tighter financing environment, a quarterly survey by China Beige Book International (CBB) showed.

10. Despite its slowing overall GDP growth, China's consumer economy is still growing by 10 percent a year to reach $6.1 trillion by 2021. In the next five years, Chinese consumers are expected to add US$1.8 trillion in new consumption, which is roughly the size of Britain's consumer economy in 2021.

II. Market Overview
FX
1. Global Market
The U.S. dollar touched its lowest level against the euro in a year on Wednesday after hawkish comments from the head of the Bank of England added to speculation that monetary policy in Europe was turning hawkish. The dollar also was weaker in the wake of a decision on Tuesday to delay a U.S. Senate vote on a bill to repeal and replace Democratic former President Barack Obama's 2010 healthcare law. The euro rose as much as 0.5 percent against the dollar to a one-year high of $1.1390 after jumping 1.4 percent on Tuesday. The dollar index, which measures the greenback against a basket of six major rivals, fell as much as 0.4 percent to hit a more than seven-month low of 95.967. The dollar inched lower against the yen after hitting a more than one-month high of 112.46 on Tuesday.

2. Home Market
China's State Administration of Foreign Exchange said service trade deficit increased 23 percent to $22.5 billion in May from the previous month's $18.3 billion, of which travel deficit accounted for 80 percent. In the month, goods and service trade surplus fell to $23 billion from April's $23.4 billion.

Precious Metals
Gold prices rose on Wednesday as the dollar weakened for a second straight day following a global cyber attack and a delay to U.S. healthcare legislation that fueled doubts about President Donald Trump's ability to pass measures expected to boost the economy. Spot gold was up at $1,248.82 an ounce. It was on track to close June down 1.5 percent, but for the second quarter finish little changed. U.S. gold futures settled up 0.2 percent at $1,249.10.

Commodities
1.Crude Oil
Oil futures climbed more than 1 percent on Wednesday to their highest in more than a week as buyers were encouraged by a small weekly decrease in U.S. production and shrugged off a surprise build in crude inventories in the world's top oil consumer. Brent futures gained 66 cents, or 1.4 percent, to settle at $47.31 a barrel, while U.S. West Texas Intermediate crude rose 50 cents, or 1.1 percent, to settle at $44.74 per barrel.

2.Base Metals
Copper, lead and zinc prices hit near three-month highs on Wednesday boosted by sharp falls in the dollar, signs of tighter supply and optimism over Chinese demand, although worries about U.S. economic growth capped the upside. London Metal Exchange copper ended up 0.4 percent at $5,881 a tonne, having struck its highest since early April at $5,881.50. Zinc ended down 0.5 percent at $2,734 a tonne, having hit its highest since early April at $2,764, while lead closed up 0.4 percent at $2,296, having reached its strongest since early April at $2,302.

U.S. Treasuries
1. U.S. Bonds
Long-dated U.S. Treasury prices weakened on Wednesday as central banks in Europe were deemed to strike a more hawkish tone, even after reports that markets had misinterpreted comments by European Central Bank President Mario Draghi on Tuesday. Benchmark 10-year notes fell 7/32 in price to yield 2.22 percent, up from 2.20 percent late on Tuesday. The yield curve between five-year notes and 30-year bonds steepened to 95.8 basis points after falling to 91.9 basis points overnight, the lowest since late 2007.

2. Chinese bonds
China's interbank cash bonds and futures softened on Wednesday, with the yields of the most active bonds rising slightly, on higher yields of overnight U.S. Treasury bonds. But liquidity remained loose, providing a floor to credit bonds and the shorter-dated bonds. The pressure on the longer-dated bonds is expected to be light.

Stock Market
1. U.S. Equities
Wall Street stock rallied sharply on Wednesday, with the benchmark S&P 500 index scoring its biggest one-day percentage gain in about two months, as financial and technology stocks led a broad market rebound. The Nasdaq posted its best session since Nov. 7, the day before the U.S. presidential election. The Dow Jones Industrial Average rose 143.95 points, or 0.68 percent, to 21,454.61, the S&P 500 gained 21.31 points, or 0.88 percent, to 2,440.69 and the Nasdaq Composite added 87.79 points, or 1.43 percent, to 6,234.41.

2. Hong Kong Equities
Hong Kong stocks fell the most in nearly two weeks on Wednesday, with sentiment hurt by a stumble on Wall Street overnight and more losses on the city's second board following the previous session's nearly 10 percent slide. The Hang Seng index fell 0.6 percent to 25,683.50, while the China Enterprises Index lost 0.9 percent to 10,408.19 points.

3. China Equities
China's main stocks indexes fell in volatile on Wednesday, led by consumer stocks that rallied the most recently, and as blue chips subdued. Cyclical sector including coal names outperformed, signaling shift of hot themes. Consolidation is expected in the near term. The Shanghai Composite Index lost 18.00 points or 0.56 percent to 3,173.20 points. The trading volume of Shanghai A shares fell to 162 billion yuan from 167.4 billion yuan.