I. Yesterday’s News
International News

1. U.S. and Chinese officials ended two days of talks on Thursday with no major breakthrough as their trade war escalated with activation of another round of dueling tariffs on $16 billion worth of each country's goods. "We concluded two days of discussions with counterparts from China and exchanged views on how to achieve fairness, balance, and reciprocity in the economic relationship," White House spokeswoman Lindsay Walters said in a brief emailed statement. The discussions included "addressing structural issues in China," including its intellectual property and technology transfer policies, Walters said. The mid-level Trump administration officials participating in the talks would brief the heads of their agencies on the discussions, she added. Earlier, a senior Trump administration official downplayed chances for success, saying China had yet to address U.S. complaints about alleged misappropriation of U.S. intellectual property and industrial subsidies.

2. Protectionism and the threat of a global trade war are the biggest risks to the euro zone economy but growth for now remains firmly on the path seen earlier, European Central Bank policymakers concluded last month. In a meeting with few if any disagreements, rate setters shared the view that the bloc was performing as expected so no tweak to policy was needed, the minutes of the July 26 meeting showed on Thursday. The ECB agreed in June to end lavish bond buys by the close of the year and to keep rates steady at least through next summer, giving markets unusually long notice for its likely policy moves. “Uncertainties related to global factors remained prominent, in particular with regard to the threat of protectionism and the risk of an escalation of trade tensions,” the minutes showed.

3. Federal Reserve policymakers broadly agree that U.S. interest rates should rise further this year and next, despite U.S. President Donald Trump's displeasure with such a plan, two policymakers' comments underscored on Thursday. "Based on what I see today, I think two more rate hikes could be appropriate," along with several more next year as the Fed aims to move interest rates to a neutral setting of about 3 percent, Kansas City Fed Bank President Esther George told Bloomberg TV. Dallas Fed President Robert Kaplan, in a CNBC interview later in the day, said he sees three or four rate increases necessary over the next nine to 12 months. George is one of the Fed's most hawkish policymakers and in the past has consistently advocated a faster path of rate hikes than her colleagues. In the interviews aired Thursday, however, she took care to hedge that view, a possible signal that the Fed is reaching a point where rate-hike policy is less predictable. Kaplan also signaled he is concerned that fiscal-policy-fueled economic growth will fade next year, making more rate hikes unnecessary, or at least not as obvious.

4. The number of Americans filing for unemployment benefits fell last week, a sign the labor market was holding firm despite tensions between the United States and its trading partners that have led to tit-for-tat tariffs. Initial claims for state unemployment benefits slipped 2,000 to a seasonally adjusted 210,000 for the week ended Aug. 18, the Labor Department said on Thursday. It was the third straight week of declines for claims, which have dropped so low that economists have scrambled for explanations. In July, claims fell to their lowest level since 1969 even though the workforce is much larger than in prior decades.

5. The European Central Bank should roll back its stimulus programme now that inflation is consistent with its target, Bundesbank President Jens Weidmann said on Thursday, warning against a delay in normalisation after years of central bank support. The ECB agreed in June to end massive bond purchases by the close of the year, but Weidmann said this should be just the first step in a process that might take years. “It’s also time to begin exiting the very expansionary monetary policy and the non-standard measures, especially considering their possible side effects,” Weidmann told reporters. “This normalisation process will probably take place only gradually over the next few years. That’s exactly why it has been so important to actually get the ball rolling without undue delay,” he said.

6. Australian Prime Minister Malcolm Turnbull stubbornly clung to power on Thursday, as senior ministers deserted him, saying he would hold a second leadership vote on Friday if he received a letter signed by the majority of the ruling Liberal party. Turnbull said if he received the letter requesting a fresh vote, he would call a party meeting for midday on Friday (0200 GMT). If a leadership spill motion was then passed, he would not stand in the vote.

Domestic News

7. China will do more to ensure that its smaller enterprises enjoy ready access to affordable credit, a State Council executive meeting decided. Financial institutions will be incentivized to be more supportive of smaller businesses. Application requirements for such lending facilities were eased, new lending formats were introduced and the scope of qualified collateral widened.

8. China's State Council on Wednesday sent 31 inspection teams across the country to make sure major policies issued by central authorities are being effectively implemented. The priorities include the work on the "three tough battles" of controlling risk, reducing poverty and tackling pollution, rural revitalization strategy, expanding domestic demand and promoting opening-up, cutting red tape, lowering fees and taxes, improving the business climate, innovation, job creation, health and elderly care.

9. The value of China's trade with North Korea in July was valued at $195 million, Chinese customs data showed. Exports to North Korea in July were worth $177 million, while imports from North Korea came out at $171.4 million.

II. Market Overview
FX
1. Global Market

The U.S. dollar stanched a five-day losing streak on Thursday as a new round of punitive U.S.-China tariffs boosted the greenback and the annual Federal Reserve conference in Jackson Hole, Wyoming began. The greenback strengthened 0.67 percent against the offshore yuan, last trading at 6.891 yuan per dollar. The dollar index gained 0.55 percent to 95.687, moving off a near three-week low of 94.934 reached overnight. The euro was down about 0.55 percent at $1.153, easing from a two-week high of $1.162. The Australian dollar dropped 1.4 percent and was last at $0.724. The Japanese yen weakened 0.65 percent to 111.26 on safe-haven demand for the dollar.

2. Home Market

China's yuan slumped 333 bps to 6.8793 per dollar before paring most losses. The U.S. and China imposed fresh tariffs on $16 billion of goods they import from one another, fueling a new round of trade dispute. Officials from both countries are still conducting discussion.

Precious Metals

Gold prices slid on Thursday, under pressure from a stronger dollar as a prominent U.S. Federal Reserve official reaffirmed the central bank's intention to raise interest rates and punitive trade tariffs between the United States and China kicked in. Bullion failed to confirm its brief break on Wednesday through $1,200 an ounce, a key psychological level, as the dollar resumed its ascent a day later. Spot gold declined to $1,184.92 per ounce. Prices hit their highest since Aug. 13 at $1,201.51 in the previous session. U.S. gold futures for December delivery settled down $9.30, or 0.8 percent, at $1,194 per ounce.

Commodities
1.Crude Oil

Oil prices steadied on Thursday as the escalating trade war between the United States and China weighed on demand expectations a day after prices jumped on a big draw in U.S. crude inventories. Brent crude oil settled down 5 cents at $74.73 a barrel. U.S. light crude was 3 cents lower at $67.83 a barrel. Options activity showed some traders were guarding against the possibility of a sharp slide in U.S. crude prices. Still, he said, prices drew support from the bigger-than-expected draw in U.S. crude inventories reported on Wednesday by the Energy Information Administration (EIA).

2.Base Metals

Benchmark copper ended down 0.3 percent at $5,986.5 a tonne on Thursday as the trade dispute between the United States and China escalated and the dollar strengthened on expectations of higher U.S. interest rates soon. Aluminium gained 0.5 percent at $2,075, lead rose 2.1 percent to $2,055, tin lost 1.4 percent to $19,100 and nickel ceded 1.8 percent to $13,275.

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

U.S. Treasuries were little changed on Thursday ahead of a speech by Federal Reserve Chairman Jerome Powell on Friday, after minutes from the U.S. central bank's most recent meeting showed that further interest rate hikes are likely soon. Benchmark 10-year notes gained 1/32 on the day to yield 2.821 percent, down from 2.824 percent on Wednesday. The difference in yield between 2-year and 10-year notes narrowed to 20 basis points, the flattest yield curve since 2007.

2. Chinese bonds

Major repo rates fell across the board, with overnight weighted interest rates down almost 10 bps, as liquidity in China’s inter-bank market kept easing on month-end fiscal spending. The situation is expected to extend into the next month despite of net withdrawal by the central bank and more auction of local debts.

Stock Market
1. U.S. Equities

Wall Street's major indexes fell on Thursday as trade-sensitive stocks were hit by a fresh round of tariffs in the trade dispute between the United States and China. Shares of industrial giants Caterpillar Inc and Boeing Co, which have been bellwethers of trade sentiment, were among the biggest drags on the Dow. Caterpillar shares fell 2.0 percent, and Boeing shares fell 0.7 percent. The Dow Jones Industrial Average fell 76.62 points, or 0.3 percent, to 25,656.98, the S&P 500 lost 4.84 points, or 0.17 percent, to 2,856.98 and the Nasdaq Composite dropped 10.64 points, or 0.13 percent, to 7,878.46.

2. Hong Kong Equities
Hong Kong shares fell on Thursday as the U.S. and China imposed fresh 25-percent tariffs on $16 billion of goods they import from one another. The Hang Seng Index declined 0.49 percent or 137.2 points to 27,790.46, while the China Enterprises Index lost 0.33 percent to 10,814.6.

3. China Equities

Shanghai stocks closed slightly higher in a seesaw trading on Thursday, lifted by the psychological support of 2,700 and signs of state-owned institutions’ support. The impact of a new round of tariff between U.S. and China has already priced in. But turnover remained subdued. The Shanghai Composite Index rose 10.017 points or 0.37 percent to 2,724.626. The trading volume rose to 107.7 billion yuan from the lowest since January 7 2016 at 98.4 billion yuan.