I. Yesterday’s News
International News

1. U.S. President Donald Trump warned the World Trade Organization on Monday that "we'll be doing something" if the United States is not treated properly, just hours after the European Union said that U.S. automotive tariffs would hurt its own vehicle industry and prompt retaliation. Trump, speaking to reporters during a meeting with Dutch Prime Minister Mark Rutte at the White House, said, "The WTO has treated the United States very, very badly and I hope they change their ways." His comments came after the Axios news website reported that Trump's administration has drafted proposed legislation that would allow Trump to raise tariffs at will and negotiate special tariff rates with specific countries -- two basic violations of WTO rules. Later on Monday, White House spokeswoman Sarah Sanders said Trump was focused on fixing problems in global trade, not on leaving the trade organization that has been a foundation of the postwar global trading system.

2. German Chancellor Angela Merkel’s conservatives settled a row over migration that threatened to topple her fragile governing coalition late on Monday evening after talks with her rebellious interior minister led him to drop his threat to resign. Emerging after five hours of talks, Horst Seehofer, leader of Bavaria’s Christian Social Union (CSU), told reporters he would remain in his post after a deal with Merkel’s Christian Democrats (CDU) that he said would stem illegal immigration.

3. A measure of U.S. manufacturing activity surged in June likely as steel and aluminum tariffs caused disruptions to the supply chains, resulting in factories taking longer to deliver goods. The Institute for Supply Management (ISM) said on Monday its index of national factory activity jumped to a reading of 60.2 last month from 58.7 in May. The survey’s new orders index slipped as did the measure of factory employment. The prices paid index also fell last month. A separate report from the Commerce Department on Monday showed construction spending increased 0.4 percent in May. Data for April was revised down to show construction outlays rising 0.9 percent instead of the previously reported 1.8 percent surge. The downward revision to April data could see economists cut further their second-quarter gross domestic product estimates. The dollar was trading higher against a basket of currencies on the escalating trade tensions. Prices for longer-dated U.S. Treasuries rose while stocks on Wall Street fell.

4. OPEC oil output rose last month as Saudi Arabia pumped at a near-record rate, a Reuters survey found on Monday, a sign the world's top exporter is heeding calls from the United States and other consumers for more oil. The Organization of the Petroleum Exporting Countries pumped 32.32 million barrels per day in June, the survey found, up 320,000 bpd from May. The June total is the highest since January 2018, according to Reuters surveys. Among other OPEC members, Algeria also increased output in June due to a diminishing impact from maintenance work and Iraq pumped more as its southern exports rose. Saudi Arabia's Gulf allies, Kuwait and the United Arab Emirates, have yet to follow the Saudi lead, keeping output steady in June, the survey found.

5. Dell Technologies Inc said on Monday it would pay $21.7 billion in cash and stock to buy back shares tied to its interest in software company VMware Inc, returning the computer maker to the stock market without an initial public offering. Dell said the agreement values its equity at between $61.1 billion and $70.1 billion. The transaction will allow Dell to bypass the traditional IPO process. It also means Dell will not have to raise any new money, because it will pay for the deal by issuing new shares and with a $9 billion dividend it will receive from VMware.

Domestic News

6. Growth in China's manufacturing sector cooled slightly in June dampened by a decline in new orders and export sales. But output kept picking up, suggesting expanding manufacturing production. While business confidence dropped the lowest year to end, as firms faced rising input costs and a decline in export orders amid an escalating trade dispute with the United States.

7. China will make it easier for foreign investors to access the country, protect their rights and ensure a fair and transparent investment environment, trade minister Zhong Shan said in comments. China is actively advancing opening-up to a higher level, by facilitating international trade, create a more attractive environment for foreign investment, and advance the Free Trade Area strategy, Zhong said

8. China will further improve its pricing mechanism to stimulate environmental protection and green development, according to a guideline issued by the National Development and Reform Commission (NDRC) Monday. China aims to establish a pricing mechanism and pricing policies in favor of green development by 2020. By 2025, the pricing mechanism will be further perfected and fully implemented, said the NDRC.

9. China releases full text draft of amendment to the Individual Income Tax Law, and solicits public opinions through July 28, quoting that the amendment will take effective from January 1, 2019.

II. Market Overview
FX
1. Global Market

The dollar started the third quarter on a positive note on Monday, benefiting from mounting global trade tensions and political developments in Europe, as investors scooped up the greenback as a safe-haven bet. Meanwhile, German Chancellor Angela Merkel was dealt a fresh blow when her interior minister offered to quit in an escalating row over migration policy, pushing the euro lower. The dollar index was up 0.4 percent at 95.035. The euro fell 0.6 percent against the dollar at $1.1615. The dollar extended gains against the Japanese currency to a new six-week high of 111.06 yen.

2. Home Market

China's yuan cut losses against the dollar in the morning session, while the midpoint rates rose 9 bps to snap an eight-day decline. China's central bank raised its guidance rates to stabilize market sentiment, but shifted expectation and demand out of bargain-hunting may pull yuan further lower in the near term, traders said.

Precious Metals

Gold slipped more than 1 percent to its lowest in 6-1/2 months on Monday ahead of a U.S. holiday, and platinum headed to its lowest in nearly 10 years as the greenback strengthened and an ongoing U.S.-European Union trade spat pressured precious metals. Spot gold was down 0.85 percent at $1,241.58 per ounce. U.S. gold futures for August delivery settled down $12.80, or 1 percent, at $1,241.70 per ounce. Platinum was down 4 percent at $815.24 an ounce after touching its weakest since December 2008 at $804.

Commodities
Crude Oil

Oil futures fell Monday as supplies from Saudi Arabia and Russia rose while economic growth stumbled in Asia amid escalating trade disputes with the United States. Brent crude fell $1.93 to settle at $77.30. U.S. light crude fell to settle down 21 cents at $73.94.

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

The U.S. yield curve held near its flattest level in over a decade on Monday as investors preferred longer-dated U.S. government debt over short-dated issues on worries that a global trade war would slow inflation and business activity worldwide. Anxiety about the viability of German Chancellor Angela Merkel's coalition government added safe-haven demand for U.S. and German government bonds, analysts said. Bond yields bounced back from session lows following solid U.S. data on domestic manufacturing activity in June and construction spending in May. The yield on 10-year Treasury notes edged up 1 basis point to 2.862 percent. The five-year to 30-year part of the U.S. yield curve stood at 23.8 basis points, 1 basis point flatter than late on Friday. It hit 22.8 basis points on Friday, which was the flattest level since July 2007.

2. Chinese bonds

China’s interbank bonds consolidated in weak momentum in the first trading session of the second part of the year, with cash bond yields approaching the closing prices of the previous session and Treasury bonds futures declining. Correction came after supportive regulation and liquidity easing last week. Weakening official and Caixin PMI report had a limited impact. Cash bonds were traded within a tight range, while futures still closed below water after paring some losses.

Stock Market
1. U.S. Equities

Wall Street ended higher on Monday after a choppy session, with gains in Apple and other technology stocks offsetting worries about an escalating trade war between Washington and its trading partners. Microsoft Inc, Facebook Inc and Apple Inc each rose 1 percent or more, pushing the S&P 500 information technology index up 0.99 percent. The Dow Jones Industrial Average rose 35.77 points or 0.15 percent to end at 24,307.18 points, while the S&P 500 gained 8.34 points or 0.31 percent to 2,726.71. The Nasdaq Composite added 57.38 points or 0.76 percent to 7,567.69.

2.Hong Kong Equities

Hong Kong stock market was closed on Monday.

3. China Equities

Chinese stocks took a battering to a 28-month trough on Monday, reversing last Friday’s gains. Shanghai Stock 50 Index hit a new low of 2,756.82 before recouping some losses. The Shanghai Composite Index tumbled 71.86 points or 2.52 percent to close at 2775.56 points - its lowest level since March 1, 2016 when 2,733.17 was hit.