I. Yesterday’s News
International News

1. The United States and South Korea have agreed to suspend a joint military exercise scheduled for August, South Korean and U.S. officials said on Monday, following President Donald Trump’s pledge to end “war games” after his summit with North Korean leader Kim Jong Un last week. “South Korea and the United States have agreed to suspend all planning activities regarding the Freedom Guardian military drill scheduled for August,” according to a South Korean defence ministry statement. A Pentagon statement confirmed the suspension and added that there would be a meeting between the secretaries of defence and state as well as Trump’s national security adviser on the issue this week. “We are still coordinating additional actions. No decisions on subsequent wargames have been made,” Pentagon spokeswoman Dana White said.

2. U.S. Secretary of State Mike Pompeo on Monday slammed China's trade practices as "predatory economics 101" and said statements by Beijing in recent weeks that it was moving to open its economy were "a joke." Pompeo said China's theft of U.S. intellectual property "is at an unprecedented level of larceny" and he had raised the issue in talks last week with China's President Xi Jingping. Pompeo said excess Chinese steel and aluminum production had flooded the market and suppressed global prices for the metals, making it hard for American companies to compete. "This is predatory economics 101, and many other countries have recognized this," said Pompeo, "President Trump is now working to re-shift this balance."
The U.S. Commerce Department has determined that Chinese common alloy aluminum sheet products are being sold in the U.S. market at less than fair value and will be subject to preliminary anti-dumping duties of 167.16 percent, the Aluminum Association said on Monday. The trade group, which typically announces the findings of Commerce anti-dumping and anti-subsidy probes involving aluminum before the agency does, applauded the decision.

3. The U.S. economy "appears to be in a pretty good place" that should let the Fed continue its steady program of raising interest rates, Atlanta Federal Reserve bank president Raphael Bostic said on Monday, though he feels only one more such increase is needed this year. "I am still at three" rate increases for the year, Bostic said. "We are going at a nice steady pace and I am going to let data inform how rapidly I think we need to be moving...I have not seen anything to suggest we need to do more."

4. The German economy should rebound in the second quarter after a weak start to the year, the Bundesbank said on Monday, as a wave of flu dissipates and state spending rises. "After subdued growth at the start of 2018, the German economy should expand at a stronger pace in the spring," the Bundesbank said in its monthly report. The Bundesbank said that in addition to higher state spending, a humming construction sector and strong private consumption should help the economy in the second quarter. It added that any rebound would not match the high growth levels seen last year, mainly because of weak activity in the industrial sector. While it raised its 2019 estimate to 1.9 percent from 1.7 percent, Bundesbank President Jens Weidmann injected caution in an otherwise positive economic outlook.

5. Japan's exports rose in May at the fastest rate in four months thanks to increased shipments of cars, car parts, and semiconductor equipment, a sign that global demand is gaining strength. Exports rose 8.1 percent in May from the same period a year ago, more than the median estimate for a 7.5 percent annual increase expected by economists in a Reuters poll. In April, exports grew an annual 7.8 percent.

6. Britain's economy could grow at the slowest rate since 2009, courtesy of Brexit uncertainties, fears of a trade war, and higher oil prices, the British Chambers of Commerce (BCC) said on Monday. The BCC now sees Britain's economy expanding 1.3 percent in 2018 vs the previous forecast of 1.4 percent and also cut its outlook for 2019 to 1.4 percent. "The economy is in a torpor, with uncertainties around Brexit, interest rate rises, and international developments such as a possible trade war and rising oil prices all having an impact," the BCC said.

Domestic News

7. Chinese telecoms equipment maker Huawei Technologies refuted Australian claims it poses a security risk, calling the criticism "ill-informed" in an open letter on Monday that threatens to inflame already heightened Sino-Canberra tensions. Australia is likely to ban Huawei from participating in a 5G mobile telecommunications roll-out in the nation as it fears the company is de facto controlled by China and sensitive infrastructure will fall into the hands of Beijing, according to Australian media reports. Huawei denies the allegations, and, in a move that threatens to draw Australian politicians into a public spat that will further stain relations with China, dismissed Canberra's security concerns.

8. The PBOC has maintained a prudent and neutral monetary policy and stepped up efforts in policy fine-tuning, which "achieved sound results," the central bank said. It said risks in its bond market were generally controllable and the default rate was not high. According to the bank, China's economy remained resilient with stable indicators, and will continue to see stable, healthy growth in the medium and long run. The PBOC will closely track economic and financial changes at home and abroad, and make more efforts to fend off external impacts, stabilize market expectations, and ensure stable financial development.

9. China will release revised negative lists aimed at expanding market access for foreign investors before July 1. The State Council, China's cabinet, on Friday approved more foreign investor-friendly measures to further open up and promote economic development. According to the notice, financial-sector opening up will be further pushed. The mechanism regarding qualified overseas investors will be improved and foreign investors will be encouraged to participate in underwriting local government bonds.

II. Market Overview
FX
1. Global Market

Anxiety about a global trade war spurred demand on Monday for the Japanese yen and Swiss franc, while the euro remained under pressure due to a dispute in Germany's governing coalition and expectations the European Central Bank will hold interest rates steady into 2019. The ongoing trade dispute between the United States and China knocked the yuan to 6.4600 per dollar, its weakest in five months in the offshore market. The yen was up nearly 0.2 percent against the dollar at 110.48 yen and about 0.1 percent higher versus the euro at 128.32 yen in early U.S. Trading. The Swiss franc notched a 0.3 percent increase against the greenback at 0.9943 franc and a 0.2 percent gain versus the euro at 1.1550 franc . The dollar was steady against the euro at $1.1615.

2. Home Market

China's market was closed for public holidays.

Precious Metals

Gold on Monday held close to 5-1/2-month lows, with a strong dollar offsetting the upward influence of an escalating trade dispute between the United States and China. Spot gold closed at $1,277.91 an ounce, while U.S. gold futures for August delivery settled up $1.60, or 0.1 percent, at $1,280.10 per ounce.

Commodities
Crude Oil

Oil prices rose on Monday in volatile trade as market participants lowered their expectations for how much OPEC might increase production and investors assessed the impact of a trade dispute between the United States and China. U.S. crude oil rose 79 cents a barrel to settle at $65.85. The contract traded at a two-month low of $63.59 early in the session. Brent crude jumped $1.90 to $75.34 a barrel.

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

U.S. long-dated Treasury yields drifted higher on Monday, as stocks on Wall Street trimmed losses, in thin trading after a hectic week when the Federal Reserve struck an upbeat tone on the American economy. In afternoon trading on Monday, U.S. 10-year yields were at 2.927 percent, up from Friday's 2.924 percent. U.S. 30-year yields rose to 3.056 percent, compared with 3.047 late on Friday. On the short end, U.S. two-year yields were at 2.557 percent , up slightly from 2.553 percent on Friday.

2. Chinese bonds

China’s bond market was closed for public holidays.

Stock Market
1. U.S. Equities

The Dow and S&P fell modestly on Monday, ending well off session lows, as gains in energy shares helped curb declines stemming from trade war concerns after China's retaliation to U.S. Tariffs. The Dow Jones Industrial Average fell 103.01 points, or 0.41 percent, to 24,987.47, the S&P 500 lost 5.79 points, or 0.21 percent, to 2,773.87 and the Nasdaq Composite added 0.65 points, or 0.01 percent, to 7,747.03.

2.Hong Kong Equities

Hong Kong’s stock market was closed for public holidays.

3. China Equities

China’s stock market was closed for public holidays.