I. Yesterday’s News
International News

1. President Donald Trump on Monday defended his decision to revisit penalties for Chinese company ZTE Corp, saying the telecom maker is a big buyer for U.S. Suppliers. Trump faced backlash from both Republican and Democratic lawmakers after he pledged to work with Chinese President Xi Jinping to help ZTE. "ZTE, the large Chinese phone company, buys a big percentage of individual parts from U.S. companies. This is also reflective of the larger trade deal we are negotiating with China and my personal relationship with President Xi," Trump said on Monday.

2. Three European Central Bank policymakers stuck with an upbeat assessment of the euro zone economy on Monday, shrugging off signs of a slowdown in inflation and activity. Bank of France governor Francois Villeroy de Galhau and ECB board members Sabine Lautenschlaeger and Peter Praet all said a recent easing of price growth was likely to be temporary, signalling the central bank was still on course to withdraw its monetary stimulus. Villeroy went as far as saying the ECB could soon clarify the timing of its first increase in interest rates since 2011, which he expects to happen "some quarters" after the end of its bond-buying programme.

3. A global oil glut has been virtually eliminated, figures published by OPEC showed on Monday, thanks to an OPEC-led pact to cut supplies that has been in place since January 2017 and due to rising global demand. Despite this, OPEC's latest report said producers were cutting more than required under the deal, while producers not party to the agreement, such as U.S. shale companies, were starting to face constraints on future output. The OPEC report said oil inventories in OECD industrialised nations in March fell to 9 million barrels above the five-year average, down from 340 million barrels above the average in January 2017.

4. Italy’s anti-establishment 5-Star Movement and far-right League won more time on Monday to put together a government, amid suggestions they were struggling to agree on a prime minister to enact their big-spending policies. Looking to end 10 weeks of deadlock following inconclusive elections, the two parties had been expected to present their coalition plans and the name of their candidate to head the new administration at a meeting with President Sergio Mattarella.

5. The U.S. yield curve could invert later this year to early 2019, St. Louis Federal Reserve James Bullard said on Monday, in a market move in which short-term U.S. interest rates rise above longer-term bond yields and which has preceded recent U.S. Recessions. With the risk of a curve inversion, there is no need for the U.S. central bank to quicken its pace of increases on short-term rates, Bullard said.

6. Israeli troops shot dead dozens of Palestinian protesters on the Gaza border on Monday as the United States opened its embassy to Israel in Jerusalem, a move that has fueled Palestinian anger and drawn foreign criticism that it undermines peace efforts. It was the bloodiest single day for Palestinians since the Gaza conflict in 2014. Palestinian Health Ministry officials said 55 protesters were killed and 2,700 injured.

Domestic News

7. China said Monday it will work with the U.S. to make progress in the talks later this week, and appreciates U.S. hints at a possible easing of sanctions on Chinese telecoms firm ZTE. Chinese vice premier Liu He will visit the United States from May 15 to 19.

8. There is no winner in a trade war, and the use of unilateral tariff threats as means to achieve economic ends is a mistake, read the report prepared by China Finance 40 Forum and Peterson Institute for International Economics (PIIE) Saturday on trade frictions between China and the United States. The report suggested expanding two-way cross-border direct investment, saying discussion between the two largest economies should focus on the “negative list”. Economic disputes, such as technology transfer, that cannot be addressed using the WTO mechanisms should be addressed by making new deals, it said.

9. Chinese Ambassador to the U.S. Cui Tiankai said U.S. concerns about the Made in China 2025 plan are unnecessary. "Right now, trade issues (between US and China) are very prominent. We could have a balanced approach to each other's concerns”, he said.

10. China's fiscal revenue rose 11 percent year on year to 1.8473 trillion yuan last month, with budget spending up 8.2 percent to reach 1.4696 trillion yuan, data from the Ministry of Finance (MOF) showed.

II. Market Overview
FX
1. Global Market

The dollar rose on Monday, erasing earlier losses, as investors questioned whether a rally that last week sent the greenback to more than four-month highs had run out of steam. The index fell as low as 92.243 on Monday, the lowest since May 2, before rising back to 92.619, up 0.09 percent on the day. The euro had strengthened earlier on Monday after European Central Bank policymaker Francois Villeroy de Galhau said that the ECB could give fresh guidance on the timing of its first rate hike as the end of its exceptional bond purchases approaches.

2. Home Market

China's yuan turned lower after opening high in a quiet session on Monday with the midpoint up 180 bps to a two-week peak. Yuan is expected to see limited potential on appreciation as the dollar index steadied, market appetite on forex settlement lowered and capital inflow firmed, traders said.

Precious Metals

Gold slipped on Monday as the U.S. dollar strengthened and precious metals prices remained within a tight range as investors awaited key U.S. Data. Spot gold lost at $1,312.42 per ounce, erasing earlier gains after the U.S. dollar, in which it is priced, turned positive. U.S. gold futures for June settled down $2.50, or 0.2 percent, at $1,318.20 per ounce.

Commodities
Crude Oil

Oil prices rose on Monday as OPEC reported that the global oil glut has been virtually eliminated, while U.S. crude's discount to global benchmark Brent widened to more than $7, its deepest in five months. Global benchmark Brent gained $1.11 to settle at $78.23 a barrel. West Texas Intermediate crude rose 26 cents to settle at $70.96. WTI's discount to Brent was as much as $7.28, its widest since Dec. 12 on surging U.S. output.

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

Treasury yields edged up on Monday, extending weekend gains as trade tensions eased a day after President Donald Trump pledged to help Chinese telecommunications company ZTE Corp, which has been penalized for violating U.S. sanctions with Iran. Monday's moves were modest, with the 2-year note yield gaining less than a basis point. Nevertheless, its peak at 2.552 percent in morning trade was the highest it has been since August 2008. The benchmark 10-year government yield remained range-bound, last at 2.993 percent.

2. Chinese bonds

Major cash bonds in China’s inter-bank market rose slightly on Monday with two benchmark T-bonds little changed. Lack of direction, renewing MLF by the central bank, and little eased liquidity failed to impost much effect, traders said. Investors shall focus on economic data due tomorrow in a choppy market.

Stock Market
1. U.S. Equities

Wall Street ended a choppy session slightly higher on Monday as weakness in defensive stocks offset optimism following U.S. President Donald Trump's conciliatory remarks toward China's ZTE Corp that calmed the waters of U.S.-China trade tensions. The Dow Jones Industrial Average rose 68.24 points, or 0.27 percent, to 24,899.41, the S&P 500 gained 2.41 points, or 0.09 percent, to 2,730.13 and the Nasdaq Composite added 8.43 points, or 0.11 percent, to 7,411.32.

2. Hong Kong Equities

Hong Kong stocks rose for a six straight session and hit a more than seven-week high on Monday, as Sino-U.S. trade tensions eased after U.S. President Donald Trump pledged on Sunday to help ZTE Corp "get back into business, fast." The Hang Seng index rose 1.35 percent, or 419.02 points to 31,541.08, while the China Enterprises Index gained 1.6 percent, to 12,544.55 points.

3. China Equities

China stocks rose slightly on Monday, extending gains in a volatile trading after investors took some profits. Correction is expected ahead of MSCI's final A-share inclusion list is released. The Shanghai Composite Index rose 10.77 points or 0.34 percent to 3,174.03 points, while the blue-chip CSI300 index rose 0.94 percent, to 3,909.29.