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ICBC Financial Market Daily Review-September 13, 2017

I. Yesterday's News
International News
1. Major U.S. allies in Asia on Tuesday welcomed the U.N. Security Council's unanimous vote to step up sanctions on North Korea, with its profitable textile exports now banned and fuel supplies to the reclusive North capped after its sixth nuclear test. North Korea haven't respond to the the newest sanctions. U.S. President Donald Trump said on Tuesday the U.N. sanctions on North Korea agreed this week were a small step and nothing compared to what would have to happen to deal with the country's nuclear program.

2. OPEC on Tuesday forecast higher demand for its oil in 2018 and pointed to signs of a tighter global market, indicating its production-cutting deal with non-member countries is helping to tackle a supply glut that has weighed on prices. In a monthly report, the Organization of the Petroleum Exporting Countries said the world would need 32.83 million barrels per day (bpd) of OPEC crude next year, up 410,000 bpd from its previous forecast. The report also said OPEC's output in August declined by 79,000 bpd from July. OPEC's compliance with its pledged output cut stands at 83 percent, according to a Reuters calculation, down from 86 percent initially reported for July. OPEC raised its forecasts for global oil demand growth in 2017 and 2018, saying consumption would rise by 1.35 million bpd next year, 70,000 bpd more than previously thought.

3. Japan Prime Minister Shinzo Abe said he wants the country's central bank to focus on monetary policies geared at achieving its 2 percent inflation target, regardless of who becomes the next Bank of Japan governor, the Nikkei newspaper said on Wednesday. "It's important for Japan to reach a stage where inflation rises above 2 percent and stabilise at that level," he told the financial daily in an interview that ran on Wednesday. He also said there was no change to his plan to raise Japan's sales tax to 10 percent from 8 percent in October 2019.

4. British consumer prices overall increased by 2.9 percent compared with a year earlier, hitting its joint highest in more than five years in August as households paid more for fuel and clothing, complicating the Bank of England's job this week of explaining why it is not raising interest rates.

Domestic News
5. China's Premier Li Keqiang said global economy is showing positive signs, but still remains fragile, urging other countries to support economic growth by structuring reform and free trade, instead of QE. China will not seek yuan's competitive depreciation and China's economy will remain stable and keep improving, he said.

6. China's ban on initial coin offerings (ICO) is a necessary move to stop illegal fundraising and pyramid schemes but should not stop firms from studying blockchain technology, Sun Guofeng, director general of the People's Bank of China's research institute, said. "In general, financial technology still holds strong risk characteristics and we must strengthen supervision," he said, adding that China need to build a sustainable supervision and science & technology development system to cut supervision cost.

7. China's U.N. ambassador, Liu Jieyi, urged North Korea to "take seriously the expectations and will of the international community" and called on all parties to remain "cool-headed" and not stoke tensions. China's Big Four state-owned banks have stopped providing financial services to new North Korean clients, citing branch staff.

II. Market Overview
1. Global Market
The U.S. dollar on Tuesday clung to the previous day's gains, supported by a bounce in Treasury yields and ahead of U.S. inflation data that could influence the timing of the next Federal Reserve interest rate increase. The dollar index, which tracks the currency against a basket of six major rivals, was little changed at 91.892, after rising as high as 92.08. The dollar was 0.71 percent higher against the Japanese yen, the highest since September 1. The euro was up 0.15 percent against the dollar at $1.1969.

2. Home Market
China's yuan kept falling against the dollar in the morning session on Tuesday, nearing to the key support of 6.55 per dollar, while the official yuan midpoint tumbled 280 pips, snapping a 11-day winning streak. Yuan is expected to see further correction in the near term in a more rational market due to more balanced forex settlement, lower midpoint rates and a stronger dollar.

Precious Metals
Gold bounced up from the lowest level in more than a week on Tuesday as the dollar pared gains and U.S. President Donald Trump said U.N. sanctions on North Korea are "nothing compared to what ultimately will have to happen." Spot gold hit its lowest since Sept. 1 at $1,322.15 an ounce in early trade and was up at $1,331.54 an ounce.  U.S. gold futures settled down 0.2 percent at $1,332.70. Among other precious metals, silver was up at $17.91 an ounce after hitting its lowest since Sept. 1 at $17.67.

1.Crude Oil
Oil prices rose on Tuesday after OPEC forecast higher demand in 2018 and Russia and Venezuela confirmed their commitment to a production-cutting deal to reduce the global crude glut. Brent crude settled up 43 cents or 0.8 percent to $54.27 per barrel. Its session low was $53.42. U.S. West Texas Intermediate (WTI) was up 16 cents or 0.3 percent to $48.23 a barrel. It hit a session low of $47.73.

2.Base Metals
Copper prices slid on Tuesday as funds cut bets on higher prices, inventories in London Metal Exchange warehouses jumped and the dollar steadied at higher levels. Benchmark copper on the LME ended down 1.2 percent at $6,668 a tonne. Aluminium closed up 0.7 percent at $2,137 a tonne, zinc fell 0.7 percent to $3,061, lead rose 1.5 percent to $2,312, tin slipped 0.4 percent to $20,675 and nickel climbed 2 percent to $11,990.

U.S. Treasuries
1. U.S. Bonds
U.S. long-dated Treasury yields rose for a third straight session as tepid demand for benchmark 10-year notes pressured overall bond prices. In late trading, benchmark 10-year Treasury yields rose to 2.17 percent, from 2.125 percent late on Monday. Ten-year yields had hit 2.18 percent, a three-week high, following the 10-year auction. U.S. 30-year bond yields rose to 2.775 percent, up from 2.739 percent in the previous session. Thirty-year yields also climbed to three-week peaks of 2.788 percent.

2. Chinese bonds
China's cash bonds edged up in interbank bond market on Tuesday, while T-bonds futures edged lower. Market was still looking for direction.

Stock Market
1. U.S. Equities
The major Wall Street indexes hit record closing highs on Tuesday, with financial stocks leading the charge, but gains were stunted by a decline in Apple Inc shares after it unveiled its latest line of iPhones. The S&P 500, Dow Jones industrials and Nasdaq Composite clocked record closes. The Dow Jones Industrial Average rose 61.49 points, or 0.28 percent, to 22,118.86, the S&P 500 gained 8.37 points, or 0.34 percent, to 2,496.48 and the Nasdaq Composite added 22.018 points, or 0.34 percent, to 6,454.28.

2. Hong Kong Equities
Hong Kong shares were steady on Tuesday, with the benchmark index staying close to more than two-year highs but not joining most Asian exchanges climbing after New York stocks surged overnight. The Hang Seng index inched up 0.1 percent, to 27,972.24, while the China Enterprises Index climbed 0.2 percent, to 11,242.06 points.

3. China Equities
China's stocks extended gains, hitting an over 20-month high during the session led by new-energy auto names. But gains were pared after the sector's pullback, cooling down market morale. The Shanghai Composite Index settled at 3,379.49, up 3.07 points or 0.09 percent. The trading volume of Shanghai A shares surged almost 30 percent to 324.6 billion yuan from 256.4 billion yuan.