I. Yesterday's News
International News
1. President Donald Trump warned on Tuesday that all options are on the table for the United States to respond to North Korea's firing of a ballistic missile over northern Japan's Hokkaido island into the sea in a new show of force. Trump said the world had received North Korea's latest message "loud and clear". Investors flocked to safe-haven assets after the missile firing. The dollar fell to its lowest in more than 2-1/2 years against a basket of major currencies but then rebounded, while benchmark 10-year U.S. Treasury note yields fell and the price of gold hit more than a nine-month peak. U.S. stocks recovered from a sharply lower open.

2. U.S consumer confidence surged to a five-month high in August as households grew increasingly upbeat about the labor market while house prices rose further in June, suggesting a recent acceleration in consumer spending was likely to be sustained. The data on Tuesday also supported views that economic growth would accelerate in the second half of the year after a sluggish performance earlier. The Conference Board said its consumer confidence index increased to a reading of 122.9 this month from 120.0 in July. That was the strongest reading since March and also the second highest reading since 2000. A second report on Tuesday showed the S&P CoreLogic Case-Shiller composite index of house prices in 20 metropolitan areas rose 5.7 percent in June on a year-over-year basis after a similar increase in May. An acute shortage of homes on the market and strong demand are pushing up house prices.

3. Standard & Poor's said on Tuesday the United States would maintain its AA+ credit rating as long as the federal government avoids a default even if it does not increase the debt ceiling in a timely manner. S&P is the only one of the three major U.S. bond agencies that do not currently assign the top-notch AAA-rating to the world's biggest economy. "If the debt ceiling is not raised in a timely way, we expect, at a AA+ level of confidence, that the government will take necessary measures to avoid default on the debt which our ratings address," Robert Sifon-Arevalo, a managing director in S&P's sovereign ratings group, said in a statement.

4. Russia's central bank launched one of the biggest banking bail-outs in its history on Tuesday, saying it would rescue troubled private lender Otkritie which has suffered a sustained run on its deposits amid worries about its loan portfolio. The central bank said it planned to tap its own funds in order to become a major investor in Otkritie. The bail-out is likely to stoke anxiety about the wider state of the Russian banking sector, fuelling speculation that other big banks may have similar problems. It also raises questions about the central bank's supervisory performance. Otkritie is the country's largest private lender by assets, according to second-quarter data from Interfax, and some of its shareholders are connected to major state entities, a fact that prompted some analysts to believe it was too big and influential to be allowed to fail.

Domestic News
5. China's finance minister Xiao Jie said China will actively resolve local government debt risks and curb the increase in hidden local government debt by pushing for a transition to market-based local government financing vehicles (LGFV). He Lifeng, head of the National Development and Reform Commission, said China will also step up financial coordination to fend off risks in the country's "chaotic" financial markets while striving to stabilize the property market, where prices soared last year.

6. China's life insurers have seen the first increase in their core solvency ratio since 2016, up 2.4 percent on the quarter to 216 percent. A growing number of insurance firms are returning to their original business model as high-value, long-term protection products predominate within the sector at an increasing pace. Conversely, the percentage of short- and mid-term products demanding a larger amount of capital is continuously declining.

7. U.S. President Donald Trump last month rejected a Chinese proposal to cut steel overcapacity, despite the endorsement of some of his top advisers, the Financial Times said, citing people familiar with the matter.

II. Market Overview
FX
1. Global Market
The U.S. dollar turned positive against a basket of major rivals on Tuesday after touching its lowest level in more than 2-1/2 years as traders brushed aside concerns surrounding a North Korean missile launch over Japan. The dollar index, which measures the greenback against a basket of six major currencies, was last up 0.1 percent at 92.336 after touching its lowest since January 2015 of 91.621 earlier. The dollar, which had touched its lowest level against the yen in 4-1/2 months earlier, jumped more than half a percent against the Japanese currency in afternoon U.S. trading to a 12-day high of 109.89 yen. The euro was last roughly flat against the greenback at $1.1980 after earlier hitting a more than 2-1/2-year high of $1.2069. The dollar was last flat against the Swiss franc at 0.9549 franc after touching a two-year low of 0.9431 earlier.

2. Home Market
China's yuan surged over 200 pips against the U.S. dollar in the morning session on Tuesday after the central bank raised its official guidance to an over one-year high. Offshore yuan crossed over the key mark of 6.61 to an over 14-month high. The overnight dollar index slumped to a 16-month low, trigger stop-loss by the dollar bulls, traders said. Dwindling demand for forex at month-end and higher forex settlement sent yuan higher. Both onshore and offshore yuan breached 6.60 in the afternoon session.

Precious Metals
Gold jumped to its highest since November on Tuesday as investors bought bullion as insurance against falling prices of other assets after North Korea tested a ballistic missile over Japan. Spot gold was up at $1,309.30 an ounce, after touching $1,325.9399, its highest since Nov. 9. U.S. gold futures for December delivery settled up 0.3 percent at $1,318.90.

Commodities
1.Crude Oil
U.S. gasoline futures jumped 4 percent while crude prices were mixed on Tuesday after a hurricane shut down more than 19 percent of the country's refining capacity, curbing fuel production and further bloating crude inventories. U.S. West Texas Intermediate (WTI) crude edged down 13 cents or 0.3 percent to $46.44 a barrel. International Brent crude futures closed up 11 cents or 0.2 percent to $52.00 a barrel. U.S. gasoline futures jumped 4 percent to settle at 1.7833, the highest in more than two years.

2.Base Metals
Copper rallied to its highest in three years on Tuesday as inventories in London and Shanghai fell and the dollar sank after North Korea raised geopolitical tensions by launching a missile that flew over northern Japan. Benchmark copper jumped 1.9 percent to close at $6,791.50 tonne. It earlier touched $6,843.50, a level last seen in September 2014. Three-month nickel on the London Metal Exchange ended up 2 percent at $11,710. At one point the contract rose to $11,885, the highest since Nov. 28, 2016. Aluminium ended with gains of 1.2 percent to $2,095, lead ended 2.3 percent higher at $2,378, tin inched up 0.1 percent to $20,350, while zinc was 1.5 percent higher at $3,110.

U.S. Treasuries
1. U.S. Bonds
Benchmark 10-year Treasury yields fell to their lowest since last November on Tuesday on safety buying after North Korea fired a ballistic missile over Japan's northern Hokkaido island into the sea. Ten-year Treasury yields dropped as low as 2.086 percent, the lowest since Nov. 10 before rising back to 2.14 percent. The yield curve between two-year and 10-year notes flattened to 77 basis points, from 83 basis points late on Monday, the lowest level since June 27.

2. Chinese bonds
The shorter-dated cash bond yields in China's interbank market edged up in the morning session, while T-bonds extended rangebound in a tight range. Market sentiment remained weak amid tight liquidity and lukewarm injection in the open market. China's market was muted to tumbling risky assets in Asia following North Korea tested a ballistic missile over Japan.

Stock Market
1. U.S. Equities
Major U.S. stock indexes ended higher on Tuesday after recovering from steep early losses triggered by fears that hostilities in the Korean Peninsula could escalate. U.S. President Donald Trump warned that all options are on the table for the United States to respond after North Korea fired a ballistic missile over a Japanese island in a new show of force. The Dow Jones Industrial Average rose 56.97 points, or 0.26 percent, to 21,865.37, the S&P 500 gained 2.06 points, or 0.08 percent, to 2,446.3 and the Nasdaq Composite added 18.87 points, or 0.3 percent, to 6,301.89.

2. Hong Kong Equities
Hong Kong stocks, along with those on major global markets, fell on Tuesday after North Korea fired a missile over Japan, escalating geo-political tensions. The benchmark Hang Seng index slid 0.4 percent, to 27,765.01, while the China Enterprises Index also lost 0.4 percent, to 11,296.08 points. In Hong Kong, most sectors fell, with IT and financial shares leading the decline.

3. China Equities
China's stocks inched up in lower trading volume on Tuesday, hitting an almost 20-month high, led by newly-listed names. Consolidation is expected in the near term as 3,000 would offer strong support. The Shanghai Composite Index settled up 2.58 points or 0.08 percent at 3,365.23, extending its winning streak to the third consecutive day and on track to 3,519.18, the highest since December 31, 2015.