I. Yesterday's News
International News
1. Federal Reserve policymakers were increasingly split on the outlook for inflation and how it might affect the future pace of interest rate rises, according to the minutes of the Fed's last policy meeting on June 13-14 released on Wednesday. The details of the meeting, at which the U.S. central bank voted to raise interest rates, also showed that several officials wanted to announce a start to the process of reducing the Fed's large portfolio of Treasury bonds and mortgage-backed securities by the end of August but others wanted to wait until later in the year. The committee questioned why financial conditions had not tightened despite recent rate rises and a few said equity prices were elevated.

2. Use of the euro as an international currency has declined over the past year, primarily due to concerns over political risk and the increased use of emerging market currencies, such as the Chinese renminbi, the European Central Bank said on Wednesday. The biggest drop was recorded in the use of the euro as a funding currency, mostly due to the high cost of hedging against a fall in its value using swaps. However, central banks still increased their reserves in euros, partially reflecting views that the bloc is slowly moving past its protracted debt crisis.

3. British companies are giving ominous signs about the economy, just as the government embarks on European Union divorce negotiations, data showed on Wednesday, although momentum in the euro zone has lost some momentum. A survey published on Wednesday suggested Britain's economy probably expanded at a quarterly pace of 0.4 percent in April-June. But its business expectations component tumbled to levels not seen since just after the June 2016 vote to leave the EU. The euro zone's economy, meanwhile, probably grew nearly twice as fast, by 0.7 percent, during the second quarter. Business expectations dipped, but remained strong.

4. Euro zone businesses lost some momentum in June but chalked up their best performance last quarter in over six years, according to surveys that showed companies started the second half of 2017 in rude health. IHS Markit's final composite Purchasing Managers' Index for the euro zone was 56.3 in June, down from May's 56.8 but comfortably beating a flash estimate of 55.7. It has been above the 50 mark that divides growth from contraction since mid-2013. "The final headline PMI came in above the earlier flash estimate and consequently signalled only a very slight loss of growth momentum at the end of the second quarter," said Chris Williamson, chief business economist at IHS Markit.

5. Japan's central bank will cut its inflation forecasts but hold off expanding stimulus this month, people familiar with the matter say. At a rate review on July 19-20, the BOJ is set to keep monetary policy steady and offer a more upbeat assessment of the economy than it did in June to say it is expanding moderately, the sources said. But the BOJ is likely to cut its inflation forecast for the current year ending in March 2018, and possibly that for the following year, in a quarterly review of its long-term projections to be released on July 20, they said. The downgrades will likely be minor and reflect the effect of recent oil price falls, companies' reluctance to raise prices and weak inflation expectations, the sources said.

Domestic News
6. Government-involved investment funds will be guided to focus on public services, poverty relief and infrastructure projects, and to enhance support for the country's "Made in China 2025" plan, according to the statement following a State Council executive meeting. China will step up its efforts to attract more foreign investment and treat Chinese firms and foreign companies on an equal basis, the State Council, or cabinet, said. China will also use more high-quality assets to attract different kinds of investment through public-private partnership for investing in new infrastructure and public utilities.

7. China Caixin services purchasing managers' index (PMI) on Wednesday showed growth slowed in June to the second-weakest level in over a year, of which new business index hit a 13-month trough. Dented y slowing service growth, the Caixin Composite PMI also slowed to the lowest in a year.

8. The effectiveness of quantitative regulation tools weakened as China's financial market develops, Wen Xinxiang, the chief of the Monetary Policy Committee of People's Bank of China (PBOC) and Zhang Shuangchang, deputy chief of the Monetary Policy Department of PBOC said in an article. Time is ripe for building a conventional price-dominated framework on monetary policy regulation as the market rates regulation and transmission mechanism improve, the article said.

9. The function of macro prudential management shall be given to a decision-making institution with clear targets and power although there does not exist a universal rule for macro prudential policy framework, the People's Bank of China said in its “2017 China Financial Stability Report”. Past experiences of many countries showed that central banks shall play a key role in making macro prudential policy due to its professional expertise, intrinsic momentum and independence.

II. Market Overview
FX
1. Global Market
The dollar was little changed on Wednesday against a basket of currencies as the Federal Reserve's minutes on its June 13-14 policy meeting showed a rift among policy-makers over the pace of future U.S. rate increases. The dollar index was flat at 96.237 after touching a one-week high. The euro was little changed at $1.1348, below its highest levels in over a year reached last week. The greenback was at 113.14 yen, down 0.1 percent. The Canadian dollar fell 0.2 percent to C$1.2966 per dollar.

2. Home Market
China's yuan inched down against the dollar on Wednesday, while the midpoint rates posted a third consecutive decline, as the dollar index pulled back. It's hard tell yuan's near-term outlook as the pressure from high season for ferex buying is offset by ample liquidity provided by big banks and bullish bets by some proprietary funds. 

Precious Metals
Gold steadied on Wednesday, after Federal Reserve minutes showed a growing split among policymakers on the inflation outlook and the dollar pared gains, lifting the precious metal above an eight-week low reached earlier in the session. Spot gold was up at $1,226.45 an ounce after touching $1,217.14, the lowest since May 10. U.S. gold futures for August delivery settled at $1,221.70.

Commodities
1.Crude Oil
Oil prices tumbled about 4 percent on Wednesday, ending their longest string of daily gains in more than five years, as climbing OPEC exports and a stronger dollar spurred selling. Brent crude futures settled down $1.82, or 3.7 percent, at $47.79 a barrel. U.S. West Texas Intermediate crude fell $1.94, or 4.12 percent, to settle at $45.13 a barrel.

2.Base Metals
Copper prices eased for a fourth straight session on Wednesday on a surge in warehouse stocks but the threat of strike action at two Chilean mines curbed losses. Benchmark copper on the London Metal Exchange slipped 0.9 percent to a one-week low of $5,841 per tonne in official trade. Nickel ended 0.2 percent lower at $9,160 after touching a one-week low of $9,070. Aluminium ended slightly firmer at $1,929, lead fell 1.5 percent to $2,265, tin lost 1.4 percent to $19,675 while zinc eased 0.4 percent to $2,781.50.

U.S. Treasuries
1. U.S. Bonds
U.S. Treasury yields edged lower on Wednesday as traders remained concerned about weak U.S. factory orders data, reversing a jump on Federal Reserve meeting minutes, while holding near recent peaks on views that global central bank policy was turning more hawkish. The benchmark 10-year yields were last at 2.332 percent after touching a more than seven-week high of 2.357 percent in morning U.S. trading. Three-year yields hit a roughly 3-1/2-month high of 1.598 percent before the release of the factory orders data. U.S. two-year yields were at 1.414 percent, near Monday's more than eight-year peak of 1.426 percent.

2. Chinese bonds
Market morale for cash bonds in China's interbank bond market improved, sending T-bond futures slightly higher. Institutional buying among loose liquidity lowered cash bond yields. The auction of tier-1 10-year T-bonds was disappointing. Uncertainty in economic fundamentals capped bullish sentiment. 

Stock Market
1. U.S. Equities
A steep drop in oil prices dragged energy shares lower and kept the Dow and S&P 500 in check on Wednesday, while the Nasdaq was buoyed by gains in tech stocks. The Dow Jones Industrial Average fell 1.1 points, or 0.01 percent, to close at 21,478.17, the S&P 500 gained 3.53 points, or 0.15 percent, to 2,432.54 and the Nasdaq Composite added 40.80 points, or 0.67 percent, to 6,150.86.

2. Hong Kong Equities
Hong Kong shares rebounded on Wednesday following the previous session's slump, helped by consumer and financial stocks and as index heavyweight Tencent Holdings Ltd bounced from a seven-week low. The Hang Seng index rose 0.5 percent to 25,521.97, while the China Enterprises Index gained 0.7 percent to 10,380.73 points.

3. China Equities
The Shanghai Composite Index closed higher to an over 2-1/2-month high, crossing above 3,200 boosted by blue chips and cyclicals. Technical indicators turned to bullish, covering the gap since April. However, lackluster trading volume would cap future gains.