I. Yesterday's News
International News
1. The Trump administration on Tuesday unveiled its first full budget that would cut 3.6 trillion US dollars in government spending over the next 10 years to balance the federal budget, taking aim at healthcare and food assistance programs for the poor in an austere budget that also boosts the military. Trump's proposal foresees selling half of the U.S. emergency oil stockpile, while the plan boosts defense spending by $54 billion, including $52 billion increase in Department of Defense.

2. British police on Tuesday identified the suicide bomber who killed 22 people, including children, in an attack on a crowded concert hall in Manchester, and said they were trying to establish whether he had acted alone or with help from others. The man suspected of carrying out Britain's deadliest bombing in nearly 12 years was named as Salman Abedi, aged 22, but police declined to give further details about him. Islamic State claimed responsibility for what it called a revenge attack against "Crusaders", but there appeared to be contradictions in its account of the operation.

3. Negative interest rates have been an effective monetary policy tool for the European Central Bank and there is no reason to change its guidance on their use, Executive Board member Benoit Coeure said on Tuesday. "Our current analysis of the secondary effects of negative rates suggest that there is no reason to change the indications we've given," he added. The ECB currently charges banks 0.4 percent on their excess cash.

4. Minneapolis Federal Reserve Bank President Neel Kashkari said Tuesday that while the U.S. economy is closer now than it was in March to full employment, he still does not know “if we are there yet,” and that the recent decline in core inflation is “concerning.” Kashkari is one of the central bank's most dovish policymakers and in March was the lone dissenter against the Fed's decision to raise rates. Asked if he would dissent once more next month, he said he has not decided. “Anything is on the table, depending on how the data comes out,” he said, adding that he would have more confidence if core inflation were moving steadily toward the Fed's 2-percent goal or even moved temporarily above that goal.

5. Japan must adhere to the government's goal to achieve a balanced budget by the fiscal year ending in March 2021, Finance Minister Taro Aso said, in a resolve to push for fiscal consolidation to fix the country's tattered finances. Aso made the pledge at a meeting of Prime Minister Shinzo Abe's top economic advisory council, which on Tuesday discussed the government's annual key economic and fiscal policy guidelines due around the end of June.

6. New U.S. single-family home sales tumbled from near a 9-1/2-year high in April, but the housing recovery likely remains intact amid a tightening labor market. The Commerce Department said on Tuesday new home sales declined 11.4 percent to a seasonally adjusted annual rate of 569,00 units last month, with sales in the West region plunging to their lowest level in nearly 1-1/2 years. New home sales increased 0.5 percent on an annual basis last month.

Domestic News
7. China urged Seoul to take concrete measures to "pull out the thorn" in its relationship with Beijing, and will keep communications open, Chinese Foreign Minister Wang Yi said during his ongoing visit to Abidjan, the capital of Cote d'Ivoire on Tuesday.

8. China's Assistant Minister of Foreign Affairs Kong Xuanyou and Russian deputy foreign ministers, Igor Morgulov expressed concern over the tensions on the Korean peninsula. The two countries reiterated their serious concerns about and firm opposition to Washington and Seoul's constant attempts to deploy THAAD anti-missile system in South Korea, saying they will not allow any military activities on the peninsula.

9. China's imports of North Korean goods in April fell below $100 million to the lowest in nearly three years, data showed on Tuesday, after China stopped buying coal from the isolated country and as calls mount for further economic sanctions. The world's second-largest economy bought goods worth $99.3 million in April from North Korea, the lowest monthly tally since at least June 2014, according to Chinese customs data. That compares with $114.6 million in March and $167.7 million a year earlier.

10. Russia kept its lead in oil supply to China even as shipments were down 1.9 percent from a year earlier to 1.15 million barrels per day, according to data from the General Administration of Customs. Saudi arrivals in April were down 3.9 percent from a year ago to about 963,000 bpd.

II. Market Overview
FX
1. Global Market
The dollar rose on Tuesday from recent lows as traders bet on a U.S. interest rate hike in June and awaited Wednesday's release of the minutes of the U.S. Federal Reserve's meeting in early May. The dollar index, which tracks the greenback against six major rivals, was up 0.43 percent at 97.405 and on pace for its best day in two weeks. The euro was down 0.54 percent against the dollar at $1.1175. The euro touched $1.1267, its highest since Nov. 9, earlier in the session. Sterling fell 0.25 percent against the greenback to $1.2965 as investors awaited further developments in Britain's suspended election campaign after a suicide bombing rocked the English city of Manchester.

2. Home Market
China's yuan inched up against the dollar in the morning session along with the midpoint rates, but trading remained in a tight range. Demand for forex held at high despite of recent losses in the dollar index and strong guidance on midpoint rates. Big banks only provided liquidity in the dollar in a proper way. Forex prices are expected to keep consolidating in the near term as gains were capped.

Precious Metals
Gold prices fell on Tuesday, as the U.S. dollar rebounded from 6-1/2-month lows and investors shrugged off heightened political risk following a deadly suicide attack in Britain. Spot gold was lower at $1,250.76 an ounce. U.S. gold futures settled 0.5 percent lower at $1,255.50 an ounce.

Commodities
1.Crude Oil
Oil prices settled a bit higher on Tuesday as expectations of an extension to OPEC-led supply cuts overshadowed a White House proposal to sell half of U.S. petroleum reserves. Brent crude settled up 28 cents at $54.15 per barrel. U.S. light crude was up 34 cents at $51.47.

2.Base Metals
Zinc hit a three-week peak on Tuesday after imports of the metal into top consumer China rose, underlining potential shortages, but copper was under pressure on indications of healthy supply. London Metal Exchange benchmark zinc closed up 1 percent at $2,658 a tonne after touching $2,669, the highest since May 2. LME three-month copper ended 0.2 percent lower at $5,714 after dipping to an intraday low of $5,666.

U.S. Treasuries
1. U.S. Bonds
U.S. Treasury yields rose on Tuesday as some investors pared their bond positions to make room for this week's federal and corporate supply while others reduced their safe-haven bond holdings in favor of stocks. The benchmark 10-year Treasury yield was 2.287 percent, up three basis points from late on Monday, while the 30-year yield was more than three basis points higher at 2.949 percent.

2. Chinese bonds
Liquidity in China's interbank market kept easing in the morning session. But the decline in bond prices were limited. Liquidity will remain slightly accommodative for the time being as hefty counter repo was largely hedged by the PBOC operations.

Stock Market
1. U.S. Equities
Wall Street ended higher on Tuesday after the release of President Donald Trump's budget plan but gains were tempered by declines in consumer discretionary stocks amid weakness in auto-parts companies. The Dow Jones Industrial Average rose 43.08 points, or 0.21 percent, to 20,937.91, the S&P 500 gained 4.4 points, or 0.18 percent, to 2,398.42 and the Nasdaq Composite added 5.09 points, or 0.08 percent, to 6,138.71.

2. Hong Kong Equities
Hong Kong's benchmark index inched up to a fresh 22-month high on Tuesday, buoyed by strong money flows from mainland China. The Hang Seng index ended 0.1 percent higher, at 25,403.15 points, while the China Enterprises Index gained 0.2 percent, to 10,395.28 points.

3. China Equities
China stocks closed in the negative territory for the second consecutive day, led by defense and newly-listed names. But banks and insurance names capped losses. The Shanghai Composite Index fell 13.73 points or 0.45 percent at 3,061.95.