I. Yesterday’s News
International News

1. The U.S. Federal Reserve kept interest rates unchanged on Wednesday but said inflation likely would rise this year, bolstering expectations borrowing costs will continue to climb under incoming central bank chief Jerome Powell in March. Citing solid gains in employment, household spending and capital investment, the Fed said it expected the economy to expand at a moderate pace and the labor market to remain strong in 2018. U.S. stocks rose slightly, while U.S. Treasury yields pared losses after the Fed statement. Short-term interest rate futures showed traders adding slightly to bets the Fed would raise rates three times in 2018.

2. U.S. private sector payrolls rose at a brisk pace in January as hiring increased across the board despite unseasonably cold weather, pointing to sustained labor market strength at the start of the year. The robust jobs market is gradually putting upward pressure on compensation, with other data on Wednesday showing a solid increase in labor costs in the fourth quarter. Tightening labor market conditions and signs of a pickup in wage growth are likely to be welcomed by Federal Reserve officials. The ADP national employment report showed private sector employment rose by 234,000 jobs in January, beating economists' expectations for an increase of only 185,000. That lifted the year-on-year rate of increase to 2.6 percent, the largest gain since the first quarter of 2015.

3. Euro zone inflation slowed further in January, underpinning the European Central Bank's caution in removing stimulus any further as even a surge in crude oil prices is keeping consumer price pressures muted. Inflation in the 19 countries sharing the euro dipped to 1.3 percent this month from 1.4 percent in December, in line with expectations and reinforcing projections that any rise in the months ahead will be slow, at best. ECB projections see full year inflation at 1.4 percent this year, rising gradually to 1.7 percent by 2020, still short of target.

4. An agreement was made as British Prime Minister Theresa May arrived in Beijing and held a China-Britain annual meeting between heads of government with Chinese Premier Li Keqiang. Premier Li said both countries will strengthen strategic ties, expand bilateral openness and investment, enhance the share of high-tech products in bilateral trade. China is also ready to review and begin the preparation of the Shanghai-London Stock Connect at an appropriate time, Li said.

5. The Canadian economy accelerated in November by the most in six months, with activity broad-based across a number of sectors including manufacturing and keeping the Bank of Canada on track to raise interest rates again before long. Gross domestic product rose by 0.4 percent from October's flat reading, Statistics Canada said on Wednesday, in line with economists' expectations and the biggest increase since May 2017. Economists said the report put the fourth quarter on track for about 2 percent growth. While that would be below the 2.5 percent that the Bank of Canada anticipates, it would still cap a strong year for the Canadian economy.

Domestic News

6. China's economic planner said it reviewed and approved 184 fixed-asset projects worth a total of 991.4 billion yuan in 2017, of which 122 project were reviewed and 62 were approved. In December alone, 17 projects were reviewed and approved worth 127.9 billion yuan, of which 12 project were reviewed and 5 were approved.

7. China's trade deficit in services widened to $20.6 billion in December, lifting services trade deficit for all of 2017 to $255.4 billion, data from the State Administration of Foreign Exchange (SAFE) showed.

8. The European Union has set import duties on certain cast iron articles to counter what it sees as dumping by Chinese producers, the latest in a series of trade measures against China. The EU has set duties of between 15.5 and 38.1 percent for Chinese manufacturers, the EU said in its official journal on Tuesday. The tariff will enter into force on Wednesday and last for five years.

9. Taiwan’s gross domestic product (GDP) expanded a better-than-expected 3.28 percent in the October-December period from a year earlier, hitting the peak in almost three years, lifted by strong export ans surprising recovery momentum. For full-year 2017, growth clocked 2.84 percent, raising expectations that its central bank would hike interest rates in the second half of this year.

10. Assets at the Exchange Fund, which is used to back the Hong Kong dollar, totalled HK$4,023.5 billion ($514.56 billion) at the end of December, the Hong Kong Monetary Authority (HKMA) said on Wednesday. The figure was HK$43.9 billion higher than the total at the end of November, with foreign currency assets increased by HK$50.4 billion, while Hong Kong dollar assets decreased by HK$6.5 billion, the city's de facto central bank said in a statement.

II. Market Overview
FX
1. Global Market

The U.S. dollar turned positive on Wednesday after the Federal Reserve left interest rates unchanged but said it expected inflation to rise this year, while the euro turned negative and last hovered near flat. Against a basket of six currencies, the greenback was up 0.04 percent at 89.192. The dollar was still on track to fall more than 3 percent in January, its biggest monthly drop since March 2016. The Japanese yen last weakened 0.40 percent versus the greenback to 109.22 per dollar. The euro turned negative and hovered near flat after the Fed statement, last rising 0.02 percent to $1.2403.

2. Home Market

China's yuan expanded gains against the U.S. Dollar on Wednesday afternoon, closing 495 points higher to hit the highest since August 10, 2015. The central bank's midpoint rates, however, extended losses. Market prices started to outperform official midpoint rates. For January, yuan rose 3.5 percent, posting the largest monthly gain since 1994.

Precious Metals

Gold prices rose on Wednesday, but dipped slightly after the U.S. Federal Reserve said it would keep interest rates the same. Spot gold edged up at $1,344.7, while U.S. gold futures for February delivery settled up $3.60, or 0.3 percent, at $1,339.

Commodities
1.Crude Oil

Oil prices rebounded from earlier losses to end higher on Wednesday, after the U.S. Energy Department said oil inventories rose for the first time in nearly three months, but was offset by strong demand for gasoline and distillate products and news that OPEC countries maintained heavy supply cuts in January. Crude oil futures ended higher for the fifth straight month, with U.S. futures gaining 7.7 percent in January, the best month for the contract since September. U.S. crude futures settled up 23 cents to $64.73 a barrel, a up 0.4 percent, after hitting a low of $63.92 shortly after the release. Brent crude rose 3 cents to $69.05 a barrel.

2.Base Metals

Copper rose 1 percent on Wednesday as the dollar slid towards its biggest monthly loss against the euro in two years. The metal used in construction shrugged off slightly softer than expected Chinese manufacturing data as the weaker dollar made assets priced in the U.S. unit cheaper for holders of other currencies. London Metal Exchange copper closed 1 percent up at $7,118 a tonne. LME nickel led gains across base metals, closing 1.9 percent up at $13,600 a tonne.

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

The spread between longer-dated U.S. Treasury yields and short-dated ones contracted to the slimmest in over a decade on Wednesday as the government favored selling more short-dated debt than longer-dated issues to finance the projected rise in its budget deficit. The yield curve also flattened as the Federal Reserve bolstered the notion it would raise key borrowing costs at least three times in 2018 on an expected pickup in inflation. Benchmark 10-year Treasury yields were little changed on the day at 2.726 percent after reaching a near four-year peak at 2.754 percent. The five-year yield reached 2.553 percent, the highest since April 2010, while the two-year yield touched 2.165 percent, the highest since September 2008.

2. Chinese bonds

China’s cash bonds yields fell slightly in interbank market, while Treasury bond futures closed higher in a choppy trading. Loose liquidity and a correction in stock market lifted the appeal of safe-haven assets including cash bonds and bond futures. The official PMI pulled back compared with the previous month, but still hovered above the 50 mark. The news was muted in the market.

Stock Market
1. U.S. Equities

U.S. stocks finished marginally higher on Wednesday as indexes gave up early gains after the Federal Reserve said it sees inflation rising this year, signaling it remains on track to boost interest rates again in March. The Fed kept rates unchanged but, in a statement following its two-day policy meeting, it repeated that it expected that "further gradual" rate hikes will be warranted. The Dow Jones Industrial Average rose 72.5 points, or 0.28 percent, to 26,149.39, the S&P 500 gained 1.38 points, or 0.05 percent, to 2,823.81 and the Nasdaq Composite added 9.00 points, or 0.12 percent, to 7,411.48.

2. Hong Kong Equities

Hong Kong stocks reversed earlier losses to end higher on Wednesday, posting its best month in nearly three years, helped by gains for financial and services firms. At close of trade, the Hang Seng index was up 279.98 points or 0.86 percent at 32,887.27. The Hang Seng China Enterprises index rose 1.29 percent to 13,561.65. For the month, HSI was up 9.9 percent, marking the fourth straight month of gains and its best since April 2015.

3. China Equities

Chinese stocks closed lower, extended losses to the third day. The PMI data had a limited impact on the market, but the overnight slump in European and U.S stock market fueled uncertainty. Major stocks are expected to keep rangebound ahead of China’s New Year. The benchmark Shanghai Composite Index closed at 3,480.83, down 7.18 points or 0.21 percent, with the session low at 3,454.73. For the month, the index rallied 5.25 percent, posting the largest monthly increase in 22 months. The turnover of Shanghai A shares rose to 242.4 billion yuan from 224.5 billion yuan.