I. Yesterday’s News
International News

1. The Federal Reserve raised interest rates by a quarter of a percentage point on Wednesday, as anticipated, but left its rate outlook for the coming years unchanged even as policymakers projected a short-term acceleration in U.S. economic growth. Having raised its benchmark overnight lending rate three times this year, the Fed projected three more hikes in each of 2018 and 2019 before a long-run level of 2.8 percent is reached. That is unchanged from the last round of forecasts in September. U.S. stocks extended gains after the release of the policy statement, while Treasury yields dropped to session lows. The U.S. dollar fell against a basket of currencies.

2. Congressional Republicans reached a deal on final tax legislation on Wednesday, clearing the way for final votes next week on a package that would slash the U.S. corporate tax rate to 21 percent and cut taxes for wealthy Americans. Under an agreement between the House of Representatives and the Senate, the corporate tax would be 1 percentage point higher than the 20 percent rate earlier proposed, but still far below the current headline rate of 35 percent. A final bill could be formally unveiled on Friday, with decisive votes expected next week in both chambers.

3. Underlying U.S. consumer inflation slowed in November, held down by weak healthcare costs and the biggest drop in apparel prices in nearly two decades, which could impact the pace at which the Federal Reserve raises interest rates next year. The Labor Department said its Consumer Price Index excluding the volatile food and energy components ticked up 0.1 percent. The so-called core CPI advanced 0.2 percent in October. As a result, the annual increase in the core CPI slowed to 1.7 percent in November from 1.8 percent in October.

4. Italy is likely to hold national elections on March 4, Italian media reported on Wednesday. Corriere della Sera, Repubblica and Il Messaggero dailies said the country’s president will mostly likely dissolve parliament at the end of this month, opening the way for elections in early March. They did not give any source for their reports. The national election needs to be held by May at the latest. While the centre-right is seen winning most seats at the election, opinion polls suggest it will not win an absolute majority, making a hung parliament the most likely outcome.

Domestic News

5. The Asian Development Bank on Wednesday raised its economic growth estimate for developing Asia to 6 percent for this year from a previous estimate of 5.9 percent, citing stronger than expected exports and China's resilience. The Manila-based ADB kept its 2018 growth forecast at 5.8 percent. China's economy, the world's second largest, is projected to expand by 6.8 percent this year, higher than the ADB's prior estimate of 6.7 percent, on strong consumption, the bank said. It kept China's 2018 growth forecast at 6.4 percent.

6. Under the central government’s spirit of "houses are built to be lived in, not for speculation", China's home price growth is likely to stall as average nationwide new home prices are expected to flatline by end-2018 after rising a median 2 percent in the first six months from the same period a year earlier, a Reuters poll showed. The slowdown in China's home price growth would be primarily due to a decline in sales in tier-3 and tier-4 cities.

7. Environmental Protection Tax will take effect January 1, 2018 in China as local governments successively approved their own plan, paving the way for the levy of environmental protection tax, said the State Administration of Taxation. The notice requires local governments to determine the amount of tax to be paid for air pollutants and water pollutants, as well as taxable pollutant emissions measurement and approved levying method.

II. Market Overview
FX
1. Global Market

The U.S. dollar fell after the Federal Reserve raised interest rates in a widely expected move, but left its rate outlook for the coming years unchanged. The dollar index against a basket of six major currencies dropped as low as 93.596, the lowest level since Dec. 7, before rising back to 93.683, down 0.44 percent on the day. The greenback had weakened earlier on Wednesday after core consumer price data showed slowing inflation, raising concerns the Fed will be less able to execute multiple rate increases next year.

2. Home Market

China's yuan firmed slightly against the dollar in the morning session on Wednesday, while the official midpoint rates fell by almost 90 bps to a three-week low. A stronger dollar index only weighed on the guide rates. Yuan barely responded to the dollar due to relatively balanced forex settlement. Investors were focusing on the Federal Reserve policy meeting.

Precious Metals

Gold prices rose on Wednesday, as the dollar fell after the U.S. Federal Reserve raised interest rates as expected but left its outlook unchanged for coming years. Spot gold was up 1 percent at $1,255.37 an ounce. U.S. gold futures for February delivery settled up $6.90, or 0.6 percent, at $1,248.60 per ounce.

Commodities
1.Crude Oil

Oil prices slipped for a second straight day on Wednesday, as a slump in U.S. crude stockpiles was offset by a larger-than-forecast rise in gasoline inventories and as U.S. crude output continued to grow to record highs. U.S. West Texas Intermediate crude settled down 54 cents at $56.60 a barrel, a 1 percent decline. Brent crude ended down 1.4 percent, or 90 cents, at $62.44 a barrel.

2.Base Metals

Copper rose on Wednesday as prices extended a correction from last week's sharp fall. London Metal Exchange copper ended the day up 1 percent at $6,729 a tonne. LME tin prices fell for a second day, breaking through their late October low at $19,020 to hit their weakest since early June at $18,685 a tonne. Tin closed down 1.9 percent at $18,800 a tonne.

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

U.S. Treasury yields fell on Wednesday as a report on consumer prices in November fell short of analysts' forecasts, reducing bets on a broad pickup in inflation and supporting the view the Federal Reserve would remain on a gradual rate-hike path. The benchmark 10-year Treasury yield was 2.344 percent, down nearly 6 basis points from Tuesday after touching a near two-week high at 2.426 percent earlier Wednesday. The two-year yield touched nine-plus year peak at 1.852 percent before retreating to 1.778 percent, down 5 basis points, while the five-year yield pulled back from a 6-1/2 year high to 2.108 percent, down 6 basis points.

2. Chinese bonds

Yields of bond futures and cash bonds rebounded in China’s interbank market on Wednesday with the auction of five-year Treasury bonds beating expectations in primary market. Market was closely watching whether China’s central bank would follow up after the Federal Reserve raised interest rates. But as bonds prices were fully priced in the expectations, market sentiment was less pessimistic.

Stock Market
1. U.S. Equities

The S&P 500 ended slightly lower on Wednesday pressured by the financial sector after the Federal Reserve announced a widely expected interest rate hike but kept its rate outlook for coming years even as it projected faster U.S. economic growth. The Dow Jones Industrial Average rose 80.63 points, or 0.33 percent, to end at 24,585.43, the S&P 500 lost 1.26 points, or 0.05 percent, to 2,662.85 and the Nasdaq Composite added 13.48 points, or 0.2 percent, to 6,875.80.

2. Hong Kong Equities

Hong Kong stocks rebounded on Wednesday, underpinned by services and financial firms. At close of trade, the Hang Seng index was up 428.22 points or 1.49 percent at 29,222.10. The Hang Seng China Enterprises index rose 1.83 percent to 11,519.79. The sub-index of the Hang Seng tracking energy shares rose 1.6 percent while the IT sector rose 0.53 percent, the financial sector was 2.1 percent higher and property sector rose 0.4 percent.

3. China Equities

Chinese stocks settled higher on Wednesday in lower turnover as investors stayed on the sidelines ahead of Fed’s policy meeting statement and China’s macro economic data. Market was still looking for a bottom due to insufficient correction of blue chips. The Shanghai Composite Index closed up 22.23 points or 0.68 percent at 3,303.04. CSI 300 index ended at 4,050.09, up 0.85 percent.