I. Yesterday’s News
International News

1. Japan's government revised up its growth projections for the current and next fiscal years, forecasting the economy to expand 1.9 percent and 1.8 percent respectively on the back of steady improvement in domestic demand, the Cabinet Office said on Tuesday. Consumer inflation is estimated at 0.7 percent for this fiscal year and 1.1 percent next. The gross domestic product projections compared with earlier estimates by the Cabinet Office of 1.5 percent and 1.4 percent growth respectively in the current and next fiscal years.

2. Australia's central bank has become more confident about the economic outlook in recent months, but weakness in consumer spending remains a "significant risk" amid slow income growth and high debt levels. Minutes of the Reserve Bank of Australia's (RBA) December meeting showed policy makers again balanced subdued inflation against record high household debt. "Over the prior year or so, the unemployment rate had fallen and inflation had moved closer to target," Tuesday's minutes showed. "Recent data had increased confidence there would be further progress on these fronts."

3. South Korea's economic growth may not be strong enough for an immediate monetary policy tightening, minutes from the Bank of Korea's November meeting released on Tuesday showed one board member saying. "Though further growth is expected, it is uncertain whether the nation's economy is strong enough for immediate monetary policy tightening," said Cho Dong-chul, the sole dissenter for a rate hike among the central bank's seven board members. "It would be difficult for the BOK to bring inflation to its target if the tightening is carried out at a fast rate," Cho added.

4. Congressional Republicans hit a last-minute snag on Tuesday in their drive to pass the biggest U.S. tax overhaul in 30 years, requiring them to hold another vote on Wednesday and delaying what was still likely to be their first major legislative win under President Donald Trump. The Republican-controlled House of Representatives passed the tax package on Tuesday afternoon and sent it to the Republican-led Senate. But a staff official there ruled that three provisions of the House bill did not comply with the Senate's complex rules, said Sen. Bernie Sanders. As of early evening, the plan was for the Senate to delete the three offending provisions and vote on the bill. If approved, as widely expected, the altered bill would be sent back to the House for another vote on Wednesday. Final approval there would send the bill to Trump to sign into law. The problematic provisions deal with using educational savings accounts for home schooling and with private university endowments.

Domestic News

5. The World Bank on Tuesday raised its forecast for China's economic growth in 2017 to 6.8 percent from 6.7 percent it projected in October, as personal consumption and foreign trade supported growth. But the Washington-based lender kept its forecast for China's 2018 and 2019 GDP growth unchanged at 6.4 percent and 6.3 percent, respectively, due to less accommodative monetary policy and the government's effort to rein in credit and control leverage.

6. The entrepreneur confidence index reached 71.8 percent for Q4, 3.1 percentage points higher than Q3, according to a People's Bank of China (PBOC) survey of over 5,000 industrial companies. Another PBOC poll of over 3,000 bankers showed the banker confidence index rose 3.8 percentage points from Q3 to 79.1 percent in Q4.

7.China’s macro regulation must focus on sustainable and healthy economic growth to balance different regulation targets, improve risk-resistance capacity in the key areas of fiscal, financial, property, energy, resource, ecological environment, and prevent systematic regional risks, said Xu Shaoshi, former chairman of the National Development and Reform Commission.

II. Market Overview
FX
1. Global Market

The dollar rose against most currencies on Tuesday, helped by upbeat U.S. housing data, but gains were limited by doubts about the overall impact of a major U.S. tax overhaul plan on the economy. In late trading, the dollar rose 0.3 percent against the yen to 112.92 yen. It was little changed against the Swiss franc, but higher versus sterling as well as the Australian, Canadian, and New Zealand dollars. The euro was last at $1.1842, up 0.5 percent.

2. Home Market

China's yuan firmed slightly against the dollar in a tight range in the morning session on Tuesday, in tandem with the official midpoint rates. The dollar index edged down overnight, imposing a limited impact on the guide rates. Mid-month forex-buying demand capped spot yuan’s rebound. Consolidation is expected ahead of the New Year.

Precious Metals

Gold was little changed on Tuesday even though the dollar fell. Market players were wary of taking new positions before the holiday season. Gold is on track to post its narrowest trading range of any quarter in a decade in the last three months of the year. Spot gold was last at $1,261.66 an ounce, earlier hitting a nearly two-week high of $1,265.20, while U.S. gold futures futures for February delivery settled down $1.30, or 0.1 percent, at $1,264.20 per ounce.

Commodities
1.Crude Oil

Oil edged up toward $64 a barrel on Tuesday, helped by a North Sea pipeline outage, OPEC-led supply cuts and expectations that U.S. crude inventories had fallen for a fifth week. But rising U.S. output has put a lid on gains. Shale production will rise to a record in January, according to a government forecast published on Monday, as higher prices encourage increased drilling. Brent crude settled up 39 cents or 0.6 percent to $63.80 a barrel. U.S. crude settled up 34 cents or 0.6 percent to $57.56.

2.Base Metals

Aluminium prices touched a three-week peak on Tuesday as the prospect of slower supply growth from top producer China prompted investors to buy, but the likelihood of a surplus next year capped gains. Benchmark aluminium on the London Metal Exchange closed up 1.2 percent at $2,099 a tonne after touching its highest since Nov. 29. Lead ended down 0.4 percent at $2,552. Copper finished up 0.5 percent at $6,942 a tonne.

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

U.S. Treasury yields rose on Tuesday with the benchmark yield hitting a seven-week high as the biggest overhaul of the U.S. tax code in more than 30 years appeared on track to become law by the end of the week. The selloff in Treasuries also steepened the yield curve due to profit-taking, reversing some of the flattening for a second day. Benchmark 10-year Treasury yield was up 7 basis points to 2.459 percent after hitting its highest since late October. The two-year yield touched a nine-plus year peak of 1.861 percent, while five-year yield reached 2.230 percent, which was the highest since April 2011.

2. Chinese bonds

Yields of cash bonds were little changed in China’s interbank market in the morning session of Tuesday, while the Treasury bonds also traded in a narrow range. Market was quiet in the near term, liquidity was basically stable, but cross-year capital was short of supply. The turnover of the most active bonds dropped sharply, as most institutional investors were busy in dealing with cross-year provisions.

Stock Market
1. U.S. Equities

U.S. stocks fell on Tuesday as excitement over the likelihood of a tax code revamp was offset by concern over its effect on years of monetary policy stimulus and the future of interest rates. The Dow Jones Industrial Average fell 37.45 points, or 0.15 percent, to 24,754.75, the S&P 500 lost 8.69 points, or 0.32 percent, to 2,681.47 and the Nasdaq Composite dropped 30.91 points, or 0.44 percent, to 6,963.85.

2. Hong Kong Equities

Hong Kong stocks followed Asian markets higher after a record-beating run on Wall Street amid optimism over the likely passage of U.S. tax reforms. At close of trade, the Hang Seng index was up 203.25 points or 0.7 percent at 29,253.66. The Hang Seng China Enterprises index rose 1.11 percent to 11,541.88.

3. China Equities

Chinese stocks settled higher at session high for the second consecutive day on Tuesday, led by financial, middle and small caps. Major indexes steadied last week after an extended correction. The Shanghai Composite Index closed up 28.62 points or 0.88 percent at 3,296.54. The trading volume of Shanghai A-shares rose to 150.7 billion yuan from 149.6 billion yuan.