I. Yesterday’s News
International News

1. Shares in Apple Inc and several of its Asian suppliers fell on Tuesday after a report by Taiwan's Economic Daily and comments from some analysts suggested iPhone X demand could come in below expectations in the first quarter. Apple will slash its sales forecast for the iPhone X in the quarter to 30 million units, the newspaper said on Monday, citing unidentified sources, down from what it said was an initial plan of 50 million units. Shares of Apple fell 2.5 percent to $170.57 on Tuesday.

2. The United States on Tuesday announced sanctions on two North Korean officials for their roles in developing the country's ballistic missiles. The U.S. Treasury named the officials as Kim Jong Sik and Ri Pyong Chol. It said Kim was reportedly a key figure in North Korea's efforts to switch its missile program from liquid to solid fuel, while Ri was reported to be a key official involved in the country's intercontinental ballistic missile (ICBM) development.

3. China exported no oil products to North Korea in November, Chinese customs data showed, apparently going above and beyond sanctions imposed earlier this year by the United Nations. Beijing also imported no iron ore, coal or lead from North Korea in November, the second full month of the latest trade sanctions imposed by U.N.

4. Chinese industrial firms continued to ramp up production in the fourth quarter, a quarterly survey of thousands of Chinese firms by China Beige Book International (CBB) showed, but growth in wages and hiring slowed in a further sign of cooling momentum in the world's second-biggest economy.

Domestic News

5. China's financial hub of Shanghai will limit its population to 25 million people by 2035 as part of a quest to manage "big city disease", the cabinet has said. "By 2035, the resident population in Shanghai will be controlled at around 25 million and the total amount of land made available for construction will not exceed 3,200 square kilometers," it said, suggesting little room for growth in the next two decade considering its current base.

6. China's top economic planner strengthened regulation on the pricing of heating and natural gas as demand surged, and punish those who engage in price rigging and fixing. National Development and Reform Commission (NDRC) said on Tuesday it launched an anti-monopoly investigation into 17 natural gas suppliers on Dec. 20. The NDRC said PetroChina gas sales unit Qaqing was one of the companies under investigation, without identifying the others.

7. China and Pakistan will look at extending their $57 billion China-Pakistan Economic Corridor to Afghanistan, Chinese Foreign Minister Wang Yi said on Tuesday, part of China's ambitious Belt and Road plan linking China with Asia, Europe and beyond.

II. Market Overview
FX
1. Global Market

The dollar was little changed against major currencies on Tuesday as traders brushed off encouraging Japanese inflation data and Bank of Japan minutes that signaled policy-makers favored sticking to a loose monetary policy. The dollar held steady at $113.16 yen and flat versus the euro at $1.1863. Among cryptocurrencies, bitcoin gained following last week's selloff, trading as high as $16,147.87 during one point.

2. Home Market

China's yuan bounced off an almost 3-1/2-month high against the dollar in the morning session on Tuesday, after the official midpoint rates set a three-month peak. Capital flow slowed down during public holidays, with bilateral spread widening, traders said. Yuan’s prices swung sharply after hitting 6.53, and are expected to extend wide rangebound in the near term.

Precious Metals

Gold prices edged up on Tuesday to a more than three-week high on support from a weaker dollar and chart signals, as palladium touched the highest level since February 2001 on supply worries. Spot gold was up at $1,283.24 per ounce, after reaching its highest level since Dec. 1 at $1,283.72. U.S. gold futures for February delivery settled up $8.70, or 0.68 percent, at $1,287.50 per ounce. Prices are on track for a second straight annual gain. Spot palladium closed at $1,051.50. Strong demand from autocatalyst makers reinforced the prospect of market shortages.

Commodities
1.Crude Oil

Oil prices surged to 2-1/2-year highs and U.S. crude touched $60 a barrel in light trading volume on Tuesday, boosted by news of an explosion on a Libyan crude pipeline as well as voluntary OPEC-led supply cuts. Brent crude, the international benchmark for oil prices, settled at $67.02 a barrel, up by $1.77, or 2.71 percent.

During the session, front-month prices touched a high of $67.10 a barrel, their highest since mid-May 2015. U.S. crude climbed $1.50, or 2.6 percent, to end the session at $59.97 a barrel after touching a session high of $60.01, the highest since late-June 2015.

2.Base Metals

LME was closed on Tuesday for public holiday.

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

Two-year U.S. Treasury yields rose to their highest levels in nine years on Tuesday as investors focused on new supply being sold into light trading conditions this week, and on large increases in issuance expected in 2018. Two-year Treasury yields were last 1.908 percent, up from 1.895 percent on Friday. The yields rose as high as 1.916 percent in overnight trading, the highest since Oct. 14, 2008. Five-year note yields rose as high as 2.263 percent, the highest since April 12, 2011.

2. Chinese bonds

In China’s interbank market, overnight liquidity was ample, while cross-year capital remained low. Seven-day financing cost for non-bank institutions kept above 10 percent. End-of-year liquidity eased for banks, but remained high for non-bank institutions.

Stock Market
1. U.S. Equities

U.S. stocks declined on Tuesday as Apple and shares of its parts suppliers weakened on a report of soft iPhone X demand, which pulled technology shares lower. The Dow Jones Industrial Average fell 7.85 points, or 0.03 percent, to 24,746.21, the S&P 500 lost 2.84 points, or 0.11 percent, to 2,680.5 and the Nasdaq Composite dropped 23.71 points, or 0.34 percent, to 6,936.25.

2. Hong Kong Equities

Hong Kong market was closed on Tuesday.

3. China Equities

Chinese stocks rebounded across the board on Tuesday, led by FTZs and oversold newly-listed names. Major indexes are expected to remain consolidating in the near term on cautious sentiment. The Shanghai Composite Index closed up 25.66 points or 0.78 percent at 3,306.12. The trading volume of Shanghai A-shares fell to 174.6 billion yuan from 177.2 billion yuan.