I. Yesterday’s News
International News

1. U.S. job openings fell for a second straight month in November, with declines in the manufacturing and real estate sectors, supporting economist forecasts that job growth will slow in 2018. The monthly Job Openings and Labor Turnover Survey, or JOLTS, released by the Labor Department on Tuesday, also found that job openings, a measure of labor demand, fell to a seasonally adjusted 5.88 million, the lowest level since May. The job openings rate was 3.8 percent, a decline from October's 3.9 percent.

2. The People's Bank of China (PBOC) effectively reduced the influence of the "counter-cyclical factor" it introduced in May last year to the formula it uses to determine the mid-point reference rate for the yuan's exchange rate against the U.S. dollar each day. Sources said the PBOC had notified banks that they could adjust the counter-cyclical factor by themselves. The yuan tumbled after the news, weakening 0.38 percent from the previous late night close, the largest decline since September 28. The offshore yuan was trading weaker by over 380 bps.

3. South Korea said on Tuesday it will consider a temporary lifting of sanctions against North Korea if it is necessary to facilitate the visit of North Koreans to the Winter Olympics in South Korea next month. If Seoul needs to take "prior steps" to help the North Koreans visit for the Olympics, it will consider it together with the United Nations Security Council and other relevant countries, Foreign Ministry spokesman Roh Kyu-deok told a regular briefing. North Korea said during rare inter-Korean talks on Tuesday it will send a delegation of high-ranking officials, athletes and a cheering squad to the Pyeongchang Olympics.

4. The Bank of Japan cut buying of 10 to 25 year bonds and 25 to 40 year paper by 10 billion yen ($88.39 million) each, from its previous operations. Speculation the BOJ may wind back its monetary stimulus this year gripped markets on Tuesday after the central bank trimmed the amount of its purchases of Japanese government bonds.

Domestic News

5. As bad assets in China's local banks are expected to increase, China Banking Regulatory Commission has authorized five provinces to set up local asset-management companies, including Guizhou, Liaoning, Heilongjiang, Gansu and Anhui. Four of the five provinces (excluding Guizhou) are the second batch of local AMCs approved by China's banking regulator.

6. China's banking regulator will extend the regulatory campaign this year to tackle the “various phenomena of disorder” in the banking sector, including improper corporate governance, violation of macro regulation, shadow banking and cross-market financial products, misconduct in interbank transactions, etc.

II. Market Overview
FX
1. Global Market

The dollar edged higher against a basket of major currencies on Tuesday, to hit an eleven-day peak, as its decline last week to the lowest in more than three months continued to draw bargain hunters. The dollar index, which measures the greenback against six rival currencies, was up 0.18 percent at 92.524. The Japanese currency hit a six-day high. Sterling was down 0.24 percent against the dollar as investors took profits after a recent rally.

2. Home Market

China's yuan pull back against the dollar on Monday morning after the offical midpoint rates bounced off an over 20-month high. Offshore yuan CNH went back t the mark of 6.5 per dollar. A weaker euro also dragged yuan’s midpoint down, while forex demand pulled yuan’s prices to a low of 6.5059, traders said. But many firms were still looking for a good time to cash in profits.

Precious Metals

Gold edged lower on Tuesday, weighed down by a stronger U.S. dollar on the back of concerns about political uncertainty in Europe, while a buoyant stock market also drained enthusiasm for bullion. Palladium, meanwhile, recorded its third record high so far in January, boosted by increased demand from the automotive industry. Spot gold was down at $1,312.58 per ounce. U.S. gold futures for February delivery settled down $6.70, or 0.5 percent, at $1,313.70 per ounce. Palladium was trading at $1,099.90 an ounce after touching a fresh record high of $1,111.40.

Commodities
1.Crude Oil

Oil prices edged higher on Tuesday, with U.S. crude touching its highest since December 2014, supported by OPEC-led production cuts and expectations that U.S. crude inventories have dropped for an eighth week in a row. U.S. West Texas Intermediate (WTI) crude rose $1.23, or 2 percent, to settle at $62.96 a barrel after touching its highest since December 2014 at $63.48. Brent crude ended the session up $1.04, or 1.5 percent, at $68.82 per barrel after hitting a session high of $69.29, its highest since May 2015. Both contracts had their strongest close since December 2014.

2.Base Metals

Zinc prices hit their highest in more than a decade on Tuesday as investors anticipating another year of shortages and falling inventories bought the metal used to galvanise steel. Benchmark zinc ended down 1.5 percent at $3,335 a tonne from an earlier $3,400, its highest since August 2007. Copper was down 0.3 percent at $7,101.

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

Yields on the 10-year U.S. Treasury note reached a 10-month high on Tuesday, after the Bank of Japan said it will trim its purchases of Japanese government bonds and U.S. corporate debt hit the market. The U.S. 10-year note yielded 2.546 percent, the highest since March 15. The 3-year note yield, which is sensitive to traders' views on Fed policy, was 2.074 percent, its highest since the instrument was reissued in 2007.

2. Chinese bonds

Yields of longer-dated bonds diverged in China’s interbank market on Tuesday morning, with the 10-year Treasury bonds tracked futures down, while 10-year CDB bonds inching up. The central bank said its open market bulletin that total liquidity has turned from relatively higher to moderate, but funds remained loose in the morning session, providing a floor to the short-dated bonds. The auction of one-year CDB bonds was well-received, with its pricing well below expectations.

Stock Market
1. U.S. Equities

Wall Street's major indexes extended the New Year rally to close at record levels on Tuesday on investor optimism ahead of quarterly earnings reports and hopes for easing tensions with North Korea. Defensive S&P sectors - utilities, real estate and telecommunications - were out of favor, while bank stocks were boosted by rising U.S. 10-year Treasury yields. Healthcare stocks rose with the sector in focus on the second day of an industry conference. The Dow Jones Industrial Average rose 102.8 points, or 0.41 percent, to 25,385.8, the S&P 500 gained 3.58 points, or 0.13 percent, to 2,751.29 and the Nasdaq Composite added 6.19 points, or 0.09 percent, to 7,163.578.

2. Hong Kong Equities

Hong Kong stocks rose for the 11th straight session to a fresh 10-year high on Tuesday, aided by inbound money flows from China and strength in index heavyweight Tencent Holdings. Chinese investors continued to pile money into Hong Kong stocks, using up nearly a quarter of the daily quota under the Shanghai-Hong Kong Stock Connect. At close of trade, the Hang Seng index was up 111.88 points or 0.36 percent at 31,011.41. The Hang Seng China Enterprises index rose 0.17 percent to 12,255.68.

3. China Equities

Chinese stocks rose for the eighth consecutive day, hitting an over 1-1/2-month high on Tuesday, but with its momentum slowing. Consumer sector firmed, offsetting previous winner cyclicals. The benchmark Shanghai Composite Index closed up 4.42 points or 0.13 percent at 3,413.94. The trading volume of Shanghai A-shares fell to 238.1 billion yuan from 285.9 billion yuan. The Hushen 300 index ended at 4,189.3, up 0.7 percent.