I. Yesterday’s News
International News

1. The Federal Reserve may only need to raise interest rates two times in 2018 given weak price pressures and possible loss of public confidence in the central bank's ability to hit a 2 percent inflation target, Atlanta Fed President Raphael Bostic said on Monday. Bostic, a voter on interest rate policy this year, also added his voice to a group of Fed officials concerned that central bank action may "invert" the yield curve and make long-term rates lower than short-term ones, historically a signal of future recession.

2. OPEC is monitoring unrest in Iran as well as Venezuela's economic crisis, but the group will only boost output if there are significant and sustained production disruptions from those countries, a senior OPEC source from a major Middle Eastern oil producer said. Venezuela's economic troubles have hit the country's oil output, which is at near 30-year lows, but Iran's output has not been affected by a wave of anti-government protests. "Even if there was a supply disruption (from Iran or Venezuela)... OPEC will not raise output," the senior OPEC source said. "OPEC's policy is to bring inventories down to their normal levels and will stay the course, unless the disruption in supply of something like 1,000,000 barrels per day persists for more than a month, and causes shortages of crude supply to consumers."

3. German industrial orders fell in November for the first time since July, data showed on Monday, easing slightly after a strong run as Europe's largest economy enjoys robust form. Factories registered a 0.4 percent drop in orders. November's reading from the Federal Statistics Office confounded expectations in a Reuters poll for a 0.5 percent rise. Contracts for 'Made in Germany' goods climbed by a revised 0.7 percent in October, an upward revision from a rise of 0.5 percent previously reported.

4. North and South Korea will hold their first formal talks for more than two years on Tuesday, brought together by sport to discuss how the North's athletes can attend next month's Winter Olympics in the South despite simmering fears of conflict. Regardless of its narrow, primarily sporting agenda, the meeting will be closely watched by world leaders eager for any sign of a reduction in tensions on the Korean peninsula amid rising fears over North Korea's development of nuclear weapons and defiance of United Nations Security Council resolutions. Five senior officials from each side will meet at the Peace House on the South Korean side of the Panmunjom truce village.

Domestic News

5. As of Dec. 31, China’s foreign exchange reserves rose for the 11th month in a row to $3.1399 trillion, up 0.66 percent from the previous month, data from the central bank showed Sunday. The reading up 4.3 percent higher compared to the figure recorded on the same period in 2016, snapping a downmomentum since 2015. Looking ahead, the forex regulator said China will keep its forex reserves balanced and stable in 2018.

6. China will loose its regulation on housing market. High-quality personnel are no longer limited by restrictions on first home purchasing and can apply for mortgage up to 1.2 million yuan with their housing provident funds, while rent subsidy to college graduates will be extended to five years, Nanjing Municipal Government said in a statement.

7. The China International Capital Corp (CICC) raised its forecast for China's 2018 and 2019 real GDP growth to 7.0 percent and 6.9 percent year-on-year from 6.9 percent and 6.8 percent, in anticipation of surprising foreign demand growth, according to a report from the company, as the CICC also notched up its forecast on growth of nominal goods export to 9.4 percent from 6.3 percent.

8. China's top banking regulator on Saturday issued rules to tighten management over entrusted loans, prohibiting commercial banks from using entrusted loans as registered capital, in capital increase investment and share expansion. Meanwhile, entrusted loans should not be used in production, operation or investment in government-banned sectors, and they are also prohibited from investments such as bonds, futures, financial derivatives and asset management products.

II. Market Overview
FX
1. Global Market

The dollar rose to a more than one-week high against a basket of other major currencies on Monday, helped by a pullback in the euro as investors took profits after the common currency's recent rally. The dollar index, which measures the greenback against six rival currencies, was up 0.46 percent at 92.368. The euro slipped 0.57 percent to $1.196. The Canadian dollar was slightly weaker against its U.S. counterpart.

2. Home Market

China's yuan pull back after hitting a four-month high on Monday morning after the central bank set midpoint to an over 20-month high. Offshore yuan CNH also hit a four-month peak in the morning. The lackluster U.S. Payroll report had not pulled the dollar index down, and forex demand emerged again at around 6.48 per dollar, capping yuan’s strength, traders said.

Precious Metals

Gold edged lower on Monday, retreating further from last week's 3-1/2-month high as the U.S. dollar regained some ground against the buoyant euro and traders bet on further U.S. interest rate hikes after Friday's payrolls data. Spot gold was down at $1,320.49 an ounce, while U.S. gold futures for February delivery settled down $1.90, or 0.1 percent, at $1,320.40 per ounce. Among other precious metals, silver was down 0.7 percent at $17.11 an ounce.

Commodities
1.Crude Oil

Oil prices were little changed on Monday, trading near their highest since May 2015, as political concerns in some OPEC nations offset projections for higher U.S. oil production. Brent futures gained 16 cents, or 0.2 percent, to settle at $67.78 a barrel, while U.S. West Texas Intermediate (WTI) crude rose 29 cents, or 0.5 percent, to settle at $61.73.

2.Base Metals

Copper hit a two-week low on Monday, weighed down by a stronger dollar and as the market consolidated following sharp gains in December, while zinc again reached its highest in more than a decade on supply concerns. LME copper ended up 0.1 percent at $7,125 a tonne, having hit its lowest in two weeks at $7,105. Aluminium closed down 1.3 percent at $2,175, having hit its lowest in nearly two weeks at $2,171. Zinc closed up 1 percent at $3,386, having hit its highest since 2007 at $3,390.

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

U.S. bond yields were little changed on Monday after a boost from stronger German government debt and a Federal Reserve official's remarks that the U.S. central bank may only raise rates two times this year. The U.S. 10-year note yielded 2.478 percent. The three-year note yield, which is sensitive to traders' views on Fed policy, stayed near the decade high of 2.07 percent reached earlier in the day.

2. Chinese bonds

Yields of longer-dated bonds rose slightly in China’s interbank market on Monday morning after a central bank official said China still has room to increase interest rates, while concerns over rising inflation and tightening regulation continued to keep market sentiment in check. Bond futures rose to the positive territory in the morning, but the gains of cash bonds were limited.

Stock Market
1. U.S. Equities

The S&P 500 extended its winning streak for 2018 on Monday although its advance slowed to a crawl as the healthcare and financial sectors weighed and investors awaited the start of the quarterly earnings season. The Dow Jones Industrial Average fell 12.87 points, or 0.05 percent, to 25,283, the S&P 500 gained 4.56 points, or 0.17 percent, to 2,747.71, and the Nasdaq Composite added 20.83 points, or 0.29 percent, to 7,157.39.

2. Hong Kong Equities

Hong Kong's benchmark stock index rose for a 10th session in a row on Monday, aided by bullish sentiment in global equity markets, and inbound investment from the mainland. Asian shares crept toward all-time peaks on Monday after Wall Street boasted its best start to a year in over a decade, with brisk economic growth and benign inflation proving a potent cocktail for risk appetite. At close of trade, the Hang Seng index was up 84.89 points or 0.28 percent at 30,899.53. The Hang Seng China Enterprises index rose 0.19 percent to 12,235.19.

3. China Equities

Chinese stocks remained at a 1-1/2-month high on Monday, extending its winning streak to the seventh consecutive day, boosted by property sector. But a correction is looming on profit-taking after recent gains, despite the medium-term moving averages started to turned up. The benchmark Shanghai Composite Index closed up 17.73 points or 0.52 percent at 3,409.48, within a striking distance to 3,430.46 hit on November 22, 2017. The trading volume of Shanghai A-shares rose to 285.9 billion yuan from 248 billion yuan.