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I. Yesterday’s News
International News
1. President Donald Trump summoned Senate Republican tax-writers to the White House on Monday to urge passage of a sweeping tax bill that congressional fiscal analysts said separately would balloon the federal budget deficit by $1.4 trillion over a decade. As Republicans rushed to bring the bill to a Senate vote, possibly as soon as Thursday, the Joint Committee on Taxation (JCT), a nonpartisan unit of Congress, estimated it would expand the $20-trillion national debt. Despite this sunny outlook, some senior lawmakers still had reservations about the bill and its impact on the deficit and debt, on healthcare and on small businesses.
2. Jerome Powell, President Donald Trump’s nominee to be chairman of the Federal Reserve, pledged “to respond decisively” to any new economic crisis that may crop up while he is chief of the U.S. central bank, in remarks to be delivered at his Senate confirmation hearing on Tuesday. In a nod to the wide discretion Fed officials have relied on in recent years, sometimes drawing criticism from the Republican politicians who now run Congress, Powell said, “We must retain the flexibility to adjust our policies in response to economic developments... We must be prepared to respond decisively and with appropriate force to new and unexpected threats to our nation’s financial stability and economic prosperity–the original motivation for the Federal Reserve’s founding.”
3. Dallas Federal Reserve Bank President Robert Kaplan on Monday made his clearest case yet for an interest-rate hike next month and more to come in 2018, saying that waiting too long to tighten policy could increase the risk of recession. "I believe it will likely be appropriate, in the near future, to take the next step in the process of removing monetary accommodation," Kaplan said in an essay staking out his policy views ahead of next month's Fed meeting. "This should be done in the context of an overall strategy of removing accommodation in a gradual and patient manner."
4. Oil markets will rebalance after June 2018 at the earliest, an OPEC working panel concluded last week, OPEC sources said on Monday, signalling the need to extend existing production cuts well into next year. The conclusion from OPEC's national representatives and the group's secretariat came after a meeting on Thursday and Friday, according to four sources at the Organization of the Petroleum Exporting Countries. It also came as non-OPEC Russia said it would support extending cuts in tandem with OPEC but gave conflicting signals on the duration of the extension.
Domestic News
5. Profits of China's industrial firms surged in October backed by rising prides in industrial products, sharp annual growth in profits from steel, oil and hi-tech industries. The monthly growth declined, but still remained at high level. Growth in industrial profits, however, is expected to slow down later this year and well into 2017 as the PPI growth slipped.
6. Prices of new homes and existing homes reversed in some cities under the macro regulation, triggering panic buying for new homes. It is the newest indication of insufficient regulation and reform, instead of signs of over-tight control.
7. The value of assets held by China's banking sector rose 10.0 percent to 241.58 trillion yuan ($36.61 trillion) as of end-October compared with a year earlier, the China Banking Regulatory Commission (CBRC) said on Monday. Liabilities rose 10.0 percent from a year earlier to 222.66 trillion yuan, it said on its website.
II. Market Overview
FX
1. Global Market
The dollar shook off initial weakness to edge higher against a basket of other major currencies on Monday as traders braced for the resumption of deliberations on the U.S. tax plan and the confirmation hearing for Federal Reserve Governor Jerome Powell as the central bank's next chair. The dollar index, which measures the greenback against six rival currencies, was up 0.12 percent at 92.893, after hitting a nine-week low of 92.496 earlier in the session. The dollar was 0.45 percent lower against the yen.
2. Home Market
China's yuan inched up against the U.S. dollar in the morning session of Monday, as the official midpoint rates dropped moderately. Yuan’s gain was moderate, responding quietly to the subdued dollar index. In case that the dollar index extended weakness, forex prices will be pushed up by unsettled forex positions. But it’s hard to determine the proper entry point.
Precious Metals
Gold prices rose on Monday, buoyed by a weaker dollar, as investors looked ahead to congressional testimony by the nominee to chair the U.S. Federal Reserve and a meeting between U.S. President Donald Trump and Senate Republicans on tax reform. Spot gold was up at $1,294.44 an ounce, after hitting $1,299.13, its highest since Oct. 16. U.S. gold futures for December delivery settled up $7.10, or 0.6 percent, at $1,294.40 per ounce.
Commodities
1.Crude Oil
U.S. oil prices fell more than 1 percent on Monday, easing from two-year highs on prospects of higher supply from a planned restart of the Keystone crude pipeline and uncertainty about Russia's resolve to join in extending output cuts ahead of this week's OPEC meeting. Brent futures ended down just 2 cents at $63.84 a barrel while U.S. crude settled 84 cents, or 1.4 percent, lower at $58.11 a barrel.
2.Base Metals
Nickel prices fell on Monday, pressured by weakening demand for stainless steel in top metals consumer China, rising Chinese borrowing costs and Beijing's regulatory crackdown on risky financing. London Metal Exchange nickel ended 3.9 percent down at $11,570 a tonne, having touched a one-week low of $11,565. Copper hit $7,024 a tonne, its highest in a month, before reversing to finish with a 0.9 percent decline at $6,942.
U.S. Treasuries
1. U.S. Bonds
Treasury yields slipped on Monday in choppy trading, partly dragged down by a combination of a pullback on Wall Street after hitting record highs earlier, plus reports that North Korea may be preparing for another nuclear missile test. In late trading, the 10-year Treasury yield was down slightly at 2.333 percent, from 2.34 percent late on Friday. U.S. two-year yields were slightly off at 1.744 percent, from 1.748 percent on Friday. U.S. 30-year bond yields rose to 2.770 percent, from Friday's 2.761 percent. Earlier in the session, 30-year yields touched 2.738 percent, the lowest since mid-November.
2. Chinese bonds
Cash bonds in China’s inter-bank market were traded in a tight range on Monday, Treasury bond futures also consolidated around the previous trading session’s closing prices. Little changes were seen in bond market after a slight recovery in the previous session. Yields of the active 10-year CDB bonds hovered around 4.81 percent. Institutional investors were closely watch CDB’s pricing on the bonds due tomorrow.
Stock Market
1. U.S. Equities
Wall Street's major indexes ended little changed on Monday, retreating modestly from record highs set during the session, as gains for Amazon countered losses in shares of energy companies. The Dow Jones Industrial Average rose 22.79 points, or 0.1 percent, to 23,580.78, the S&P 500 lost 1 points, or 0.04 percent, to 2,601.42 and the Nasdaq Composite dropped 10.64 points, or 0.15 percent, to 6,878.52.
2. Hong Kong Equities
Hong Kong shares closed lower on Monday, as investors largely shrugged off data showing profits at China's industrial firms continued to grow at a robust pace last month. At close of trade, the Hang Seng index was down 180.13 points or 0.6 percent at 29,686.19. The Hang Seng China Enterprises index fell 1.14 percent to 11,772.27.
3. China Equities
China’s stocks to a three-month low amid an across-board weakness on Monday, led airlines, telecommunication sector, despite of economic data in line with market consensus, traders said. Cashing pressure and technical softness triggered heavy selloff. Major indexes are expected to remain weak with support at 3,300. The benchmark Shanghai Composite Index settled down 31.59 points or 0.94 percent to 3,322.23, within the distance from 3,271.51 hit on August 24. The CSI300 closed at 4,049.95, down 1.32 percent.
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