I. Yesterday's News
International News
1. The United States on Tuesday declined to name China as a currency manipulator although it remained critical of the Chinese government's economic policies ahead of a planned visit to Beijing by President Donald Trump. The semi-annual U.S. Treasury currency report said no countries deserved the currency manipulator label, but it kept China on a currency "monitoring list" despite a fall in China's global current account surplus since 2016. The Treasury cited China's unusually large, bilateral trade surplus with the United States.

2. U.S. President Donald Trump has a pool of five candidates to choose from for the next chair of the Federal Reserve and is likely to announce his choice before going to Asia in early November, a source familiar with the situation said on Tuesday. Except the current chair, Janet Yellen, the others consist of his chief economic adviser, Gary Cohn, along with former Fed Governor Kevin Warsh, Fed Governor Jerome Powell and Stanford University economist John Taylor. Trump said in all likelihood he would choose one of the five as the next Fed chair.

3. U.S. industrial production increased 0.3 percent last month after a 0.7 percent drop in August as the lingering effects of Hurricanes Harvey and Irma hobbled activity at factories, but the outlook for the industrial sector remains bullish amid a strengthening global economy and weakening dollar.

4. Accelerating inflation bodes well for the German economy and makes it more probable that the European Central Bank will alter its ultra-loose monetary policy, the ZEW research institute said on Tuesday. The fact that inflation is rising again, and expected to climb further, equally points towards a positive economic development in Germany and improves the conditions for German exports. In a statement released as ZEW's monthly survey showed investor morale in Germany brightening in October.

Domestic News
5. Companies from China invested in 5,159 companies in 154 countries and regions from January to September, the Ministry of Commerce announced on Tuesday. China's outbound direct investment from non-financial sectors dropped 41.9 percent year-on-year to $78.03 billion between January and September, further capping irrational ODI.

6. China has taken baby steps towards deleveraging and has made a “tentative but uneven” start to reduce the level of debt in its economy, S&P Global Ratings said on Tuesday. Rising commodities prices helped Chinese industrial corporations to restore their balance sheet, while the growth of banking assets dropped below nominal economic growth for the first time since 2012. However, household credit and government-related infrastructure expenditure continued to rise rapidly.

7. China shall tighten its monetary policy, said Zhu Baoliang, head of the Economic Forecast Department of China's State Information Center. The spread between PPI and CPI will be erased the next year, while PPI and CPI is quite likely to hit government's 3 percent target, suggesting no further room for easing during the process of deleveraging.

8. The 19th National Congress of the Communist Party of China will be opened in Beijing in 18-24 October 2017, when the Party's 19th Central Commission for Discipline Inspection will be elected, said Tuo Zhen, spokesman for the 19th National Congress of the Communist Party of China

II. Market Overview
FX
1. Global Market
The dollar rose to a one-week high against a basket of currencies on Tuesday on speculation that U.S. President Donald Trump was leaning towards nominating a Federal Reserve head who would be more inclined to raise interest rates at a faster pace. The greenback was also supported by U.S. two-year Treasury yields hitting nine-year highs on Tuesday. The dollar index, which measures the greenback against a basket of six major peers, hit a one-week high of 93.729. The index was last up 0.2 percent at 93.488. Knocked by a stronger dollar, the euro slipped to a one-week low of $1.1734, having fallen almost 3 percent since hitting a 2-1/2-year high last month. The euro was last down 0.2 percent at $1.1770. Sterling dropped below $1.32 for the first time since Thursday, after comments by Bank of England policymakers were interpreted by markets as broadly dovish.

2. Home Market
China's yuan slumped over 200 pips against the dollar, crossing below the mark of 6.6 once again after one week. A firmer dollar index and strong mid-month demand dragged yuan down, trader said. Yuan is widely expected to keep trading within a wide range during the 19th National Congress.

Precious Metals
Gold prices fell on Tuesday on speculation that the eventual successor to U.S. Federal Reserve Chair Janet Yellen will favor higher interest rates. Spot gold was down at $1,284.81 an ounce, after dipping to $1,281.31, while U.S. gold futures for December delivery settled down $16.80, or 1.3 percent at $1,286.20 per ounce, hitting a one-week low of $1,283.20.

Commodities
1.Crude Oil
Oil prices ended little changed on Tuesday, steadying after earlier gains and losses, as expectations of high U.S. production and exports offset concerns that fighting between Iraqi and Kurdish forces could threaten the country's crude output. Brent crude futures gained 6 cents, or 0.1 percent, to settle at $57.88 per barrel, while U.S. crude gained 1 cent to settle at $51.88.

2.Base Metals
Zinc prices slipped to their lowest level in over three weeks on Tuesday as the dollar strengthened and inventories rose, highlighting concern that increasing supply would ease shortages. LME benchmark zinc closed down 3.4 percent at $3,085 a tonne, the biggest one-day fall in six months. It touched a low of $3,054, the weakest level since Sept. 22. LME three-month copper shed 1.5 percent to finish at $7,027 a tonne, hit by profit-taking after its biggest daily jump in eight months on Monday. LME aluminium bucked the weaker trend, rising 0.2 percent to end at $2,140 a tonne. Nickel shed 0.8 percent to close at $11,765 a tonne, lead fell 1.9 percent to $2,492 a tonne and tin gave up 1.2 percent to $20,350 a tonne after touching a two-month low of $19,885.

U.S. Treasuries
1. U.S. Bonds
The U.S. Treasury yield curve flattened on Tuesday as 2-year yields rose to their highest level since November 2008 and yields on longer-dated maturities declined. Yields on 5-year notes touched their highest level since Oct. 6 while 30-year yields fell to the lowest since Sept. 27. That pushed the yield spread between 5- and 30-year maturities to 83.94 basis points, the lowest since November 2007. The difference between yields of Treasuries maturing in two years and those maturing in 10 years fell to the lowest since August 2016.

2. Chinese bonds
China's bonds remained subdued on Tuesday with the CFFEX benchmark 10-year Treasury bonds posting the largest one-day drop in over two months. Cash bonds in inter-bank market also softened with the most active 10-year Treasury bonds rising 3.75 percent to the highest since December 2014. Shorter-dated maturities relatively steadied, but the yield curve kept steepening up.

Stock Market
1. U.S. Equities
The Dow Jones Industrial Average briefly broke above the 23,000-point mark for the first time on Tuesday, driven by strong earnings from UnitedHealth and Johnson & Johnson, but finished the session just below that milestone. The blue-chip index has been steadily inching higher and is up 2.6 percent so far this month, putting it on track for a seventh straight monthly advance.

2. Hong Kong Equities
Hong Kong stocks were little changed in quiet trading on Tuesday, with the main index hovering around 10-year peak as investors await a congress of China's Communist Party and third-quarter Chinese economic data this week. The Hang Seng index was unchanged at 28,697.49, while the China Enterprises Index lost 0.3 percent, to 11,568.31 points.

3. China Equities
China's stocks fell slightly, trading in a narrow range on Tuesday, but the losing momentum eased after Monday's decline. Home appliance names firmed, while resource sector led the decline. Investors chose to stay on the sidelines ahead of the 19th National Congress due on Wednesday, as shown by sharply shrinking turnover. Major indexes are expected to remain stable in the near term. The Shanghai Composite Index settled at 3,372.04, down 6.43 points or 0.19 percent. The trading volume plunged almost 30 percent to 162.5 billion from 221.4 billion.