I. Yesterday's News
International News
1. The greenback had been on track for an 11th consecutive day of gains but it retreated as U.S. Federal Reserve Chair Janet Yellen, in her second day of economic testimony before Congress, offered no additional insight on the timing of the central bank's next rate hike. Philadelphia Federal Reserve Bank President Patrick Harker reckoned three rate hikes were appropriate this year, while Boston Fed President Eric Rosengren suggested an even more aggressive pace of rate increases may be needed.

2. U.S. retail sales rose a stronger-than-expected 0.4 percent in January as households bought electronics and a range of other goods, pointing to sustained domestic demand that should bolster economic growth in the first quarter. In a separate report, Consumer Price Index jumped 0.6 percent, its biggest increase in nearly four years, suggesting steady growth of factory output. The dollar briefly rose to a one-month high versus a basket of currencies on the data. Prices for U.S. government bonds fell, while Wall Street was almost flat.

3. Bank of Japan Governor Haruhiko Kuroda said on Wednesday he has no plan now to raise the central bank's bond yield targets as inflation was still distant from its 2 percent target. Kuroda also reiterated that the BOJ was abiding by a G7 and G20 agreement to use monetary policy solely for the domestic purpose of achieving price stability.

4. The European Union is preparing an early summit with China in April or May in Brussels to promote free trade and international cooperation in the face of a more protectionist and inward-looking Washington, three EU officials said. The EU believes China wants to use the summit to press home President Xi Jinping's vigorous defence of open trade and global ties at the World Economic Forum in Davos in January, in response to the new U.S. President Donald Trump. The EU, on the other hand, wants to solicit China's vocal support for international institutions such as the United Nations.

5. Japan's SoftBank Group Corp on Wednesday said it has agreed to buy Fortress Investment Group LLC for about $3.3 billion, looking to add investment expertise as it prepares to launch the world's largest private equity fund. The all-cash deal is SoftBank's first major investment in an asset manager and represents yet another unpredictable gambit for a group. The companies said Fortress principals would continue to lead the investment manager, which will operate within SoftBank as an independent business, based in New York. Fortress shareholders will receive $8.08 per share, a premium of 38.6 percent to the closing price on Feb. 13. JP Morgan Securities and Morgan Stanley & Co acted as financial advisers for SoftBank and Fortress respectively.

Domestic News
6. China's high leverage ratios and high saving rate are closely related to its growth mode, but leverage itself is not a problem while the key is leverage efficiency, the People's Bank of China said in a working thesis. Pure deleveraging or leveraging-up is not appropriate. The right way is to allow market forces to determine the resource allocation and reasonably push forward the process of deleveraging and economic restructuring, the paper said.

7. China's top economic planner approved 18 large fixed asset investment projects, mainly in water conservancy, transport and energy, with investment totalling 153.9 billion yuan last month.

8. China's recent recovery in luxury spending may boost sales of domestic department-store operators and luxury-goods retailers, including Golden Eagle Retail Group Limited (BB-/Negative), Hengdeli Holdings Limited (B+/RWN), and Parkson Retail Group Limited (B-/Negative), though it may not be enough to offset the effects of structural problems caused by changing spending patterns and competition from new retail formats, according to Fitch Ratings.

9. China's central bank said on Wednesday it lent 393.5 billion yuan to 22 financial institutions via its medium-term lending facility (MLF), more than the 151.5 billion yuan that expired today. The central bank lent 150 billion yuan for six months and 243.5 billion yuan for one year. Interest rates on the MLF loans were unchanged at 2.95 percent for six-month loans and 3.1 percent for one-year loans, the People's Bank of China (PBOC) said.

II. Market Overview
FX
1. Global Market
The dollar was flat on Wednesday as investors took profits after reaching a one-month high early in the session versus a group of currencies. The dollar index, which measures the currency against its six major peers, was flat at 101.21. It had rallied to a session high of 101.76, its highest since Jan. 12 as data showed a jump in retail sales and consumer prices last month. The greenback had been on track for an 11th consecutive day of gains but it retreated as U.S. Federal Reserve Chair Janet Yellen, in her second day of economic testimony before Congress, offered no additional insight on the timing of the central bank's next rate hike.

2. Home Market
China's yuan was almost flat against the dollar, with the central parity rate jumping over 170 basis points, as institutional bids for FX settlement countered a stronger dollar. Investors continued to bet on FX settlement, but the proprietary funds oversold the dollar at key levels, driving up market prices. In the afternoon session, a softer euro sent the dollar index higher, while yuan also pared some gains.

Precious Metals
Gold rose as the dollar came off its highs on Wednesday, shrugging off earlier pressure from stronger-than-forecast U.S. inflation and retail sales that added to expectations for near-term U.S. interest rate rises. Spot gold was up at $1,232.56 an ounce. U.S. gold futures for April delivery settled up 0.6 percent at $1,233.10.

Commodities
1.Crude Oil
Oil prices eased slightly on Wednesday in choppy trade as record high U.S. crude and gasoline inventories fed concerns about a global glut. A weaker dollar also helped to support greenback-denominated oil. Brent futures ended down 22 cents, or 0.4 percent, at $55.75 a barrel and U.S. crude fell 9 cents, or 0.2 percent, to $53.11 a barrel.

2.Base Metals
Copper rose on Wednesday on upbeat signals for the U.S. economy and as talks to end a major strike in Chile were delayed, while nickel rose on continued supply disruptions in the Philippines. Three-month copper on the London Metal Exchange closed up 0.7 percent at $6,065 a tonne. Nickel ended the day 1.4 percent higher at $10,920, its highest since mid-December.

U.S. Treasuries
1. U.S. bonds
Benchmark U.S. Treasury yields rose to 2-1/2-week highs on Wednesday after data showing surging consumer price inflation in January bolstered expectations that the Federal Reserve is closer to raising interest rates. Benchmark 10-year notes were last down 11/32 in price to yield 2.51 percent. Those yields earlier rose as high as 2.52 percent, the highest since Jan. 27.

2. Chinese bonds
China's interbank money rates edged down in a choppy trade, and government debt futures also fell slight on Wednesday. Spot bonds rose earlier boosted by upbeat financial reports in January and mounting expectations of interest rates hike from the Federal Reserve. But news on continued medium-term lending facility cast doubts on the market, pulling spot bonds into consolidation.

Stock Market
1. U.S. Equities
Wall Street pushed further into record-high territory on Wednesday, with the S&P 500 notching a seven-session winning streak, helped by a round of robust economic data and ongoing optimism that President Donald Trump will cut corporate taxes.
Fourth-quarter earnings for S&P 500 companies have risen about 7.2 percent, the strongest expansion since the third quarter of 2014, according to Thomson Reuters data.

2. Hong Kong Equities
Hong Kong stocks hit a five-month high on Wednesday, after Federal Reserve Chair Janet Yellen's comments on the U.S. economy and rising interest rate hike expectations sent Wall Street to record highs.

3. China Equities
China stocks reversed earlier gains to end lower on Wednesday, snapping a five-day winning streak, pressured by technical correction after recent strong rally, analysts said. But surging new stocks led by Rural Commercial Bank of Zhangjiagang lifted banking sector slightly higher. The Shanghai Composite Index dipped 4.94 points or 0.15 percent to finish at 3,212.99 after hitting the ytd high of 3,236.00.