I. Yesterday's News
International News
1. The number of Americans filing for unemployment benefits fell to near a 44-year low last week, pointing to further tightening of the labor market even as economic growth appears to have remained moderate in the first quarter. The stronger labor market and rising inflation could push the Federal Reserve to raise interest rates this month. Initial claims for state unemployment benefits dropped 19,000 to a seasonally adjusted 223,000 for the week ended Feb. 25, the lowest level since March 1973, the Labor Department said on Thursday. The figure of the previous week was revised down 2,000. It was the 104th straight week that claims remained below 300,000, a threshold associated with a healthy labor market. That is the longest stretch since 1970, when the labor market was much smaller. It is now at or close to full employment, with an unemployment rate of 4.8 percent. After the report, stocks on Wall Street slipped, the dollar firmed, while prices for U.S. government debt fell.

2. Euro zone inflation surged to a four-year high last month, zooming past the European Central Bank's target and piling pressure on rate setters to open talks about when and how extraordinary stimulus measures will be scaled back. Inflation in the 19 countries sharing the euro rose to 2.0 percent from 1.8 percent in January, Eurostat data showed on Thursday, the highest since the start of 2013 and just above the ECB's target of a rate just below 2 percent. Producer price inflation, which feeds into overall inflation with a lag, meanwhile surged to an annual 3.5 percent rate from 1.6 percent, hinting at building pressure for underlying price growth. Still, the ECB is likely to resist any call to step off the accelerator when it meets next week, arguing that the oil price fuelled inflation surge is temporary, growth is fragile and the outlook is fraught with uncertainty given elections in France, Germany, the Netherlands and possibly Italy.

3. China will improve policy tools for counter-cyclical management of cross-border flows, establish a so-called "negative list" based on prudential assessment, and gradually phase out foreign exchange conversion limits for "microscopic areas", Fang Shangpu, deputy head of the State Administration of Foreign Exchange (SAFE) said. In the meanwhile, china should let a flexible exchange rate mechanism regulate the impact of capital flows and balance international payments. Writing in a publication, he said china's foreign exchange market is stabilizing and the authority will also continue to "combat illegal activities and wrongdoings in order to keep order in the forex market.

4. Chinese telecom equipment maker ZTE Corp is nearing an agreement to plead guilty to U.S. criminal charges and pay hundreds of millions of dollars in penalties over allegations it violated U.S. laws that restrict sale of U.S. technology to Iran, a person familiar with the matter said. The company has not yet signed a deal with the U.S. Department of Commerce, the U.S. Department of Justice and the U.S. Department of Treasury, cautioned the person, who declined to speak on the record because the negotiations are not public. Others noted that with a new U.S. administration prompting changes in personnel at government departments, a final deal may be delayed or even scuttled. But ZTE is expected to plead guilty to conspiring to violate the International Emergency Economic Powers Act, among other charges, the source said, and pay penalties in the hundreds of millions.

5. Federal law enforcement officials conducting a criminal probe of heavy machinery manufacturer Caterpillar Inc searched three of its facilities on Thursday, prompting a sharp sell-off in the company's stock. A spokeswoman for the U.S. Attorney Office for the Central District of Illinois, Sharon Paul, confirmed that federal law enforcement officials conducted searches at locations in Peoria, East Peoria and Morton, Illinois, but did not say why agents raided the three facilities. Caterpillar, in a statement issued on Thursday afternoon, said it believed the search was part of an Internal Revenue Service investigation related to profits earned by a Swiss parts subsidiary, Caterpillar SARL, or CSARL.

6. PSA Group and General Motors hope to announce the French carmaker's acquisition of Opel within days after narrowing differences on pension liabilities at GM's European division and other issues, sources said. Talks are progressing well ahead of a PSA board meeting to be held before the tie-up can be unveiled, people close to the discussions said, adding the deal could be announced as soon as Monday, the eve of the Geneva car show. The talks are not concluded, the people cautioned, and there is still no guarantee a definitive deal can be reached, or that the PSA board will approve it.

Domestic News
7. China's newly appointed banking regulator said on Thursday that the risks faced by China's banking and financial system are controllable. "We are determined to remove "chaos" from the regulatory system, and will put the prevention of financial risks at a more prominent position to make sure there won't be a systematic financial crisis," Guo Shuqing said in his first public appearance as chairman of the China Banking Regulatory Commission (CBRC).

8. China's fixed asset investment (FAI) volume of 32 provincial-level regions rose 7.9 percent year on year to 60.65 trillion yuan in 2016 and is likely to hit 65 trillion yuan in 2017, said Li Pumin, secretary general of the National Development and Reform Commission, at a news conference.

9.China will crack down illegal coal mining and launch a nationwide safety check on all coal mines, China's Ministry of Land and Resources announced. The country's work safety watchdog said the inspection will last from March to the end of August, targeting coal mines that are either involved in illegal mining or are not able to meet safety standards.

10. China is asking the EU to end tariffs on Chinese solar panels as soon as possible following a decision by the European Commission to extend anti-dumping duties for 18 months before eventually phasing them out. Wang Hejun, a trade department head within China‘s Commerce Ministry, urged the EU to drop anti-dumping duties on Chinese solar panels in order to limit the negative impacts on normal international solar panel trade.

11.Ministry of Commerce spokesman Sun Jiwen said all foreign enterprises including those from the Republic of Korea are welcome to China for investment. China is committed to protect the legal rights of foreign companies in China as long as they abide by China's laws, he said.

12. Lotte Duty Free on Thursday said a cyber attack using Chinese internet protocol (IP) addresses has crashed its website. A distributed denial-of-service (DDoS) attack, which overloads servers with requests, crashed the website, Lotte Duty Free said in a statement.

13. Hong Kong's residential transactions increased by 24 percent in February compared with January, which represented a jump of 126 percent year on year from a record low, the Land Registry reported. This was boosted by hot new home sales in early 2017.

II. Market Overview
FX
1. Global Market
The dollar rose to a seven week high against a basket of currencies on Thursday, after hawkish comments by a Federal Reserve official late on Wednesday encouraged investors to expect a near-term interest rate hike. The dollar rose 0.45 percent against a basket of six major currencies to 102.24, its highest since Jan. 11. The greenback was last up 0.75 percent against the Japanese yen at 114.56, the highest since Feb. 15. The euro fell 0.47 percent against the dollar to $1.0496.

2. Home Market
China's yuan fell against the U.S. Dollar along with a lower midpoint rate on Thursday, hitting bottom of 6.88-6.89 per dollar in 1-1/2 months. The greenback climbed on reduced uncertainty over interest rate hike in March, regardless of lack of details on President Trump's economic policy. Rising forext bets weighed on yuan.

Precious Metals
Gold prices were on track for their weakest session since December on Thursday, buoyed by a firm dollar and rising U.S. rate hike expectations in March following buoyant U.S. economic data and hawkish comments from Federal Reserve governors.
Spot gold was down at $1,234.72 an ounce. U.S. gold futures settled down 1.4 percent at $1,232.90.

Commodities
1.Crude Oil
Oil prices fell more than 2 percent on Thursday after Russian crude production remained unchanged in February, showing weak compliance with a global deal to curb supply to tighten the oversupplied market. Brent futures ended the session $1.28, or 2.3 percent, lower at $55.08 per barrel and U.S. crude settled down $1.22, or 2.3 percent, at $52.61.

2.Base Metals
Copper fell on dollar strength on Thursday and after recent gains tempted investors to book profits, though sentiment remains underpinned by manufacturing reports from China and elsewhere that pointed to firmer demand. London Metal Exchange copper ended down 1.4 percent at $5,930 a tonne, having hit its highest since Feb. 21 in the previous session. In other metals, aluminium closed down 1.9 percent at $1,912, while zinc ended down 2.8 percent at $2,782, having hit a month low earlier of $2,775. Tin ended down 0.9 percent at $19,350, nickel closed down 2.3 percent at $10,780.

U.S. Treasuries
1. U.S. bonds
U.S. two-year Treasury yields hit their highest in more than 7-1/2 years on Thursday, while other U.S. yields hit multi-week or multi-month highs on increasing expectations that the Federal Reserve will raise interest rates at its March meeting. Yields on U.S. two-year notes, which are considered most vulnerable to Fed rate hikes, hit their highest since August 2009 at 1.340 percent. The three-year yield reached a nearly 11-week high of 1.617 percent, while the benchmark 10-year hit a more than two-week high of 2.505 percent.

2. Chinese bonds
China's interbank money rates firmed in the morning session, but government bonds fell in a choppy trade. U.S. Treasury yields climbed on increasing expectations that the Federal Reserve will raise interest rates in March. This added with sustaining fundamentals recovery at home in dampening market sentiment. Investors shall keep an eye on regulator's policy and the sustainability of economic recovery.

Stock Market
1. U.S. Equities
U.S. stocks retreated on Thursday, led by financial stocks, while Caterpillar shares dropped following news that federal officials searched its Illinois facilities. The Dow Jones Industrial Average fell 112.58 points, or 0.53 percent, to end at 21,002.97, the S&P 500 lost 14.04 points, or 0.59 percent, to 2,381.92 and the Nasdaq Composite dropped 42.81 points, or 0.73 percent, to 5,861.22.

2. Hong Kong Equities
Hong Kong stocks, which joined a regional rally in the morning, erased earlier gains and ended Thursday lower, as some investors took advantage of the morning rebound to dump shares. The Hang Seng index ended the session down 0.2 percent, at 23,728.07, while the China Enterprises Index lost 0.4 percent, to 10,246.89 points.

3. China Equities
China stocks fell in volatile on Thursday, with losses picking up late in the session. Most sectors ended in the negative territory, led by decline in previous outperformers such as agricultural sector, while large-cap blue chips limited losses, traders said. Major indexes are expected to go sideways amid cautious sentiment ahead of the Two Sessions.