I. Yesterday's News
1. U.S. factory activity accelerated to a two-year high in December amid a surge in new orders and employment, indicating that some of the drag on manufacturing from a slump in oil prices was fading. Other data on Tuesday showed U.S. construction spending hit a 10-1/2-year high in November, providing a boost to a fourth-quarter economic growth estimate. The reports suggested President-elect Donald Trump would inherit a strong economy, with a labor market that is near full employment, from the Obama administration. The Institute for Supply Management (ISM) said its index of national factory activity rose 1.5 percentage points to 54.7 last month, the highest level since December 2014. In a separate report the Commerce Department said construction spending increased 0.9 percent to $1.18 trillion in November, the highest level since April 2006.

2. German inflation rose more than expected in December, hitting the highest level in more than three years, preliminary data showed on Tuesday, a welcome sign for the European Central Bank. German consumer prices, harmonised to compare with other European countries (HICP), rose by 1.7 percent on the year after an increase of 0.7 percent in November, the Federal Statistics Office said. This was the highest annual inflation rate since July 2013 and stronger than a Reuters consensus forecast of 1.3 percent. German annual inflation picked up to 1.7 percent after 0.8 percent in November. German unemployment fell more than expected in December, keeping the jobless rate in Europe's biggest economy at a record low, data from the Federal Labour Office showed on Tuesday. The seasonally adjusted jobless total fell by 17,000 to 2.638 million, the Labour Office said. That was more than three fold the 5,000 forecast in a Reuters poll. The adjusted unemployment rate remained at 6.0 percent, the lowest level since German reunification in 1990.

3.Report released by French National Institute for Statistics and Economic Studies on Tuesday showed that the Harmonised Index of Consumer Prices (HICP) was up slightly to 0.3 percent month on month. Over the year, it rose by 0.8 percent, compared to +0.7 percent in November. This was the highest annual inflation rate since May 2014, boosted by a 4.3 percent rise in energy prices.

4. South Korea's central bank chief said on Tuesday monetary policy should remain accommodative as low growth could continue in the foreseeable future while financial market volatility may widen. "As low growth may continue for a considerable period of time, the Bank of Korea will support economic recovery by maintaining accommodative monetary policy," Governor Lee Ju-yeol said in a New Year speech. He stressed the importance of keeping financial markets and household debt stable, a sign the central bank could refrain from taking action and leave the benchmark rate unchanged at a record low of 1.25 percent at its policy meeting on Jan. 13.

5. Singapore's economy posted surprisingly strong growth in the fourth quarter, although the outlook is clouded by worries over a slowdown in China and uncertainty over rising global trade protectionism under the incoming Trump Administration. Gross domestic product (GDP) expanded 9.1 percent in the October-December period from the previous three months on an annualised and seasonally adjusted basis, the Ministry of Trade and Industry said on Tuesday. That came after GDP contracted a revised 1.9 percent in the third quarter. The median forecast in a Reuters poll was for growth of 3.7 percent. The economy grew 1.8 percent for the full year, exceeding the government's previous forecast of 1.0-1.5 percent growth, but still the lowest growth since 2009.

II. Market Overview
FX
The U.S. dollar rose to its highest in 14 years against the euro and a basket of major currencies on Tuesday after data showed solid growth in U.S. Manufacturing. The dollar index rose to 103.820, its highest level since December 2002 after data showed U.S. factory activity accelerated to a two-year high last month. The euro fell to a 14-year low against the dollar, dropping to $1.0342 after the data's release. The dollar gained against the yen as well, reaching 118.60 yen, its highest since Dec. 15 and just a hair below its highest point since February. It later retraced much of those gains, even turning negative against the yen after investors took profits on the day's strong moves. The greenback rose to its highest against the Mexican peso since Nov. 11, the day it hit its all-time high.

Precious Metals
Gold prices rose 1 percent to a near 3-week high on Tuesday as early gains in stocks and other assets perceived as risky gave up gains and investors fled to save-haven bullion. Platinum and palladium both jumped by more than 4 percent as investors scrambled for position as the new year got under way. Spot gold was little changed at $1,158.82 an ounce, while U.S. gold futures for February delivery ended the session up at $1,162.

Commodities
1.Crude Oil
Oil prices slid more than 2 percent on the first trading day of 2017, knocked off 18-month highs hit in early trade as the U.S. dollar rallied to its highest level since 2002 and traders took profits. Brent futures fell $1.35, or 2.4 percent, to settle at $55.47 a barrel, while U.S. West Texas Intermediate (WTI) crude lost $1.39, or 2.6 percent, to settle at $52.33, its lowest close in two weeks. Brent reached as high as $58.37 and WTI $55.24 before sliding.

2. Base Metals
Copper retreated from a two-week high on Tuesday as a stronger dollar outweighed expectations of solid consumption in the United States and China, where economic data showed signs of improvement. Three-month copper on the London Metal Exchange closed 0.6 percent down at $5,500 a tonne, having hit its highest since Dec. 19 at $5,616.50 in earlier trade. Weakness in copper hit aluminium, which touched its lowest in more than two months at $1,676 a tonne before closing down 0.4 percent at $1,687. Nickel closed at its lowest since Sept. 19 at $9,910. In other metals, lead closed unchanged at $2,015, zinc finished 2.1 percent down at $2,522 and tin was bid 0.8 percent lower at $20,950.

U.S. Treasuries
U.S. Treasury debt yields were mostly higher on Tuesday after three days of losses, supported by positive U.S. data and upbeat economic reports from China and Europe. Bond prices, which move inversely to yields, trimmed losses however, as U.S. stocks and oil pared gains. U.S. 30-year bond yields, which are particularly sensitive to oil-driven inflation expectations, fell to four-week lows as a result. In late trading, the U.S. 10-year note was down 4/32 in price to yield 2.446 percent. U.S. 30-year bond prices were up 4/32, yielding 3.044 percent. U.S. two-year note prices were down 1/32, with a yield of 1.218 percent.

Stock Market
1. U.S. Equities
Wall Street rose sharply on Tuesday as a post-election rally extended into the new year, helped by gains in Verizon Communications and technology companies Alphabet and Facebook. The Dow Jones Industrial Average climbed 119.16 points, or 0.6 percent, to end at 19,881.76 points and the S&P 500 gained 19 points or 0.85 percent to 2,257.83. The Nasdaq Composite added 45.97 points or 0.85 percent to 5,429.08.

2. Hong Kong Equities
Hong Kong stocks advanced on the year's first trading day on Tuesday, with optimism stemming from China's solid manufacturing surveys offsetting the negative impact of a strong U.S. Dollar. The Hang Seng index rose for a fourth straight trading session, up 0.7 percent to 22,150.40 points. The China Enterprises Index gained 0.7 percent, to 9,459.55 points.