I. Yesterday's News
1. U.S. services sector activity held at a one-year high in December as new orders surged, while the number of Americans filing for unemployment benefits fell to near a 43-year-low last week, suggesting the economy ended 2016 with strong momentum. The Institute for Supply Management (ISM) report on Thursday also showed a sustained increase in prices paid by services industries for inputs, potentially signaling that the days of very low inflation could be coming to an end. ISM said its non-manufacturing activity index was at 57.2 last month, matching November's reading, which was the highest since October 2015. Another report on Thursday from payrolls processor ADP showed that private employers added a lower-than-expected 153,000 jobs in December. A third report from the Labor Department on Thursday showed initial claims for state unemployment benefits dropped 28,000 to a seasonally adjusted 235,000 for the week ended Dec. 31. That was close to the 233,000 touched in mid-November, which was the lowest level since November 1973.

2. Saudi Arabia cut oil output in January by at least 486,000 barrels per day (bpd) to 10.058 million bpd, fully implementing OPEC's agreement to reduce output. Saudi Aramco has started talks with customers globally on possible cuts of 3 percent to 7 percent in February crude loadings as it moves to implement the agreement on curbing global oil output, sources said on Thursday.

3. German economists called on the European Central Bank on Thursday to raise interest rates after euro zone consumer prices rose faster than expected in December. Inflation in the 19 countries sharing the euro increased an annual 1.1 percent last month, data showed on Wednesday, stirring a fear of inflation among German that goes back to the 1920s. "It is time for a normalisation (of monetary policy)," Stefan Bielmeier, the chief economist at DZ Bank, told the newspaper Bild. "Now a change in interest rates is doable."

4. Activity in Japan's services sector expanded in December at the fastest pace in 11 months, a private survey showed on Thursday, in a sign that economic growth could pick up due to gains in consumer spending. The Markit/Nikkei Japan Services Purchasing Managers Index (PMI) rose to a seasonally adjusted 52.3 in December from 51.8 in November. The index remained above the 50 threshold that separates expansion from contraction for the third consecutive month, and rose to its highest since January 2016.

5. U.S. President-elect Donald Trump on Thursday targeted Toyota Motor Corp, threatening to impose a hefty fee on the Japanese automaker it if builds its Corolla cars for the U.S. market at a plant in Mexico. "Toyota Motor said will build a new plant in Baja, Mexico, to build Corolla cars for U.S. NO WAY! Build plant in U.S. or pay big border tax," Trump said in a post on Twitter. This was Trump's latest broadside against automakers building cars in Mexico and first against a foreign automaker. Toyota President Akio Toyoda said in Japan on Thursday that the automaker has no immediate plans to curb production in Mexico, preferring to wait until after Trump's Jan. 20 inauguration before deciding whether to make any changes.

6. Euro zone producer prices rose for the third consecutive month in November on a monthly basis, mostly driven by soaring energy prices which offset subdued prices for consumer goods, estimates released on Thursday by Eurostat showed. The European Union's statistics office said prices at factory gates in the 19 countries sharing the euro increased 0.3 percent month-on-month in November and 0.1 percent from a year earlier. The November increase of the monthly reading is slower than the 0.8 percent rise recorded in October, but confirms a positive trend begun in September. Subdued prices for consumer goods confirmed however that inflation trends were still not structurally changed and remained mostly driven by volatile energy prices.

II. Market Overview
FX
The dollar fell to a three-week low against a basket of major currencies on Thursday after U.S. inflation and unemployment data failed to reverse a downtrend that followed some of the biggest gains on record for China's yuan. A rise in overnight borrowing costs in Hong Kong helped the offshore yuan to its highest rate against the dollar in nearly two months and the largest two-day rise since its inception in 2010. The dollar index, a measure of the greenback against six world currencies, fell 1.3 percent to a low of 101.300. It was the worst one-day percentage loss since Sept. 6. The dollar was last down 1.4 percent against the yen and around 1 percent lower versus the euro and Swiss franc. The greenback hit its lowest against the yen since Dec. 14 and lowest against the euro and Swiss franc since Dec. 30.

Precious Metals
Gold rose to its highest price in one month on Thursday as the dollar slipped further below a 14-year peak hit earlier this week, while palladium turned lower after extending this week's steep gains to a four-week high. Spot gold rose as much as 1.85 percent to its highest since Dec. 5 at $1,184.90 an ounce and was up at $1,180.39. Spot prices were heading for a 2.5 percent gain for the week, the strongest since June. U.S. gold futures settled up 1.5 percent at $1,181.30 per ounce.

Commodities
1.Crude Oil
Oil prices rose on Thursday in an up-and-down session, lifted by news that Saudi Arabia had cut production to meet OPEC's agreement to reduce output after prices fell on data showing a surprisingly large increase in U.S. gasoline and distillate inventories. West Texas Intermediate crude settled up 50 cents, or 0.9 percent, to $53.76 a barrel. Brent crude rose 43 cents, or 0.8 percent, to settle at $56.89 a barrel, after hitting a session high of $57.35.

2. Base Metals
Copper slipped on Thursday as investors cut bets on higher prices, although expectations of robust growth in China and a surge in the yuan supported optimism about demand in the world's largest consumer of industrial metals. Benchmark copper on the London Metal Exchange closed down 1.2 percent at $5,580 a tonne. In other metals, lead closed 1.2 percent lower at $2,053.5 a tonne, while nickel gained 0.7 percent to $10,290. Aluminium closed 1 percent higher at $1,702 a tonne, and tin slipped 0.3 percent at $21,075 a tonne. Zinc closed 0.1 percent lower at $2,618.5 a tonne.

U.S. Treasuries
U.S. Treasury debt yields dropped broadly on Thursday, falling for a third straight session, as investors grew risk-averse amid uncertainty about the incoming Trump administration. Thursday's gains in Treasury prices were led by the intermediate sector of the curve, the U.S. five-year and seven-year notes . Their yields fell to four-week lows. Long-dated U.S. debt yields also slid, with 30-year bonds sinking to five-week lows and 10-year notes to four-week troughs. In late trading, the U.S. 10-year note was up 25/32 in price to yield 2.358 percent. It hit a four-week low of 2.346 percent earlier. U.S. 30-year bond prices were up more than a point, yielding 2.950 percent, a five-week low.

Stock Market
1. U.S. Equities
The Nasdaq squeaked out a record high close on Thursday thanks to Amazon.com, while deep drops in Macy's, Kohl's and other department stores weighed on the broader stock market. But online retailer Amazon.com, which has been luring customers away from department stores, rose 3.07 percent, helping push the Nasdaq Composite to a record high close. The Nasdaq Composite rose 10.93 points or 0.2 percent to end at 5,487.94, less than 1 point higher than its previous record high close on Dec 27. The Dow Jones Industrial Average lost 42.87 points or 0.21 percent to end at 19,899.29 while the S&P 500 lost 1.75 points or 0.08 percent to 2,269.00.

2. Hong Kong Equities
Hong Kong stocks, joining an Asia-wide rally, had their biggest gain in eight weeks on Thursday, a day on which the offshore yuan's surge against the dollar stole the spotlight. The Hang Seng index rose 1.5 percent, to 22,456.69 points, its best day since Nov. 10, while the China Enterprises Index gained 1.7 percent, to 9,598.68 points.