I. Yesterday's News
International News
1. Hiring by U.S. private employers surged in February, suggesting that the economy remains on solid ground even as growth appears to have slowed further in the first quarter. The ADP National Employment Report showed on Wednesday that private payrolls grew by 298,000 jobs last month, well above economists' expectations for a gain of 190,000. January's private payrolls gains were revised up to 261,000 from 246,000. Prices of U.S. Treasuries were trading lower after the data, while U.S. stock indexes were mixed. The dollar was stronger against a basket of currencies. In a separate report on Wednesday, the Labor Department said nonfarm productivity, which measures hourly output per worker, rose at an annualized 1.3 per cent rate in the final three months of 2016, as it had estimated last month. Unit labor costs, the price of labor per single unit of output, increased at an unrevised 1.7 per cent pace in the fourth quarter. They rose at a 0.7 per cent rate in the third quarter.

2. Britain's economy is likely to feel the pain of Brexit more sharply in the coming years despite holding up well so far, according to finance minister Philip Hammond's latest plan to steer the economy through its split from the European Union. Hammond, announcing an annual budget, said the world's fifth-biggest economy had so far "continued to confound the commentators" by withstanding the referendum shock. The economy is on course to grow by 2.0 percent in 2017, up from a forecast of 1.4 percent made in November, according to official forecasts. Faced with that outlook, Hammond said he would stick to his plan to bring down  budget deficits.

3. Japanese inflation remains in line with the central bank's latest forecasts, a key policymaker said on Wednesday, adding that the country had escaped a protracted period of sliding consumer prices. Bank of Japan board member Takako Masai said recent policy efforts to keep government borrowing costs on a tight leash had been "smooth" and had not accelerated declining liquidity in bond markets. "The negative impact of the oil price has been diminished, so it (inflation) is in line with our previous expectations," Masai said. Masai said market-based measures of long-term inflation expectations, which remain muted, play an important role in getting inflation back to target.

4. U.S. crude oil inventories surged last week to another record high, while gasoline stocks went the other direction, posting their largest one-week drop in nearly six years, the Energy Information Administration said on Wednesday. Crude inventories rose 8.2 million barrels in the week to March 3, compared with analysts' expectations for a 2 million-barrel build. Most of that - 4.6 million barrels - came from an unexpectedly large surge in stocks on the west coast. The ninth weekly crude build boosted total stockpiles to a fresh record of 528.4 million barrels. On the other side of the refining equation, gasoline posted its biggest weekly inventory drawdown since April 2011, with a 6.6 million-barrel drop. U.S. gasoline futures rose sharply on the news, hitting a session high of $1.7072 a gallon before backtracking to $1.6526. U.S crude futures extended losses, trading $2.86 or 5.38 percent lower at $50.28 a barrel.

5. German industrial output rose more than expected in January, driven by strong demand for machinery, cars and other capital goods, suggesting Europe's biggest economy started into 2017 on a solid footing. Industrial output jumped 2.8 percent on the month, the data showed. This was the strongest monthly increase since August 2016 and overshot the consensus forecast in a Reuters poll for a 2.5 percent rise.

Domestic News
6. China's imports surged 38.1 percent from a year earlier, the biggest increase since February 2012, official data showed on Wednesday, while exports unexpectedly fell 1.3 percent. China unexpectedly posted its first trade gap in three years in February on China's New Year distortion and high commodity prices.

7. Yi Gang, vice governor of the People's Bank of China, said he's confident in the rise of yuan, known as RMB, as a global currency in trade and investment worldwide as yuan's internationalization pushing forward and driven by market force, underscoring its underlying stability.

8. Wang Zhaoxing, Co-Vice Chairman at China Banking Regulatory Commission, said the plan for debt-to-equity swap had been submitted to the State Council for approval that is expected to put into effect in the first half of this year. The basic principle for setting up institutions conducting debt-to-equity swap had also been confirmed with details to be announced shortly, Wang said.

9. CSRC approved China International Capital Corp (CICC) acquisition of China Investments Securities on Wednesday, but warned risk contagion and improper interests transfer between the two, a key step-up toward the 16.7-billion-yuan M&A deal.

10. Dong Caiping, President of Zenith Steel Group Corp Ltd., and a NPC representative said, China's steal sector still retains huge capacity as many steel plants are expanding output after recent price recovery, suggesting a supply glut in the second half of this year.

11. China, fearing a rapid escalation of tension on the Korean peninsula, called on North Korea on Wednesday to stop its nuclear and missile tests and for South Korea and the United States to stop joint military drills and seek talks instead. Such a "dual suspension" would allow all sides to return to the negotiating table, Chinese Foreign Minister Wang Yi said.

12.China hinted at changing its long-standing forex policy at the Two Sessions, triggering hot discussion. Analysts said the setback in yuan's internationalization due to forex reform in the past two years would be reversed even amid downbeat external environment.

II. Market Overview
FX
1. Global Market
The dollar rose on Wednesday to its highest level in five days, just below a two-month peak, as data showed U.S. private sector payrolls rose more than expected for February, increasing investor expectations of an increase in interest rates by the Federal Reserve later this month. The dollar index was last up 0.25 percent at 102.08, close to a March 2 peak of 102.26 which was a level not seen since Jan 11. The dollar rose to 114.74 yen, its highest against the Japanese currency since March 3, just below a nearly one-month high. The euro also fell to its lowest since March 3.

2. Home Market
China's yuan fell against the dollar on Wednesday, but managed to hold above yesterday's lows. Traders said the timetable of the Two Sessions overlaps with Fed's policy meeting. Big banks continued to injected liquidity above 6.90 per dollar to meet mounting demand for forex. Yuan's prices are expected to remain steady unless the dollar index surged.

Precious Metals
Gold prices extended losses to a five-week low on Wednesday as the dollar gathered strength on the prospect of a U.S. interest rate hike. Spot gold was down at $1,207.5 an ounce, after touching its lowest since Feb. 1 at $1,206.05. The most active U.S. gold futures for April delivery settled down 0.6 percent at $1,209.40. In other precious metals, silver slipped to $17.234 per ounce, after tapping its lowest since Jan. 31 at $17.19. Platinum fell to $944.8 per ounce, after falling to $941.50, the lowest since Jan. 5.

Commodities
1.Crude Oil
Oil prices plunged 5 percent to their lowest levels this year on Wednesday as U.S. crude inventories surged much more than expected to a record high, stoking concerns a global glut could persist even as OPEC tries to prop up prices with output curbs. U.S. West Texas Intermediate crude settled at $50.28 per barrel, down $2.86, or 5.38 percent after falling to its lowest level since Dec. 15. Brent crude slumped to its lowest level since Dec. 8 at $52.93, before settling at $53.11, down $2.81 or 5.03 percent.

2.Base Metals
Copper prices slipped on Wednesday to a one-month low on selling triggered by a higher dollar, lower imports of the metal by top consumer China and rising inventories. Benchmark copper on the London Metal Exchange was untraded at the close, but bid down 0.1 percent at $5,765 a tonne from an earlier session low at $5,755.50. Aluminium ended up 0.1 percent at $1,877, zinc gained 0.6 percent to $2,710, lead added 0.8 percent to $2,251.

U.S. Treasuries
1. U.S. bonds
U.S. Treasury yields jumped on Wednesday, with the two-year yield hitting its highest levels in more than 7-1/2 years, as a strong gain in U.S. private-sector jobs in February cemented expectations that the Federal Reserve would raise interest rates next week. Longer-dated yields reached their highest since December before retreating due to a strong 10-year note sale. The two-year Treasury yield, which is especially sensitive to traders' views on Fed policy, rose to 1.378 percent, the highest since August 2009. It was last at 1.354 percent, up 2 basis points from late Tuesday, Reuters data showed.

2. Chinese bonds
China's interbank money rates continued to go sideways in the morning session, with government bonds trading in a tight range. Traders said yields of cash bonds were little changed. But interests swap edged up 2-3 bps, fueling institutional investors' concern over MPA supervision. The result of tier-1 five-year government bonds showed limited enthusiasm among institutional investors. Uncertainty over interest rate hike from the Federal reserve kept investors on the sidelines.

Stock Market
1. U.S. Equities
The S&P 500 and the Dow Jones Industrial Average dipped on Wednesday as energy stocks suffered their worst drop in nearly six months. The energy sector, slumped 2.5 percent for its biggest decline since mid-September. The Dow Jones Industrial Average fell 69.03 points, or 0.33 percent, to 20,855.73, the S&P 500 lost 5.41 points, or 0.23 percent, to 2,362.98 and the Nasdaq Composite added 3.62 points, or 0.06 percent, to 5,837.55.

2. Hong Kong Equities
Hong Kong shares extended gains for a third day on Wednesday, helped by strength in mainland property developers, as well as a jump in ZTE Corp after the Chinese telecom equipment maker agreed to plead guilty in a U.S. sanctions case. The benchmark Hang Seng index added 0.4 percent, to 23,782.27, while the Hong Kong China Enterprises Index gained 0.5 percent, to 10,280.31.

3. China Equities
China stocks fell slightly on Wednesday amid mixed signals on economic outlook from the Two Sessions. Major indexes are expected remain rangebound in near term on uncertainty toward economy and lack of key drivers, awaiting clearer clues for direction. The Shanghai Composite Index closed down 1.75 points or 0.05 percent lower to 3,240.66. The trading volume of Shanghai A shares dropped to RMB 198 billion from 209.8 billion.