I. Yesterday's News
International News
1. U.S. producer prices increased more than expected in February as the cost of services such as hotel accommodation pushed higher and the year-on-year gain was the largest in nearly five years, pointing to steadily rising inflation pressures. Firming inflation, together with a tightening labor market, which is expected to generate strong wage growth, could allow the Federal Reserve to raise interest rates on Wednesday. The Labor Department said on Tuesday that its producer price index for final demand increased 0.3 percent last month. Economists polled by Reuters had forecast a 0.1 percent uptick. In the 12 months through February, the PPI jumped 2.2 percent, the biggest advance since March 2012 and ahead of the 2.0 percent gain forecast in the Reuters poll.

2. The International Monetary Fund on Tuesday called on the Group of 20 major economies to work together to preserve the benefits of trade and avoid protectionism, while also urging them to reduce external imbalances and halt policies that distort global trade. Under pressure from rising protectionist sentiment in many advanced economies, including the United States, the IMF said that international cooperation was needed to maintain trade as an engine of growth.

3. Moody's said rate hike by the Federal Reserve would reflect a US economy nearing full employment, and expected that the Fed will raise rates another two or three times this year in increments of 25 bps, after raising rates at the March meeting. The rating agency also said next Fed rate hike would have "little" effect on US borrowing costs.

4. The mood among German investors improved less than expected in March, a survey showed on Tuesday, as uncertainty about the outcome of major European elections and their effect on the growth outlook for Europe's biggest economy remained high. Mannheim-based ZEW said its monthly survey showed its economic sentiment index rose to 12.8 from 10.4 points in the previous month. This undershot the Reuters consensus forecast for rise to 13.1. A separate gauge measuring investors' assessment of the economy's current conditions edged up to 77.3 points from 76.4 in February. This was also slightly weaker than the Reuters consensus forecast which predicted a reading of 78.0.

5. Francois Fillon's troubled election campaign suffered yet another blow on Tuesday when magistrates put him under formal investigation on suspicion of embezzling state funds, a first for a presidential candidate in France. With less than six weeks to go until the first round of voting, Fillon has been unable to draw a line under allegations that he paid his wife hundreds of thousands of euros of public money for little work. Tuesday's decision put him one step closer to a trial and covered a wide range of grounds. The former prime minister has refused to pull out of the presidential race and on Tuesday his camp and some party allies reacted defiantly to the magistrates' move, saying the campaign would go on.

6. The harmonized index of consumer prices (HICP )rose by 2.2 percent on the year after an increase of 0.7 percent in January, the Federal Statistics Office said. That was the highest annual inflation rate since August 2012 and came in stronger than the ECB targets of 2 percent. a Reuters consensus forecast of 2.1 percent. T a rate of below but close to  for the 19-member euro zone as a whole. The consumer price index inflation rose 2.2 percent on an annual basis in February. Compared to the previous month, the CPI rose 0.6 percent.

Domestic News
7. China's factory output and fixed-asset investment grew more strongly than expected in the first two months of the year, adding to encouraging foreign trade report in suggesting that China's economy gets off to strong start in 2017. But retail sales disappointed as consumption, a main driver of economic growth, was curbed by slower household income growth and strong home sales, adding uncertainties on China's economy.

8. The new Index of Services Production grew 8.2 percent year on year in the Jan.-Feb. Period, according to the National Bureau of Statistics (NBS). This is the first time the NBS has rolled out a comprehensive index to evaluate short-term changes in service sector development. Industries including information transmission, software, IT, transport, warehousing and courier services showed strong growth in January and February, the index showed.

9. China's net foreign exchange sales  declined for the 16th consecutive month in February, but at the slower pace in nine months. Compared with January, the decline eased 70 percent, supporting the government's assertions that capital outflows are easing amid tighter scrutiny of cross-border flows. Fund outflow curbs and a steadying yuan also eased the pressure on the People's Bank of China (PBOC) to inject liquidity.

10. China could consider a RRR cut to cover the base currency injected into market by MLF and PSL instruments, thus ensuring accomodative monetary policy, said Yu Xuejun, chairman of the CBRC's Supervisory Board for Key State-owned Financial Institutions

II. Market Overview
FX
1. Global Market
The dollar rose on Tuesday, bolstered by a widely expected U.S. interest rate increase from the Federal Reserve this week and bolstered by political risks in Europe as Dutch elections get under way. The dollar index, which measures the greenback against a basket of six major currencies, climbed 0.4 percent to 101.71. The euro fell 0.4 percent to $1.0609 on caution ahead of the Dutch vote. Sterling, meanwhile, slipped 0.5 percent to $1.2158, after earlier falling to an eight-week low, amid worries about a possible second Scottish independence referendum and the triggering of Article 50, which will formally begin the negotiations that will take Britain out of the EU.

2. Home Market
China's yuan was little changed against the dollar on Tuesday, with midpoint rate falling 130 bps. Big banks continued to injected dollar liquidity to meet real demand for forex. Yuan is expected to remain under downward pressure on long buying of the greenback, bolstered by a widely expected U.S. interest rate increase from the Federal Reserve.

Precious Metals
Gold prices were little changed on Tuesday as an expected U.S. interest rate hike boosted the dollar and weighed on the precious metal, but political risks in Europe provided safe-haven support. Spot gold was down at $1,198.33 an ounce), as investors took a wait-and-see approach ahead of the Fed meeting. U.S. gold futures settled down 0.04 percent at $1,202.60.

Commodities
1.Crude Oil
Oil tumbled on Tuesday after OPEC reported a rise in global crude stocks and a surprise output jump from its biggest member, Saudi Arabia, further pressuring prices that have now erased nearly all gains since OPEC announced output cuts in November. Brent futures dropped below their 200-day moving average for the first time since late November during the session. Brent settled down 43 cents, or 0.8 percent, at $50.92 a barrel. U.S. West Texas Intermediate crude lost 68 cents, or 1.4 percent, to settle at $47.72 per barrel for the seventh daily decline in a row, the longest losing streak since January 2016. It is down almost 11 percent since March 3.

2.Base Metals
Copper prices climbed on Tuesday as funds bought on growing expectations of stronger demand from top consumer China, but a higher dollar ahead of Wednesday's decision on U.S. interest rates by the Federal Reserve capped gains. The benchmark copper contract on the London Metal Exchange ended up 0.4 percent at $5,820 a tonne, nearly 3 percent above the two-month low at $5,652 hit last week.

U.S. Treasuries
1. U.S. bonds
U.S. long-dated and benchmark Treasury yields edged lower on Tuesday after a drop in oil prices was viewed as a deflationary sign, but the drop in yields was limited as investors awaited the Federal Reserve's policy statement on Wednesday. U.S. 30-year Treasury bond yields, which are sensitive to inflation expectations, were last down about 3 basis points at 3.167 percent, from 3.192 percent late Monday. Benchmark 10-year yields were down about 2 basis points at 2.591 percent, from 2.607 percent late Monday. Two-year notes edged slightly higher to exhibit a "curve flattener" trade ahead of the Fed statement.

2. Chinese bonds
China's interbank money rates were little changed in a tight range, while government bond futures extended gains after opening at highs. Investors were staying at sidelines without much impetus for short selling, after surging late in the session the previous session. The encouraging investment and industrial output report had limited impact on the market.

Stock Market
1. U.S. Equities
U.S. stocks fell on Tuesday as oil prices dropped to their lowest since November and airlines pulled industrial stocks down as a blizzard hit the U.S. Northeast. The S&P energy sector fell 1.1 percent to close at its lowest since Nov. 4. Chevron was off 1.8 percent and was the biggest drag on the Dow and the S&P 500. The Dow Jones Industrial Average fell 44.11 points, or 0.21 percent, to 20,837.37, the S&P 500 lost 8.02 points, or 0.34 percent, to 2,365.45 and the Nasdaq Composite dropped 18.97 points, or 0.32 percent, to 5,856.82.

2. Hong Kong Equities
Hong Kong's main index barely moved on Tuesday, as many investors stayed on the sidelines ahead of a series of global "risk events" this week. They are awaiting the outcome of the Federal Reserve's rate-setting meeting on March 14-15, policy decisions by the Bank of England and Bank of Japan, and also keeping an eye on the Dutch general election and shaky oil prices. The Hang Seng index was unchanged at 23,827.95. But the China Enterprises Index, which tracks mainland companies, gained 0.6 percent, to 10,315.23 points, aided by stronger-than-expected economic data.

3. China Equities
The Shanghai Composite Index rose slightly in a tight range on Tuesday. Trading volume shrank again as consumer-related sector softened on subdued retail sales in January-February. Major index is expected to keep going sideways as investors stay on the sidelines ahead of the incoming policy meeting of the Federal Reserve.