Asian Market Update: China services PMI hits 4-month highs; EUR/USD falls to 2-week lows


Economic Data

- (CN) CHINA DEC NON-MANUFACTURING PMI: 56.1 V 55.6 PRIOR (10th straight month of expansion, 4-month high)


Markets Snapshot (as of 04:30 GMT)

- Nikkei225 closed

- S&P/ASX +0.8%

- Kospi -0.6%

- Shanghai Composite closed

- Hang Seng +0.1%

- Mar S&P500 -0.3% at 1,453

- Feb gold -0.1% at $1,687/oz

- Feb Crude Oil -0.3% at $92.85/brl


Notes/Observations

- Asian equity markets are trading more subdued despite the outsized fiscal cliff resolution upswing seen in US indices overnight. Japan and China remain on holiday break, just as investors brace for the ADP jobs report on tap for Thursday and the non-farm payrolls data on Friday. Conference Board online jobs data released earlier portend strong employment figures, undoubtedly padded by the catch-up hiring in the Northeast in the wake of Hurricane Sandy as well as seasonal retail jobs leading into the busy holiday period.
Anticipated improvement may be accompanied by the rise in the jobless rate from November's 3-year low of 7.7%, as job-seekers return to the labor force.

- Regionally, economic data was limited to non-manufacturing PMI out of China rising to a 4-month high and coming in above the expansion threshold of 50 for the 10th consecutive month. The single datapoint was a non-factor in terms of sentiment, as profit-taking played out across the asset classes. Mar S&Ps are down 4pts at 1,453, crude oil retreated as low as $92.50, and USD and JPY pared their overnight declines. EUR/USD was the most notable mover, extending the US-session downward reversal to a 2-week low below $1.3150, while USD/JPY retreated to ¥87.70 after hitting fresh 28-month highs above 87.35.
In the case of the former, yield differentials may also be shifting in favor of the US dollar, as the yield on the 10-year note rose to a 3-month high of 1.86%, some 40bps above its German counterpart. Separately, S&P and Moody's offered their takes on the fiscal cliff developments overnight, alleviating some dollar-bearish concerns of a looming US sovereign downgrade. S&P, which is the only agency rating US below AAA, said the deal does not have an impact on its outlook, reiterating 2013 GDP projections at 2.2% and 2014 at 2.7%. Moody's said it would like to see more fiscal action beyond recent deal, but also anticipating the debt limit hurdle to be raised when it comes up for debate in 2 months.


Currencies/Fixed Income/Commodities

- USD/KRW: Analysts see KRW continue to gain in 2013, possibly reaching 1,000 vs USD - Korean press

- EUR/USD: Accelerating decline below $1.3130; 2-week lows


Speakers/Political/In the Papers

- (CN) China property tycoon Ren Zhiqiang expressing concern over exorbitant prices seen in the latest Beijing land auction; Report noting an auction of a land parcel in Tongzhou, a Beijing suburb, sold this week for CNY1B or 491% more than the starting price - FT

- (CN) China vehicle production in 2013 to exceed that of Europe for the first time ever - FT

- (JP) Japan Center for Economic Research (JCER): Japan's Nov GDP estimated at -0.4% m/m v +1.4% prior - Nikkei News

- (JP) According to a Nikkei News poll of Japan's large corporation managers, respondents' average view of Japan's FY13/14 GDP is 1.3% - Nikkei News

- (KR) Bank of Korea (BOK): South Korea banks to tighten lending in Q1 - Korean press

- (KR) South Korea Ministry of Knowledge and Economy (MKE): 2013 exports to rise 4.1% as global demand recovers; Trade surplus to narrow 12.6% to $25B - Korean press

- (KR) South Korea Finance Ministry: To spend 72% of 2013 budget in H1, 45% in Q1 - financial press


Equities

- Fuji Heavy: 7270.JP: To increase US production capacity by approx 30% by FY16 - Japan press

- Kddi: 9433.JP: Follow-up: 2-hr long LTE service crash on Jan 2nd said to have impacted up to 1.75M subscribers - financial press

- 9983.JP: G.U. Co. unit looking to reduce production ratio in China from two-thirds to less than half within three years due to rising labor costs - Nikkei News

- HMC: Plans to increase motorcycle market share in India - Yomiuri News

- China Railway 390.HK: Shanxi provincial govt investigating a cover-up of an explosion on Christmas Day by the company; At least 8 people said to have been killed - SCMP

- RIO: Head of iron ore unit Sam Walsh: Current price spike in iron ore likely to be temporary - The Australian

- JBH.AU: Said to be the most heavily shorted stock in Australia's retail sector with 28.5% short interest - The Australian

- F: Positive Mad Money mention; Selected as "best stock idea of 2013" - CNBC