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Asia Market Update

Asia buckles under U.S. recession fears

Wed, Jan 16 2008, 04:30 GMT
by Trade The News Staff

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- Rumors of an emergency FOMC meeting continued to do the rounds in Asia. "There's talk about a Fed meeting - that's what the futures people are telling us," said Ric Klusman at Aequs Securities. "But then again it makes sense for them to wait for the December CPI figures out tonight." Some analysts are saying that those betting on an emergency move seem bound for disappointment, since the official meeting date is too close. "The only other way in which they might get bailed out is if the Fed cuts by 75bps on January 30," said Matthew Johnson at ICAP Australia. "The Fed hasn't cut by 75bps since they moved to interest rate targeting in the early 1990s, and I don't think that they'll do so now." Other analysts suggest an emergency Fed rate cut won't calm market nerves, as these moves may do little to resolve the subprime loan problem fundamentally.

- Forex: More stop losses were triggered after the New York close. Stop losses lifted AUD/USD above 0.8780 and NZD/USD above 0.7730. EUR/USD also had upside momentum after moving above 1.4775 on additional stop losses. EUR/USD closely tracked EUR/JPY in Asia, but choppy trading failed to answer the question whether Japanese investors see today's EUR/JPY drop as a buying opportunity. Key support for EUR/USD is seen at Friday's low at 1.4760. Chartists say the EUR/JPY's break below 159.65 means that the next downside target is 156.30 (61.8 fibo of 149.25 - 167.65). USD/Asia generally traded higher as investors sold shares on Asian stock markets, while the central bank of Taiwan has asked major banks not to rush into "dumping" the USD. Between 17:00 ET and 23:22: ET: EUR/USD +0.26%, GBP/USD -0.04%, USD/JPY -0.43%, GBP/JPY -0.46%, AUD/JPY +0.15%, AUD/USD +0.60%, NZD/AUD -0.22%, NZD/USD +0.35%, AUD/CHF -0.18%, USD/CHF -0.77% (USD/CHF hit a new record low)

- Japanese machinery orders decline in November, extending a sideways trend that has been in place for more than a year: (JP NOV MACHINE ORDERS MOM: -2.8% V -4.0% expected, +12.7% prior; YOY: 0.9% V -1.0% expected, +3.3% prior) The data confirms the consensus that Japanese capital expenditure growth will likely be subdued in the near term, failing to change the Cabinet Office assessment that the trend in machinery orders is flat.

- Japan's current account surplus rises less than expected in November: (JP NOV CURRENT ACCOUNT: ¥1.78T V ¥1.88T expected, ¥2.23T prior; ADJUSTED: ¥2.16T V ¥2.04T expected, prior 2.56T prior) Exports increased 9.7% in November from a year earlier, as shipments to Asia and Europe cushioned a decline in exports to the slowing U.S. economy. If you are watching the carry trade, it is worth noting that the capital and financial account, which measures international fund flows, registered an outflow of ¥1.71T in November, compared to an outflow of ¥214.3B a year earlier.  

- Rising commodity prices lift Japanese corporate goods price index: (JP DEC DOMESTIC CORPORATE GOODS PRICE INDEX MOM: 0.4% V 0.1% expected, +0.2% prior; YOY: 2.6% V 2.3% expected, 2.3% prior)

- Aussie consumer sentiment takes a knock in January: (AU JAN WESTPAC CONSUMER CONFIDENCE: -8.3% V 1.8% prior; largest decline is the in 14 months) The index for January stood at a seasonally adjusted 103.1 points, down from December's reading of 112.5 (an index reading above the 100 shows that optimists outnumber pessimists). Westpac attributed the sharp deterioration to an increase in existing mortgage rates and rising gas prices. Westpac added that media focus on the probability of a U.S. recession have also unnerved Aussie consumers.

- Equities: Weak U.S. economic data and disappointing earnings results from Intel and Citigroup caused sharp declines across Asian markets. At 23:07 Japan's Nikkei is -1.39% after staging a recovering, the S&P/ASX200 is -2.41% as thin volumes exaggerates index movement, South Korea's KOSPI is -1.84% and the Shanghai Composite Index is -2.00%. The S&P futures contract traded lower by -0.68% between 16:30 ET and 23:09 ET. Automakers and technology shares are leading declines in Japan, while Japanese banks were pulled down by reports that Mizuho Financial and Mitsubishi UFJ will increase their subprime-related loss estimates. The Nikkei is just above 26-month lows and traders are currently eyeing the 13,650 level (the 61.8% Fibo level for the move from the April 2005 lows to the Feb 2007 highs. The S&P/ASX200 is trading lower, as shares of Centro Properties continued to weigh on the index. In Seoul, shares of LG Philips and Posco traded sharply lower. Chinese financials traded lower, as China tracked losses on other stock markets.

- British Prime Minister Gordon Brown signaled for the first time that he was ready to nationalize Northern Rock.

- Commodities: Nymex crude oil recovered some early losses and is trading around $91.86/bbl at 23:17 ET. Nymex crude traded as low as $91.50/bbl in the Asian morning, but bargain hunters stepped in ahead of tomorrow's U.S. crude inventories data. Some analysts expect stockpiles rose for the first time in 9 weeks. Spot gold managed to recover from heavy selling at the start of the Asian session, losing -0.22% between 18:00 ET and 23:19 ET. Gold is currently trading above $900/oz. Shanghai copper traded down by its daily limit (-4%) on global growth concerns.

Published on  Wed, Jan 16 2008, 04:31 GMT

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