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Asia Market Update

Freddie Mac to sell $10B in shares, Asian stocks lose upside momentum

Fri, Jul 18 2008, 04:21 GMT
by Eben Esterhuizen

TradeTheNews.com

- The Wall Street Journal reported that Freddie Mac is considering the sale of $10B in new shares to investors. "The high-stakes maneuver would have the potential to avoid a full-blown government rescue for Freddie Mac and Fannie Mae," said the paper.

- Forex: GBP/USD traded sharply lower, currently trading around the 200day MA at 1.9955, on an FT report that the U.K. Treasury is considering ditching strict fiscal rules on government borrowing. Since then a Treasury spokesman said the FT report was "pure speculation", but the GBP continues to look heavy. EUR/USD dipped after ECB chief Trichet said that he sees growth risks for Q2 and Q3. Trichet said these risks include a very significant financial market correction, but he added that recapitalization of European banks seems to be in line with the amount of losses so far disclosed. NZD/USD traded in a tight 15pip range, with 0.7640 capping the upside. With no economic data or news to provide direction, the pair is expected to remain range bound ahead of the European open. AUD/USD lost some upside momentum in Asia, but traders say the sentiment towards the AUD remains bullish, since the RBA is one of the few central banks viewed to be ahead of the inflation curve.

- Japanese bond prices rallied after the minutes from the Bank of Japan's June meeting showed that policy makers think slowing growth is more of a concern than accelerating inflation. One member said the Bank of Japan should take a gradual and pre-emptive approach to forestall an increase in inflation expectations. 

- Australia's export prices jump more than expected in Q2: (AU Q2 IMPORT PRICE INDEX QOQ: 1.4% V 2.2% expected, 2.7% prior; EXPORT: 13.5% V 10.0% expected, 3.5% prior) "The terms of trade, which effectively measure the nation's living standards, continues to surprise on the upside," said Su-Lin Ong at RBC Capital Markets. "It is a once in a generation shock which has underpinned a 13 percent increase in real incomes over the last five years." Analysts said the positive terms of trade data is a key factor arguing against interest rate cuts by the end of the year.

- Equities: At 0:09 EDT Japan's Nikkei is -0.10%, the S&P/ASX200 is -1.02%, South Korea's KOSPI is -0.10%, Hong Kong's Hang Seng index is +0.28%, and the Shanghai composite index is +0.28%. The S&P500 futures contract lost -0.80% since the U.S. close, last trading at 1,243.40. Asian stocks lost some upside momentum after the weaker than expected earnings results from Merrill, Google and IBM after the U.S. close. The Nikkei rallied in the early part of the morning, but erased all of its gains after the index failed to move above 13,000. Lower oil prices and a rising USD/JPY boosted exporter shares, with financials tracking the earlier rise in U.S. banks. The correction in commodity prices continues to drag on the S&P/ASX200, with BHP down -1.0%. Chinese equities are marginally higher, with investors buying oil refiners, airlines and financials.

- Commodities: Nymex crude oil gained +0.68% between 18:00 EDT and 0:07 EDT, last trading at $130.17/bbl (remains below its 55-day MA around $131.50). Goldman Sachs reiterated its year-end $149/bbl price target for oil, citing the possibility of supply shocks and low oil inventories. Spot gold lost -1.22%, last trading at $958.90/oz.

Published on  Fri, Jul 18 2008, 04:22 GMT

Archive

• Carry trades unwind ahead of U.S. jobs data
  Published On Fri, Sep 5 2008, 04:25 GMT
• Asian stocks trade lower, JPY gains traction
  Published On Thu, Sep 4 2008, 04:11 GMT
• Sharp declines in the Korean Won, lead Asian currencies lower
  Published On Wed, Sep 3 2008, 08:43 GMT
• Asian central banks intervene after Thailand declares State of Emergency
  Published On Tue, Sep 2 2008, 03:56 GMT
• Gustav approaches Gulf Coast, Koreans deny LEH talks
  Published On Mon, Sep 1 2008, 03:55 GMT

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