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Asia Market Update

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Risk appetite rebounds as central banks step up their coordnation

Thu, Oct 9 2008, 07:32 GMT
by Eben Esterhuizen

TradeTheNews.com

- Equities: Risk aversion flows are being reassessed across Asian markets in spite of capitulation among optimists seen at session close in the US. Coordinated rate-cuts across most of G-7 central banks spurred excess volatility in Asian session yet again, however unlike their US counterparts, the momentum among Far East buyers appears to be much more sustainable. In Japan, Nikkei has pared its near double-digit percentage losses yesterday with sound gains, rallying 1.25% in early session. Meanwhile, the Hang Seng index - the other major casualty the day before - is ecclipsing Nikkei gains with a near 3% rally. Shanghai composite is also in positive territory, gaining 0.5% in the morning session while breaching the 2,100 handle. Additionally, South Korea's KOSPI index was a strong gainer on the session, benefitting from surprise 25bp rate cut by Korean central bank while rallying by over 2%. Taiwan's Taiex has also responded positively to looser monetary policy action of its central bank, gaining just over 1%. Australia's S&P/ASX 200 was mostly flat in spite of upbeat rhetoric from Aussie Prime Minister Rudd who sees local economy in a "different league" compared to most other economies.

- Forex: Coordinated rate cuts have also put the sustainability of risk averse trends into question in FX markets, where gains made by Japanese Yen and US dollar are being corrected. EURUSD has spent the last 24 hours in 1.3550-1.3750 range with bullish pressure growing in stature ahead of European Session. Swissy has also found some buying interest just above 1.13 handle in USDCHF - technically significant former support turned resistance. Meanwhile, GBPUSD is bouncing off fresh multi-month lows below 1.72 with consecutive rallies over 1.73 handle. Japanese Yen is particularly weak across the board, with USDJPY gaining two big figures above 101.00 in conjunction with a rebound in Asian equities, EURJPY gaining 3 big figures above 138, and GBPJPY rallying above 174.50 low from 171 handle. Aussie dollar was also a notable outperformer in light of resurfacing of carry seeking risk appetite, rallying over 3 big figures above 0.69 against the greenback while also regaining ground against the Kiwi dollar. In emerging markets, South Korean Won recovered from post-rate cut decline. Taiwan dollar, Singapore dollar, Hong Kong dollar, and Thai bhat all traded off earlier session lows.

- Commodities: Crude oil prices are lower by more than 0.80% and trading just above $88.00/oz. Crude oil is declining despite the Asian equity rebound and earlier reports that OPEC could meet before its scheduled December meeting to discuss the oil market. . During the US session, crude fell by 1.2% as weekly crude and gasoline inventories were higher than expected. Spot Gold is lower by more than 1% and trading below $900 per ounce, with session lows around $892.00/oz. Gold has declined as Asian equities have rebounded. In other commodities markets, Shanghai Copper is higher after opening limit down for the past 3 sessions. Shanghai Copper is tracking the gains in Chinese equities.

Other News: Both the New York Times and the Wall Street Journal reported that the US Treasury is examining a plan to take ownership stakes in banks, which are facing difficulties, as the government continues to seek ways to stabilize markets.

Published on  Thu, Oct 9 2008, 07:32 GMT