• Home ::
• Fundamental ::
• Analysis Reports ::
• Asia Market Update

• Send
• Print
• Add To
• Rss

Asia Market Update

1f5fc881-7154-45e5-872c-a4f5bcc17687

5

0

Cable Testing Multi−month Highs amid Broad Dollar Weakness

Tue, Jun 30 2009, 12:27 GMT
by Trade The News Staff

TradeTheNews.com

Asian Market Update: Equities Extend Gains, Shrugging Decline in Japan Employment Sector and Australia Credit Conditions; Cable Testing Multi-month Highs amid Broad Dollar Weakness

- Asian equity markets are trading firmer across the board, led by consumer service and oil names benefiting from weak currency impact in Japan and near multi-month highs seen in front-month crude. Nikkei225 led the advancers with a 1.9% gain going into midday break, while S&P/ASX and Hang Seng closely trailed the rally with a 1.5% boost. Korean Kospi and Taiwan's Taiex were less firm but also advanced by 0.9% and 0.7% respectively. Ahead of the US session, front-month S&Ps are off their highs but still in positive territory at $921.70 and benchmark yields have retraced some of the US session decline to 3.485%.

- Equity markets have risen despite the mixed data highlighting continued deterioration in Japan's employment sector.
Jobless rate rose to 5.2% from 5.0% prior - the highest level since September of 2003 - while job-to-applicant ratio fell to its lowest level on record at 0.44. Poor job market translated into deeper than expected decline in labor cash earnings, which fell 2.9% v -2.5% expected. On a related noted, NY Times has commented on rising protests from Japan's younger generation against the government, demanding improved employment conditions. The feature notes that unemployment among young people is double that of the overall rate. Poor jobs data was however mitigated by strength in other sectors.
Japan May household spending rose for the first time since early 2008 by 0.3%, better than -1.5% expected. June manufacturing as gauged by Nomura/JMMA survey remained contractionary at 48.2, but did register its best level since March of 2008. In other economic data, Australia's May private sector credit conditions registered their first contraction in 5 months at -0.1%, supporting recent sentiment from Aussie banks that lending remains challenging. Elsewhere, South Korea July Business Survey of Manufacturing was slightly firmer at 78 v prior 76 and Malaysia's Q1 Unemployment rate jumped to 4.0% from prior 3.1%.

- Among regional speakers, Japan's Finance Minister Yosano reflected on the troubling jobless rate figure by suggesting that the impact of the government stimulus is not fully evident in the overall economy but does demonstrate the need for flexible policy. Japan's PM Aso also responded to political turmoil within his own LDP coalition that has called for his resignation, noting that he was prepared to call for Parliament's lower house elections. In South Korea, Finance Minister Yoon echoed Yosano's tone stating that the increase in jobs and income needs time to materialize, and Dep Trade Minister Lee forecasted moderation in export declines through September with subsequent growth starting in October. New Zealand deputy governor Spencer remarked following RBNZ statement of intent that inflation has finally become less of a concern, but may still become an issue once confidence returns to the markets. On June 10th, RBNZ also forecasted lower inflation pressures leading to a normal rate by 2010.

- In equity news, Nikkei tech names NEC and Elpida traded firmer by over 2.5% on reported partnership to make LCD-TV semiconductors. Separately, NEC forecasted a "several percent" increase in chip orders for the next quarter and pledged to bolster its output, while Elpida was confirmed to be on track to receive a ¥200B capital injection from state banking and private sources. In materials sector, Yokohama Rubber denied being the source of a press rumor that the company may report a quarterly operating loss of about ¥1.5B on lower sales of passenger-vehicle tires. In energy space, Nippon Oil and Inpex were up 2% and 4%, tracking the gains in front month crude, and Japan Cosmo Oil shrugged announcement of a processing cut in July to rally 1%.

- Outside Japan, Australia's commodity sector traded stronger on rebound in metals, with BHP rising 2% and Rio Tinto up 3.5%, while Aussie energy names Woodside Petroleum and Santos rallying 2.5%. In other Sydney shares, Qantas reported improved load factor of 77.9% vs 74.3% y/y, although overall passenger traffic fell 2.8%. Consumer sector's David Jones raised its profit growth by 8-12% for FY09, an upgrade from prior forecast of 0-5% profit growth, noting that sales to date have been above expectations.

- In currencies, the dollar remained weak, falling particularly sharply against the Aussie and European majors. AUD/USD saw its best level in 2 weeks above 0.8120, Sterling approached multimonth highs around 1.6660, and EUR/USD extended its advance above intraday highs around 1.4130. In other commodity FX, USD/CAD remained contained above 1.15 despite the sharp rally in crude, while NZD/USD continued to approach multi-month high of 0.66. Japanese Yen pared some of the broad weakness seen in the US session, with USD/JPY falling back below 96.00 handle.

- Crude oil prices are higher on the session as the commodity has moved to an 8-month high above $73/bbl. Today's gain in oil prices is tracking the advances in the European major currencies against the dollar. Crude oil prices are also being supported by renewed geopolitical concerns in Nigeria. During yesterday's European session, Shell announced that it had to shut its Estuary oil field in Nigeria following an attack by militants. Back on June 26, Shell announced that Nigerian militants also attacked its Afremo field. In terms of oil demand, the IEA in its 5-year outlook lowered its oil demand estimates for every year through 2013 by approximately 3M bpd. The IEA noted that the global recession has had a severe impact on oil demand. In Japan, refiner Cosmo Oil announced that it planned to lower its oil processing by 7% in July on weaker demand. The decision by Cosmo Oil comes as recent data showed that Japan's oil imports in May declined by 63% y/y. In China, the government confirmed that it would increase domestic diesel and gasoline prices by as much as 10%. Looking ahead, the US API inventories data will be released later on today, which could give further direction to oil prices Spot Gold is higher by more than 0.20% and has so far traded as high as $942.20. Gold is tracking the gains in oil and the Euro.

Published on  Tue, Jun 30 2009, 12:30 GMT