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Asia Market Update

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Japan Finance Official to call for greater JPY stability at G20

Thu, Oct 29 2009, 06:00 GMT
by Trade The News Staff

TradeTheNews.com

Asian Market Update: New Zealand Central Bank stands pat at 2.50%, signals current levels thru mid-2010 as NZD plunges; Japan Finance Official to call for greater JPY stability at G20

ECONOMIC DATA

- (NZ) Reserve Bank of New Zealand leaves official cash rate unchanged at 2.50% (as expected)

- (NZ) New Zealand Sept Trade Balance (NZ$): -424M v -681Me; Imports: 3.25B v 3.50Be; Exports: 2.83B v 2.83Be

- (KS) Korea Nov Business Survey Manuf: 93 v 94 prior; Non-manuf: 84 v 82 prior

- (JP) Japan Sept Prelim Industrial Production M/M: 1.4% v 1.0%e (7-month low); Y/Y: -18.9% v -19.3%e (10-month high)

- (JP) Japan Sept Corp Service Price Index Y/Y: -3.2% v -3.4%e

- (AU) Australia Aug Conference Board Leading Index: 1.8% v 0.7% prior

- (AU) Australia Sept HIA New Home Sales: -4.5% v 11.4% prior (4-month low)

- (NZ) New Zealand Sept M3 Money Suppy: 2.7% v 3.5% prior

- (JP) Japan Sept Vehicle Production Y/Y: -21.6% v -25.9% prior

SPEAKERS/PRESS

- Asian equity markets accelerated their losses after two consecutive sessions of sizable declines, tracking renewed risk aversion that has gripped bourses worldwide for much of the week. With just under 2 hours to go in Tokyo and Seoul, Nikkei225 and the Kospi are down nearly 2%. Elsewhere, Taiex, S&P/ASX, and the Hang Seng are all off by about 2.5%, as losses in the high-beta energy and materials sectors lead the selloff across the board. Ahead of the Thursday open on Wall St, front-month S&Ps are up 0.2% just above 1,040, with traders eyeing the Advance US GDP report as well as earnings out of ExxonMobil, Procter Gamble, and Aetna.

- Reserve Bank of New Zealand rate decision marked the key economic event of the session, as policymakers kept rates unchanged at 2.50% in line with unanimous consensus view. The accompanying statement saw RBNZ planning to maintain current interest rates until the second half of next year - beyond market expectations for timing of tightening - helping sink NZD to 3 week lows against USD and 10-week lows against AUD. (By contrast, Australia's Finance Minister Tanner reiterated the Aussie rates are likely to head higher.) Moreover, RBNZ stated that the New Zealand housing market has reversed some declines, but saw only a very gradual increase in household spending. New Zealand September trade balance, released later in the session, saw a narrower deficit driven by lower import volumes, confirming cautious view on domestic consumption. Also speaking after the RBNZ decision, Finance Minister English commented on rising budget deficits amid lower govt tax revenue intake.

- Elsewhere, Japan's Deputy Finance Minister Noda - the appointed representative to next week's G20 summit - urged the Bank of Japan to continue to support the economy with monetary stimulus. Regarding the outlook for the G20 FX discussion, Noda said he would call for greater JPY stability, rejecting the notion that Japan is comfortable with high Yen levels, even though he did not anticipate the topic to dominate discussion.

- In China, sovereign wealth fund (CIC) Chairman Lou Jiwei Warned on formation of "small bubble" in global asset prices, noting the fund was focusing on commodity-related assets and real estate as a hedge against inflation. In Korea, Finance Minister Yoon saw no plans to change fiscal stimulus stance, forecasting Q4 GDP growth above 0.5%. Taiwan Central Bank was also dovish over the near term, stating it was not planning to tighten policy at the moment, but urged banks to be aware of rate increase in 2010 and not suppress rising mortgage interest rates.

EQUITIES

- In individual Nikkei names, another round of earnings saw Mitsubishi follow Honda's outperformance earlier this week, reporting H1 Net loss ¥36.4B v loss ¥42Be, Op loss ¥32.5B v loss ¥35Be, Rev ¥573B v ¥577Be. Japanese press also speculated that Toyota would post a narrower than expected 1H net loss, also forecasting operating loss at ¥250B on sales of ¥8.3B (in line with market estimates). In steel sector, Nippon Steel, Japan's largest steelmaker, reported a narrower than expected first half operating loss, and inline revenues. Also, Nippon raised its FY2010 operating profit forecast to ¥40B from breakeven (¥22Be), while keeping its revenue estimate unchanged. Kobe steel posted H1 Net loss ¥45.3B v loss ¥50Be, Op loss ¥24.6B v loss ¥33Be, Rev ¥788B v ¥791Be, also raising FY guidance. Steel names in Korea were also strong, with Hyundai Steel reporting Q3 Op profit KRW158B v KRW149Be on Rev KRW2.1T v KRW2Te.

Elsewhere, after reporting disappointing earnings, shippers Mitsui and Nippon Yusen faced increasing scrutiny at Moody's where the former's outlook was downgraded to Negative and the latter was placed on review. In financials, Korea's Woori beat on the bottom line, posting Net profit KRW484B v KRW287Be. Australia's ANZ missed however, reporting H2 Net profit A$1.5B v A$1.9Be.

CURRENCIES/FIXED INCOME/COMMODITIES

- In currencies, European majors consolidated the US session selloff against USD, with EUR/USD trading sideways just above 1.47 and USD/CHF contained by 1.03. Sterling is decisively stronger on a relative basis, trading sideways below 1.64. In commodity FX, AUD remained at 3-week lows below 0.90, and USD/CAD extending gains above 1.08. Japanese Yen also strengthened in line with risk averse flows, as USD/JPY fell below 90.30 and EUR/JPY found fresh 2-week lows below 133.

- Crude oil prices are lower and trading below $78/bbl. Oil prices are tracking the weakness in Asian equities. During the US session, the Department of Energy disclosed that weekly crude inventories rose less than expected, while gasoline stockpiles unexpectedly rose (DOE CRUDE: +775K V +1.4ME; GASOLINE: +1.6M V -1.0ME). Spot Gold prices are higher on bargain hunting, after the metal dropped over 1% on the COMEX. The SPDR Gold Trust ETF pared its gold holdings by 1.2 metric tons for the second consecutive session.

- In corporate news, Australia's Lihir Gold reported that its Q3 production declined by close to 7 y/y to 233K ounces. Lihir reaffirmed its full year production forecast of1-1.2M ounces of gold. Additionally, Australia's Sino Gold disclosed that its Q3 output declined by over 10% q/q to 48K ounces.

Published on  Thu, Oct 29 2009, 06:08 GMT