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Asia Market Update

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Asian equities track US Friday selloff while China rallies on 18−month PMI high

Mon, Nov 2 2009, 06:41 GMT
by Trade The News Staff

TradeTheNews.com

Asian Market Update: Asian equities track US Friday selloff while China rallies on 18-month PMI high; Australia raises GDP forecasts; USD pares gains after higher open

ECONOMIC DATA

- (CH) China Oct PMI Manufacturing: 55.2 v 54.7e (Highest figure since Apr 2008)

- (AU) Australia OCT AiG Performance of Manuf Index: 51.7 V 52.0 PRIOR (first decline in 6 months)

- (AU) Australia Oct TD Securities Inflation M/M: -0.3% V 0.0% prior (First negative figure since May); Y/Y: 1.2% V 1.3% prior (multi-year low)

- (UK) UK Oct Hometrack Housing Survey M/M: 0.2% v 0.2% prior; Y/Y: -4.2% v -5.6% prior (16-month high)

- (AU) Australia Q3 House Price Index Q/Q: 4.2% v 3.0%e; Y/Y: 6.2% v 4.3%e (highest since Q2 of 2008)

- (JP) Japan Sept Labor Cash Earnings: -1.6% v -2.1%e (9-month high)

- (TA) Taiwan Oct HSBC Manuf PMI: 59.8 v 57.5 prior

- (CH) China Oct HSBC Manuf PMI: 55.4 v 55.0 prior (18-month high)

- (KS) South Korea Oct CPI M/M: -0.3% v 0.2%e; Y/Y: 2.0% v 2.4%e

- (JP) Japan Oct Vehicle Sales: 13.0% v 3.5% prior (multi-year high)

- (IN) India Oct Markit Manuf PMI: 54.5 v 55.0 prior

- (RU) Russia Oct Manuf PMI: 49.6 v 52.0 prior

- (AU) Australia Oct RBA Commodity Index SDR: -31.1% v -32.3% prior

SPEAKERS/PRESS

- Asian equity markets are trading sharply lower as bearish sentiment from Friday US session reverberates in the region.
Nikkei225 has entered the final hour down over 2%, S&P/ASX ended the day 2.2% lower, while Korea's Kospi is also off by comparable 1.9%. Shanghai Composite is the only regional index in the green, gaining over 1.3% following an 18-month high in China Manufacturing PMI suggesting accelerated economic recovery in the region. Both India and Taiwan also released their October PMI figures, pointing to continued moderate expansion. Ahead of the first trading session of November, front-month S&Ps are around session highs, up 0.5% at 1,037,, shrugging the confirmed weekend bankruptcy from CIT group.

- Ahead of tomorrow's RBA decision, Australia's govt policy makers elevated their growth and employment estimates for the current and the following fiscal year. For the FY09/10, GDP forecast was boosted to 1.5% from -0.5%, while the GDP view for FY09/10 was lifted to 2.75% from 2.25%. Additionally, current year CPI forecast rose to 2.25% from 1.75%, and jobless rate is now expected to peak in the current year at 6.75% - down from prior forecast of 8.25%. The boost to economic projections may make the RBA decision a closer call, with current majority expecting a 25bp tightening to 3.50%, while only a handful of analysts see a 50bp hike. Overall, Aussie data on the session was also fairly mixed, with better than expected house price figures balanced by the first negative print in monthly TD securities inflation in 4 months.

- In other regional speakers, Japan's Vice Finance Minister Tamake said global economic prospects remain fragile. In Singapore, Finance Minister Shanmugaratnam saw domestic growth likely slowing over the coming 5-10 years on greater labor constraints. New Zealand Treasury officials - traditionally a more cautious bunch - were more upbeat, noting that the global recovery is stronger than expected and would accelerate in second half of 2009.

EQUITIES

- In individual equities, Nikkei225 first half earnings shifted to the industrials sector, where the news has been slightly more positive than in Tokyo tech. Suzuki Motor reported H1 Net ¥12.5B v ¥9Be, Op Profit ¥31.8B v ¥23Be, Rev ¥1.2T v ¥1.2Te, also boosting its FY net earnings view to ¥15B from ¥5B prior. Likewise, Daihatsu was largely higher than expected across the board, reporting H1 Net ¥6.8B v ¥7Be, Op Profit ¥11.1B v ¥9Be, Rev ¥718.9B v ¥690Be, and also raising FY09/10 guidance. Kawasaki Heavy beat on the bottom line despite missing 1H ests on sales, while Fuji Heavy also guided above prior forecasts despite missing on both top and bottom line. Elsewhere in Japan, All Nippon Airways came under scrutiny of Moody's for a possible downgrade who questioned the speed of its recovery. Toyota, expected to report earnings later this week, was said to target 800K autos to be sold in China, with 13% y/y increase over the past 9 months. Outside Japan, Rio Tinto CEO echoed the recent uncertainty over economic recovery displayed by BHP. Iron ore CEO Walsh said a sustained global recovery not assured yet and that the company would remain cautious through early 2010. Furthermore, Rio official saw US market space as a "glum place", and China iron ore restocking resulting in tight overall conditions.

CURRENCIES/FIXED INCOME/COMMODITIES

- In currencies, the dollar extended its early gains at the open but ended the day lower against European and commodity majors despite the persistent risk aversion in Asian equities. EUR/USD bounced off 1.4680 support - a technically critical 3-week low, and GBP/USD traded down to 1.6350 before rising above 1.6470. In commodity FX, AUD/USD found buying interest at 0.89, rising back above 0.90 later in the session. Kiwi dollar also found support at the 6-week low around 0.71, and USD/CAD sold off nearly 100pips peak to trough to around 1.0770 area. Japanese Yen was also initially firmer, rising to 89.20 vs USD, before falling to 90.20 on more rapidly fleeting risk aversion in FX space.

- Crude oil prices opened the session lower, but have since rebounded as the US dollar pared its opening gains against the commodity currencies. Additionally, crude oil prices have been supported by the continued expansion of China's PMI data.
Spot Gold is little changed and trading around $1,045/oz. In other commodities, Shanghai copper futures opened lower by more than 1%,as Shanghai Futures Exchange copper inventories rose by 6.9K metric tons to 103K tons in the week ended 10/30.

Published on  Mon, Nov 2 2009, 06:48 GMT