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Asia Market Update

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Australia equities rally after RBA upgrade on economy

Fri, Nov 6 2009, 06:52 GMT
by Trade The News Staff

TradeTheNews.com

Asian Market Update: Australia equities rally after RBA upgrade on economy; China steel pipe exports targeted by US Commerce Dept tariff; AUD, GBP firm on central bank actions

ECONOMIC DATA

- (AU) Australia Oct AiG Performance of Construction Index: 50.9 V 50.8 PRIOR (highest level since Feb 2008) 

- (JP) Japan Sept Prelim Leading Index: 86.4 v 86.2e; Coincident Index: 92.5 v 92.5e

- (AU) Australia Oct Foreign Reserves: A$48.5B v A$48.9B prior 

SPEAKERS/PRESS

- Asian equity markets are back in rally mode, bolstered by a double-digit Dow day that saw the US blue-chip index push above the psychological 10K mark for the first time in two weeks. Aussie index is leading the regional charge with a near 2% advance after upbeat commentary and growth forecast upgrade from the RBA quarterly report. Entering the final hour of trading this week, Nikkei225 is well off session highs but still up 0.5%. Those gains are matched by comparable advance in Shanghai and Taiwan, while the Kospi is firmer by just over 1%. With October jobs report looming for pre-market in the US, front-month S&Ps are marginally lower at $1,062.

- Reserve Bank of Australia quarterly policy report helped quell the selloff after yesterday's wider than expected trade deficit, raising 2009 GDP forecast to 1.75% from 0.5% and 2010 GDP view to 3.25% from 2.25%. Specifically, policy makers said the economy was operating with less spare capacity than previously expected, with strong growth in resources, brighter outlook for business development, and resilient consumption despite waning stimulus impact. Moreover, household income growth was better than expected, and terms of trade were expected to improve from recent weakness.
 In terms of inflation and policy prospects, the RBA raised its 2010-11 core inflation view to 2.25% v 2.0% prior, noting that further gradual rise in interest rates is likely required beyond the recent hikes. Later in the session, RBA member McKibbin noted that the risk of a double-dip downturn in US and UK may also be overstated, although he did see the need to resolve some structural issues in those economies. 

- Trade-related bickering between US and China entered a new chapter, as US Commerce Department imposed anti-dumping tariffs on $2.6B of Chinese pipe imports. US Steel Corp is said to have lobbied for the duties for the past 6 months and is expected to be the most direct beneficiary of the measure. Responding to the action, China's Commerce Ministry said the tariffs are "discriminatory", warning that steps will be taken to protect domestic steel industry. Elsewhere in China, FX Reserve Manager reaffirmed the commitment of the $2T fund to "improve its asset allocation" when asked if China would follow India's suit in buying gold from the IMF. Chinese press also noted the Ministry of Industry would consider extending tax cuts related to purchases of autos and appliances in rural areas.

EQUITIES 

- In individual equities, Casio computer underperformed once again on the earnings front, posting H1 net loss ¥11B v loss ¥11Be, Op loss ¥15B v loss ¥15Be, Rev ¥197B v ¥195Be. Casio also cut it FY09/10 forecast to Op loss ¥5B on sales of ¥477B, down from prior Op Profit ¥15B, Rev ¥530B. In other Tokyo earnings, Toray beat estimates across the board with H1 Net loss ¥6.3B v loss ¥10Be, Op Profit ¥5.5B v loss ¥2Be, Rev ¥618B v ¥602Be, also raising its FY earnings guidance.
 Elpida traded higher after topping 1H estimates afterhours yesterday, also announcing plans to outsource its chip production to Taiwan. Elsewhere, NEC confirmed plan to offer nearly 30% in fresh equity, and JAL caused the late-session Nikkei decline after Japan's govt called on banks to rescue the airline with bridge loans. Outside Tokyo, Taiwan press saw China Steel Q4 orders are at full production capacity, allowing the company to target FY earnings above consensus. In Taiex tech, AUO entered into strategic alliance talks with China's Haier Group after weeks of discussion by the management.

CURRENCIES/FIXED INCOME/COMMODITIES 

- In currencies, the greenback ranged against EUR and CHF ahead of the non-farms report, however Sterling and Aussie outperformed after BOE action yesterday and RBA upgrade today. EUR/USD and USD/CHF traded sideways in 1.4860-80 and 1.0155-77 respectively. GBP/USD broke above 1.63 before backing away from 2-week highs above 1.6330, and AUD/USD approached 1-week high at 0.9140. Japanese Yen preserved its gains despite the equity rally, with USD/JPY retracing the US session advance below 90.50.

- Crude oil prices are gaining and trading near $80/bbl, in line with the advances being seen in Asian equities. Spot Gold is higher by more than 0.05% and trading above $1,090/oz. Shanghai Copper prices are trading in positive territory ahead of the later today release of the weekly Shanghai Futures Exchange copper inventories. Overall, the key event risk for commodities will be the upcoming US nonfarms payroll report.

- Crude oil prices are gaining and trading near $80/bbl, in line with the advances being seen in Asian equities. Spot Gold is higher by more than 0.05% and trading above $1,090/oz. Shanghai Copper prices are trading in positive territory ahead of the later today release of the weekly Shanghai Futures Exchange copper inventories. Overall, the key event risk for commodities will be the upcoming US nonfarms payroll report.

Published on  Fri, Nov 6 2009, 06:54 GMT