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Asia Market Update

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Japan politicians turn up the heat on BOJ

Tue, Nov 24 2009, 06:46 GMT
by Trade The News Staff

TradeTheNews.com

Asian Market Update: Japan politicians turn up the heat on BOJ; Chinese advisors warn on inflation, inflow of hot money; Korea underperforms on banking, consumer confidence drop

ECONOMIC DATA

- (KS) South Korea Nov Consumer Confidence: 113.0 v 117.0 prior (First decline since Feb)

- (AU) Australia Sept Conference Board Leading Index: 0.3% v 1.5% prior (4-month low)

- (KS) South Korea Q3 External Short-Term Debt: $146.3B v $147.3B prior

- (NZ) RBNZ quarterly survey of 2-yr inflation expectations: 2.6% v 2.3% prior

- (JP) Japan Oct supermarket sales: -5.2% v -2.4% prior

SPEAKERS/PRESS

- Asian equity markets are back in the red, shrugging the rally on Wall Street that saw the Dow hit fresh multi-month highs, as dovish commentary by the Fed speakers that boosted equities yesterday takes a backseat to ominous data and worrisome statements from regional policymakers. Nikkei225 is accelerating its decline in the final hour, dropping over 1% despite missing the rally in the prior session. Korea's Kospi is the second biggest loser in Asia, shedding about 0.8% on November consumer confidence declining for just the first time since February of this year. S&P/ASX is off by 0.7%, while China region is outperforming as Shanghai Composite and Taiwan's Taiex gain 0.3%. Ahead of the potentially pivotal Tuesday in the US, where traders will see the anticipated downward revision in Q3 GDP, front-month S&Ps are at session lows down 0.2% at 1,101.

- The new cabinet in Japan stepped up its pressure on the central bank after it unexpectedly raised its outlook on the economy for the third consecutive time. Japan's Finance Minister Fujii attributed the recent Nikkei weakness to capital increases, but noted it was important to monitor equity prices and that fiscal policy alone is not sufficient in sustaining demand. Japan's Banking Minister Kamei echoed strong words of Deputy PM Kan, calling out Bank of Japan as being "asleep at the wheel" and supporting the proposed ¥11T in extra stimulus funding. Late in the session, Bank of Japan November monthly report reiterated the language from the most recent meeting, raising economic assessment on signs of improving economy and expectations of recovery in private consumption.

- Over in China, Academy of Social Sciences researcher Zhang Ming suggested that capital controls be strengthened to address speculative inflows related to low US interest rates. National Price Monitoring Center researcher Liu Manping saw the optimal time for stimulus exit as the latter part of Q2 2010, but noted that the drain in liquidity would also depend on inflation. In other regional speakers, Singapore Parliament was said to have approved Ministry of Finance proposal to raise the limit on govt bond borrowing by S$70B. Singapore's Deputy Finance Minister Lim said the debt ceiling could reach a new high in the next 5 years. In Taiwan, local press noted that the govt will not raise the salaries of state workers until the economy recovers to pre-crisis levels. A separate Taiwan press reported said the average monthly salary in Taiwan fell over 5% YTD from last year's levels.

EQUITIES

- In individual equities, financials decline on the Kospi was led by Woori Finance after South Korean State Agency sold a 32.2M share block in the open market in the prior session. In Tokyo, where high-beta energy and financials sectors led the decline, Japan Airlines was reportedly considering linking the yield on company pensions to the return on the 10-yr government bonds, cutting the return growth from 4.5% to 1.5%. Later in the day, Transport Minister Maehara said the company will not survive without resolution to the pension issue. In other Nikkei names, Hitachi Ltd was said to have signed a contract for part of the ¥1T high-speed rail project in the UK, and Nippon Yusen entered into a 20-yr deal with China's Shagang Shipping to transport iron ore from Australia and Brazil miners.

- In Sydney names, Woodside Petroleum reaffirmed FY09 and FY10 production targets and hinted it may consider a capital raise, but traded stronger on press speculation of a joint bid for the company coming from Shell and BHP. In financials, NAB CEO hinted of interest in RBS assets if a break-up in company comes to pass. Harvey Norman Chairman forecasted a strong holiday season, while Qantas Airlines squashed press speculation that it may renew merger talks with British Airways.

CURRENCIES/FIXED INCOME/COMMODITIES

- In currencies, USD strengthened against European and commodity majors on risk aversion in Asian bourses ahead of the first revision of the Q3 GDP report in the US. EUR/USD retreated from 1.50 for the 3rd time in 2-weeks, hitting late-session lows in 1.4920's. GBP/USD fell 70 pips to 1.6550, while USD/CHF firmed up to 1.0120. In commodity FX, AUD/USD fell nearly 80 pips to 0.9160, and USD/CAD rose back above 1.06. Japanese Yen was stronger across the board, with USD/JPY falling to 88.70 and EUR/JPY declining about 70 pips below 132.40.

- Crude oil prices have traded in negative territory and below $78/bbl for most of the session on the rebound in the US dollar and weakness in Asian equities. During the yesterday's US session oil prices rose by $0.08/bbl, supported by the advance in US equities and geopolitical concerns related to Iran. Upcoming event risks for oil prices include the later this week releases of US API and Department of Energy weekly inventories data. In Chinese energy news, as cold weather conditions continue to lead to shortages of natural gas in some parts of China, it was reported today in the local media that domestic energy companies are planning to divert more natural gas supplies to residential customers. The report added that during the peak consumption period (Dec-Jan), gas shortages in northern China might total 8M cubic meters/day.

- Spot Gold prices have moved off of the session's worst levels following earlier profit-taking, after the metal rose to a fresh record high on yesterday's session of around $1,173/oz. Additionally, Shanghai Gold prices have traded to a new all-time high above CNY225/gram. In terms of physical demand for gold, the SPDR Gold Trust ETF's holdings rose by 4 tons to a total of 1,121 tons as of Nov 23. Shanghai Copper prices are declining on the stronger dollar and drop in the LME metals. During yesterday's US session, copper rose to a 14-month, supported by the better than expected rise in US existing home sales. In terms of the coal market, Australia's Newcastle port, world's largest coal export terminal, disclosed that weekly coal shipments declined by more than 5% versus the prior drop of 20%. Most of the coal shipped from the Newcastle port is thermal coal which is used primarily by power stations.

Published on  Tue, Nov 24 2009, 06:51 GMT