Asian Market Update: Nikkei rises in catch-up rally, other indices track post-FOMC reversal; Australia new home sales rise at record pace, RBA cautious on recovery


ECONOMIC DATA

- (NZ) New Zealand Q3 Westpac Consumer Confidence: 120.3 v 106.0 prior (highest level since Q1 2005)

- (HK) HKMA leaves base rate at 0.5% (as expected)

- (JP) Japan Aug Merchandise Trade Balance: ¥186B v ¥157Be (3-month low); Adjusted: ¥235B v ¥188Be

- (AU) Australia Aug HIA New Home Sales: 11.4% v 0.1% prior (multi-month record high)

- (JP) Japan Jul All Industry Activity Index M/M: 0.5% v 0.8%e

- (JP) Japan Aug Supermarket Sales: -3.4% v -4.8% prior


SPEAKERS/FIXED INCOME/FX

- Asian equity markets are tracking a snap-back selloff on Wall St. that saw post-FOMC rally stall and reverse toward a negative finish. Basic materials and energy are leading regional markets down, as Hong Kong led the decline with 2.5% slide. Korea's Kospi and Shanghai Composite both fell about 1.4%, while Taiwan and S&P/ASX traded down by just under 1%. Returning from a 3-day break, Nikkei225 was the only winning index on the back of strength from the consumer sector, rallying nearly 2% to 3-week highs before paring those gains on the other side of mid-day break. Ahead of the Thursday US session, front-month S&Ps are again trading with a heavy tone as investors show greater concern over the end of monetary accommodation drawing nearer.

- In Australia, the bi-annual RBA financial stability review saw drastic improvements in banks' balance sheets and easing of downside risks. The assessment was hardly all positive however, citing declines in business borrowing and higher jobless rates posing a risk to housing portfolios. Ahead of the release, HIA new home sales grew at a multi-month record high rate of 11.4%. Nonetheless, Australia's prime-minister Rudd warned of additional job loss for the economy, while Treasurer Swan once again urged policymakers to keep stimulative measures in place.

- China's President Hu was among the dignitaries speaking at the UN, justifying stable CNY exchange rate being supportive of global trade. Deflecting the global pressure for a more aggressive currency revaluation, Hu warned about the rise of protectionism and called for an early conclusion to Doha trade talk. Back on the mainland, China Development Research Centre's economist Ba Shusong told local press there was little chance that China's economy would make a new bottom, citing strong recovery in real demand. China's Australia Ambassador Zhang promised Australian officials that the Rio Tinto espionage debacle would not hurt relations, but also maintained a firm position that Stern Hu had committed a crime. In other regional speakers, South Korea Vice Finance Minister Hur forecasted local economy to grow 4-5% in 2010. In Malaysia, Central Bank Gov Zeti said interest rates had reached an appropriate level.


EQUITIES

- A pair of Nikkei names bucked the overall positive trend, falling sharply just over 10%. In financials, Aiful cut its 2010 forecast to a net loss of ¥311B from prior view of profit of ¥8B. The company also said it could cut nearly half of its workforce to meet its debt obligations. Japan Airlines was also widely offered after local press reported the company may seek up to ¥300B in public funds and look to meet Japan's Transport Min Maehara later today to assist in restructuring.
Among notable gainers, Sony rose 3% after the company announced sales of PlayStation 3 hit 1M units globally in the 3 weeks since its launch. On a related note, Nintendo said it would cut the price for the Wii by $50 or 20% to $199.99 as of Sept 27. In the auto sector, Suzuki Motors was up over 5% after German press reported Volkswagen was in advanced talks regarding buying a stake in the company. Outside the Nikkei, Australia's retailer David Jones posted FY09 Net profit A$156M v A$151Me on revenue of A$2.0B v A$2.0Be, but saw its share fall 4% after maintaining net profit guidance at 0-5% y/y.


CURRENCIES

- In currencies, the dollar consolidated the gains from post-FOMC reversal which took the greenback to higher levels than those seen just ahead of the Fed decision. EUR/USD briefly traded below 1.47, with the subsequent upside to the correction limited to 1.4750. GBP/USD traded down to 1.6320, and USD/CHF rally stalled at 1.03. In late US session, ECB's Liikanen said the ECB is "not in a hurry" to unwind its easing, while UK Chancellor Darling anticipated that discussion of currencies at the G20 would be minimal. In commodity FX, AUD/USD fell to 0.8650 lows, while USD/CAD retreated from 1.0780 US intraday high. Japanese Yen firmed to its best levels in a week against the dollar, with USD/JPY falling to fresh lows below 90.80 late in Asian hours.


COMMODITIES

- Crude oil prices are lower by more than 0.50% and trading below $69/bbl. Oil prices have been weighed down by the rebound in the US dollar following the Fed's FOMC statement and the earlier released weekly US Dept of Energy inventories data (DOE CRUDE: +2.85M V -1.4ME; GASOLINE: +5.41M V +500KE). In terms of oil demand, Japan's crude oil imports declined by 12% y/y in Aug vs. the decline of 12.7% y/y in July. Additionally, South Korea disclosed that in Aug its crude oil imports rose by 3.7% y/y to 72.8M barrels. Japan and South Korea are Asia's second and third largest oil importers, respectively. Spot Gold prices have moved off of their best levels on the rebound in the dollar against the commodity currencies. So far gold prices have range between $1012.36-1006.88.