Asian Market Update: Monetary authorities across Asia offer more "cautious optimism"; Equities pare initial losses, greenback retreats from early gains


ECONOMIC DATA

- (NZ) New Zealand Performance of Services Index: 53.2 V 51.3 PRIOR; (Third consecutive expansion)

- (UK) UK Oct Rightmove House Prices M/M: 2.8% v 0.6% prior; Y/Y: 0.2% v -1.5% prior (Highest M/M since Feb 2008, Firsts Y/Y increase since Jun 2008)

- (JP) Japan Aug Tertiary Industry Index M/M: 0.3% v 0.1%e


SPEAKERS/PRESS

- Asian equity markets kicked off the new week with more profit-taking of recent gains, as major indices fell over 1% in the opening hours. However, a 1.4% rally in Shanghai has brought the buyers back to the table, helping regional bourses recoup some of the initial losses. With about two hours to go in Tokyo, Nikkei225 is down 0.6%, S&P/ASX is off by 0.8% and the Kospi is marginally lower. Consumer-related sectors are leading the decliners across the region. On the upside, the China bounce is ahead of the markets in Taiwan and Hong Kong, with Taiex and Hang Seng trading higher by about 0.3%.
Going into the Monday session in the US, front-month S&Ps are down 0.2%.

- In speakers, central bank officials from across the region issued more mixed commentary on recovery and forward-looking prospects. Down under, RBA deputy Governor Lowe was most upbeat, calling for the central bank to manage risks associated with higher exposure to commodity prices and healthy terms of trade outlook. Specifically, Lowe acknowledged returning demand for Australia's commodities justifying the return to a more normal monetary policy setting. Going forward, the RBA official saw high foreign investment levels in Australia's as likely to continue, helping to fund the high current account deficit incurred by the recent stimulus spending. Over in Japan, central bank governor Shirakawa said he expects the economy to keep growing, but also reiterated recent concerns over moderating corporate CAPEX, weak consumer demand, and ongoing problems in the labor sector. Earlier, Bank of Japan released the minutes for September policy meeting that saw a warning regarding the economic impact of JPY rise, while also offering little evidence that policymakers would consider an extension of the monthly asset buying program. Bank of Korea's Governor Lee maintained a neutral stance against market expectations of hawkishness, urging patience on both the rising asset prices and the frustrating credit conditions.

- Over in China, the NDRC previewed Wednesday's Q3 GDP release, noting that YTD the economy grew over 7%. The anticipated sharper levels of growth in the second half of the year are increasingly likely to balance out the lukewarm 1H, helping the economy exceed the 8% FY target. Chinese planning officials also expressed some further concerns regarding overcapacity in certain industries, including steel and cement markets, pledging to raise market entry barriers in those fields. Similar issues were also evident in energy, with CNPC noting that Q4 domestic fuel supply may exceed demand.


EQUITIES

- In equity-specific developments, Tokyo Steel said it may have to lower all steel prices in November on weak demand and lower scrap prices. Despite this first price cut in 6 months, steelmaker's shares traded around unchanged. In Nikkei gainers, Asahi Kasei rallied after raising its 1H guidance on Friday, while Japan Airlines recovered after news of a government restructuring plan involving a ¥200B bridge loan to be announced by the end of the month. Among the decliners, Casio traded down nearly 10% after cutting its 1H and FY forecasts on Friday and Fast Retailing fell over 3% on a downgrade by JPMorgan. In Australia, Fortescue projected a near doubling of output by FY12 to 95M tons from the 55M tons the company last forecasted for FY11. On the Kospi, LG Telecom posted better than expected Q3 results, reporting Net profit of KRW92.7B v KRW85.4Be on Sales of KRW1.27T v KRW1.23Te.


CURRENCIES/FIXED INCOME/COMMODITIES

- In currencies, the greenback opened firmer in line with equities weakness but pared those gains as stock markets in Asia recovered. EUR/USD traded down to 1.4830 before rising to 1.4880, USD/CHF retreated below 1.02 after rising to 1.0230, and GBP/USD benefited from better than Rightmove House Prices after the initial gap lower below 1.63. In commodity FX AUD/USD rose to 0.9180 from intraday lows below 0.9120, and USD/CAD ranged between 1.0360-1.0420. Japanese Yen was marginally firmer on balance, with USD/JPY falling below 90.80 and EUR/JPY falling over 100 pip peak-to trough below 134.80.

- Crude oil prices are higher by more than 0.10%, after trading above $79/bbl earlier during the session. Oil prices are benefiting from the early gains being seen in Chinese equities. In geopolitical news, an earlier report disclosed that a suicide bomber in Iran killed more than 25 people including, members of the country's Revolutionary Guard. Authorities in Iran have blamed the attack on Sunni Muslim separatists. Elsewhere, today's Wall Street Journal is reporting that Nigeria's government is offering stakes in its domestic oil and gas joint ventures to residents of the Niger Delta. The Nigerian government hopes that the plan will lead to less violence in the region. The move by the government comes after, rebel group MEND said it would restart attacks on Nigerian oil installations, following the end of its cease fire agreement with the government. Spot Gold has rebounded off of the session' worst levels, after dipping below $1,050/oz earlier during the session. Gold prices have tracked the EUR/USD currency pair on today's session. Shanghai Copper has gained more than 0.50%, tracking the advance in the LME copper contract. Chinese copper prices are higher, despite the 12% rise in the Shanghai Futures Exchange copper inventories in the week ended Oct 16. With respect to copper prices, the WSJ noted that downside risks for the metal include, rising inventories, a potential reversal in equities and a rebound in the US dollar.