Asian Market Update: Aussie equities outperform again on strong business confidence; Sterling collapses late in the day on report of renewed Fitch scrutiny of UK's AAA rating


ECONOMIC DATA

- (NZ) New Zealand Oct Card Spending M/M: -0.2% v 0.7% prior (First decline since June)

- (JP) Japan Oct Bank Lending Y/Y: 1.5% V 1.5%E; Banks lending banks: 1.5% V 1.7% prior; Banks lending banks adj: 1.9% V 2.3% prior

- (JP) Japan Sept Current Account: ¥1.57T V ¥1.51TE (14-month high); Adjusted current account: ¥1.34T V ¥1.32TE (3-month high); Trade balance: ¥599B V ¥630BE (3-month high)

- (JP) Japan Oct M2 Y/Y: 3.3% V 3.1%E; M3: 2.4% V 2.3%E

- (UK) UK Oct RICS house price balance: 34% V 28%E (Highest growth since Dec 2006)

- (UK) UK Oct BRC retail sales monitor: 3.8% V 2.8% prior; total sales: 5.9% V 4.9% prior

- (AU) Australia Oct NAB business conditions: 12 V 3 PRIOR (Highest level since Jan 2008); Confidence: 16 V 14 prior

- (PH) Philippines Sept Prelim Total Exports Y/Y: -18.3% v -17.8%e; Total Exports: $3.63B v $3.47B prior

- (MA) Malaysia Sept Industrial Production y/y: -6.0% V -3.8%E (11-month high)

- (JP) Japan Oct Bankruptcies Y/Y: -11.8% V -18.0% prior

- (JP) Japan Oct Eco Watchers Survey Current: 40.9 v 43.1e; Outlook: 42.8 v 44.5 prior

- (JP) Japan Oct prelim Machine Tool Orders y/y: -42.6% v -62.1% prior

- (ID) Indonesia Q3 GDP Q/Q: 3.87% v 3.94%e; Y/Y: 4.21% v 4.17%e


SPEAKERS/PRESS

- Asian equity markets traded higher across the board once again, tracking outsized gains in the US where Dow Jones rose to its best levels for the year. In Sydney, S&P/ASX led the rally for the second straight day, picking up 1.3% after a strong set of business conditions and confidence data. Elsewhere, Nikkei225, Taiex, and Hang Seng are all up 0.5-1.0%. Korea's Kospi is the laggard with a 0.3% rally on geopolitical concerns amid reports of naval fire exchange between the North and South. Ahead of the Tuesday session, front-month S&Ps are down 0.4%, with risk aversion returning across the board following late-session Fitch report discussing UK, US, and Japan sovereign AAA ratings. The credit agency noted that UK is most at risk to lose its AAA sovereign status among major economies, but US rating could also be pressured if its fiscal position does not improve.

- In regional speakers, Aussie Trade Minister Crean saw strong AUD as a reflection of the markets, noting improved exports in spite of AUD gains and warning manufacturers to plan for stronger currency levels. Over in Japan, Banking Minister Kamei said lending is paramount over capital ratio targets at the present time, but 4% tier-1 capital ratio view is appropriate for local banks going forward. Elsewhere in Japan, Finance Min Fujii expressed concern over long-term interest rates, noting the recent rise as a reflection of uncertainty about the budget process while reiterating the govt wants to keep its target for bond issuance at ¥44T.

- Ahead of his first trip to Asia this coming weekend, US President Obama is maintaining a firm position on China against the backdrop of rising protectionist rhetoric from both sides. Specifically, Obama noted that the currency issue will be discussed during his talks, attributing current imbalances to the rigid Yuan valuation. Earlier in the session, World Bank Chief Economist Lin spoke against a sharp appreciation of the Yuan, noting that it would weigh on global recovery by depressing US consumer demand for Chinese goods. In other US speakers, FOMC voting member Tarullo helped the greenback pare its losses earlier in the session, stating that additional policy tools may be needed for the central bank to deal with bubbles.


EQUITIES

- In individual equities, Rio Tinto CEO was mainly upbeat, noting signs of recovery in global economy and China fundamentals remaining strong, even as US and OECD conditions were more uncertain. Regarding production, Albanese said iron ore operations in Australia are at full capacity on strong demand. In other Sydney names, John Fairfax Holding forecasted improved business conditions in H2. In the Nikkei225 earnings, Tokyu Corp reported H1 Net ¥7.6B v ¥4Be, Op Profit ¥21B v ¥20Be, Rev ¥600B v ¥620Be, while Aiful was speculated to miss its 1H results. Japan Airlines had reportedly seen the decision for its application for public funds delayed to 2010. Meanwhile, the company cost-cutting was seen contained to exemption from landing fees and suspension of advertising. In Tokyo auto names, Honda and Nissan were speculated to reduce their domestic product range, while Toyota noted domestic new car sales would be about 2.8M units in 2010, comparable to 2009 levels. On the Kospi, Korean Air reported Q3 Net KRW264B v KRW279Be, Op Profit KRW100B v KRW144Be, Rev KRW2.5T v KRW2.5Te. In tech, Samsung Electronics said it saw little impact from ITC order on LCD imports. Note, earlier in the session, US ITC said Samsung would be prohibited from selling certain types of LCD-TVs and computer monitors in the US after it lost its patent case with Sharp.


CURRENCIES/FIXED INCOME/COMMODITIES

- In currencies, Sterling was the big loser after the Fitch scrutiny over UK sovereign rating, falling about 150 pips to 1.66 low vs USD. EUR/USD was initially lower on the back of that research note, falling to 1.4950 before retracing those losses.
In commodity FX, AUD/USD backed away from multi-month 0.9330 high and NZD/USD dipped below 0.74 after reaching 0.7460 session high. Japanese Yen was strong amid late-session post-Fitch risk aversion, with USD/JPY falling to 89.70 and EUR/JPY dropping to 134.40 from 135.00 session high.

- Crude oil prices are lower and trading near $79/bbl as the USD retraced some of its losses which were seen during the US session. Additionally, the weakening of Ida to a tropical storm from a hurricane has weighed on oil prices. According to the US National Hurricane Center, Ida is expected to miss most of the energy infrastructure located in the Gulf Coast. However, Ida has led to the shutdown of approximately 30% of the Gulf's oil production and 28% of gas production. During yesterday's NY session, crude rose by more than 2% on the weaker dollar. Looking ahead, a possible event risk for oil prices is the release of the weekly API inventories data. Spot Gold has moved toward session lows, on the firmer USD dollar. During the COMEX session, gold prices hit a fresh record high of $1,111/oz. In terms of physical demand for gold, the SPDR Gold Trust ETF increased its holdings by 6 metric tons to a total of 1,144 metric tons.