Asian Market Update: Equity weakness extends to Asia after Friday's India central bank move; Dollar, Yen slightly firmer on modest risk aversion; US equities trade lower following the US House's passage of health care bill


ECONOMIC DATA

(AU) Australia FEB New Motor Vehicle Sales m/m: -1.9% v -3.5% prior, y/y: 17.1% v 15.5% prior

- Asian equity markets are tracking the selling in Friday's US indices, when the Dow ended the streak of 8 consecutive sessions with a wave of risk aversion following a surprise rate hike from India central bank. Sydney's S&P/ASX and Korea's Kospi are down nearly 1% predominantly on the selloff in the commodities sector, while Taiwan's Taiex is off by 1.3% - trading at its worst level mid-day on technology weakness. Nikkei225 is closed due to bank holiday. Ahead of Monday US open, front-month S&Ps point to another lower open with a 0.7% loss.


SPEAKERS/PRESS

- By a 219 to 212 vote, the US House of Representatives received the 216 votes needed to pass the Senate's version of the $940B health-care overhaul bill. The House later passed its amendments to the Senate's bill by a 220 to 211 vote. Now, the bill will go back to the Senate, which is expected to hold a reconciliation vote later this week. Then President Obama is expected to sign the measure into law.

- In notable speakers, Indian press cited cabinet chief statistician Sen forecasting even more aggressive rate hikes in the event of further inflationary pressure. Note that the next scheduled central bank decision will take place on April 20th. Over in China, local press cited the Commerce Ministry resuming its opposition to increased Yuan revaluation rhetoric by US lawmakers, noting the US has benefited with "fat profits" from China's low labor costs and high purchasing power, with high trade deficit levels allowing the US "great room" to elevate its exports. Separately, China Daily notes that a delegation led by Commerce Vice Min Zhong Shan, expected to visit the US this week to address trade concerns and some of the recent currency related conflicts. In Japan, the Nikkei News reported the govt has finalized legislation making it more difficult for companies to hire temporary workers, banning manufacturers from contracting with third-party employment agencies for temporary labor.

- In terms of fresh signs of turbulence over the Greek bailout that resurfaced late last week and weighed on the Euro, German Chancellor Merkel reiterated that Greek govt has not requested any financial support from the EU, maintaining that stability of the Euro currency is paramount. On a related note, an FT feature cited strong German resistance to helping Greece as seen in the results of FT and Harris Interactive polls.


EQUITIES

- In individual names, Japanese press saw Honda targeting an increase of global output for this year by close to 10% y/y to 3.2-3.3M units, still below the 3.4M units guided in February. Nikkei News also said Mitsubishi Heavy would reduce its pension payouts. In Sydney, Arrow Energy agreed to an improved bid from Shell and PetroChina at A$4.70/shr - a 5.6% increase from the original A$4.45/share bid.


CURRENCIES/FIXED INCOME/COMMODITIES

- In currencies, the dollar was slightly firmer against European and commodity majors, with carry-over safe-haven flows following the India central bank move. EUR/USD approached Friday lows just above 1.3500, GBP/USD retested the downside of 1.50 handle, and AUD/USD traded down to 0.9130.

- Spot Gold is little changed and trading near $1105/oz, while XAU/EUR and XAU/GBP are both marginally firmer. On Friday's session, gold prices were weighed down by the unexpected interest rate increase by India's central bank, as the country is the world's largest buyer of gold. In terms of the outlook for gold prices, Greece remains a focus as the EU summit, which is expected to be held on March 25-26th, could be a possible event risk for gold. Additionally, the UK's expected budget report on March 24th could be a catalyst for gold. In press news related to the gold market, the Central Banking Publications annual 2009 poll of central bank reserve managers noted that there was a renewed interest in gold as a reserve asset. Crude oil prices are down by over 0.50% and trading near $80/bbl, tracking the weakness in equities.