Asian Market Update: Uncertainty over recovery expressed by Bernanke sees more risk aversion as Yen closes in on 2010 highs against USD

As of 12:30amET:

- Nikkei225 -0.8%

- S&P/ASX -0.5%

- Kospi -0.5%

- Taiex -0.1%

- Shanghai Composite +0.2%

- US S&P Futures -0.1% 1,063

- Spot Gold $1,086/oz

- Crude oil -0.2% at $76.41/brl


Economic Data

- (JP) JAPAN MAY ALL INDUSTRY ACTIVITY INDEX M/M: +0.2% V -0.4%E

- (NZ) NEW ZEALAND JUL ANZ CONSUMER CONFIDENCE INDE: 115.6 V 122 PRIOR (lowest level since August 2009)

- (AU) AUSTRALIA JUN RBA FOREIGN EXCHANGE TRANSACTION A$1.2B V A$446M PRIOR

- (AU) AUSTRALIA NAB Q2 BUSINESS CONFIDENCE: 6 V 17 prior quarter (1 year low)

- (BR) BRAZIL CENTRAL BANK RAISES SELIC RATE BY 50 BPS TO 10.75% (BELOW 75 BPS TO 11.0% EXPECTED)


Overview/Top headlines

- Increasingly more cautious assessment of the economy from Fed Chairman Bernanke - punishing US equity markets in the final 2 hours of US session - carried over into Asia with further selling pressure. 10-yr Treasury yield closed below 2.90% for the first time this year as US govt debt continues to benefit from safehaven flows. Similarly positioned to benefit from risk aversion, Japanese Yen extended its gains, as USD/JPY approaced 2010 lows just below 86.30, testing 86.50 in Asia hours. Continued strength in the Yen has finally prompted the previously sidelined Japan's Finance Ministry to beat the drum of intervention - Deputy Finance Min Ikeda stressed importance of avoiding excessive Yen strength, briefly helping contain the Yen rally.

- China's biggest search engine Bidu presented a pocket of strength, reporting Q2 $0.35 v $0.31e on Rev of $282M v $277Me. Share of Bidu rose over 3% afterhours, as investors focused on reduction in traffic acquisition costs (TAC) which represented 9.7% v 13.2% q/q v 16.0% y/y. Bidu also guided Q3 Rev above ests at $324-333M v $322Me.

- Mixed results in the tech sector confounding US earnings season are also felt in Aisa. South Korea's chip-making giant Hynix reported Q2 Net KRW665B v KRW893Be on Rev KRW3.2T v KRW3.2Te. Shares slumped about 4% going into the final hour on cautious Q3 outlook. Company expected DRAM shipments up mid-single digit pct with prices falling slightly. NAND shipments were expected to grow 20% q/q, also slower than 30% forecasted in prior quarter.

- Brazil Central Bank raised rates by 50bps, below consensus estimate of 75bp hike. Policymaking committee noted that in makings its decision, it "considered that inflation risks have diminished since the previous meeting."


Macro/FX

China

- (CH) China Academy of Social Sciences (CASS) economist Yuan Gangming: Current property market regulations are very dangerous as they could lead to stable yet prolonged high prices - China Daily

- (CH) China's Finance Ministry reportedly plans to implement a property tax in certain cities in 2012 - NetEase

- (CH) S&P Affirms Stable outlook for the Chinese banking sector; factored in relatively high credit losses for the Chinese banking sector across cycles.

- (CH) China's southern province of Guangdong reviewing wage dispute laws - Xinhua

- (CH) China's Finance Ministry reportedly plans to implement a property tax in certain cities in 2012 - NetEase

- USD/CNY: (CH) PBoC Researcher Wang Yong said China should allow the yuan to move within a wider range in a gradual process over the next 5 years - Shanghai Securities News (Update)

- USD/CNY: (CH) PBoC sets yuan mid point at 6.7859 v 6.7769 prior close (lowest Yuan setting in July)

- (CH) PBoC sells CNY80B in 3-month bills at 1.5704% (unchanged)

Australia

- (AU) Australia's Victoria state is planning to build up to 10 solar plants worth A$2B by 2020; Incentives to be given to owners of the facilities - Australian Financial Review

- (AU) Australia's wheat farmers who are producing 22M tons, largest in 10 years, are set to capitalize on rising wheat prices in the rest of the world - Australian Financial Review

Japan

- (JP) Japan's DPJ party looking to cut existing programs by ¥2T for emergency steps on economy in the next FY

- JGB: Japan MoF sold ¥1.0T of 1.8% 20-yr bonds, bid to cover ratio of 4.46X v 4.60X prior

Other

- (NZ) New Zealand Fin Min English: There are early signs the economy is rebalancing; Consumers have been more cautious when it comes to spending, need more work to build economic momentum

- (NZ) Dominion Post citing economists suggest housing market may slow further amid decline in net migration to New Zealand

- (US) Follow-up: US Senate officially passes $34B extension of unemployment benefits through Nov with 59-39 vote; House to vote on Thurs

- (TT) Taiwan banking regulator considering limits on fundraising by private local banks - FT


Equities

Australia

- FGL.AU: Targeting EBIT A$84M in wine earnings for 2011; A$37M posted in first half of 2010 - Australian press

- MRK: Australian Federal Court is being urged to listen cases of users that took Vioxx and experienced a heart attack - Australian Age

- STO.AU: Reports Q2 Rev A$580M, +20% y/y; Output 11.9MMBOE, -11% y/y; Maintains FY10 49-52MMBOE output guidance

- NCM.AU: Reports Q4 gold production at 526k oz, +26% q/q v -6% prior

- FMG.AU: Still has serious concerns about the impact of the mining tax on the industry; Says the tax is biased in favor of bigger miners

- BHP: US moratorium on deepwater drilling in the Gulf following BP spill to erase all of company's petroleum production growth in current fiscal year - The Australian

Japan

- Shin-Etsu Chemical reports Q1 Net ¥36B v ¥15B y/y, Op Profit ¥36B v ¥21B y/y, Rev ¥260B v ¥190B y/y

- (JP) Japanese press comments on big 4 pharma names in Japan boosting their R&D spending in FY10

- HMC: Workers at Atsumitec's Chinese plant reached an agreement with management on Wed

- Panasonic making 3D technology standard in all large (42" or larger) TVs sold in Japan - Japanese press

- Tokyo Electric Power Co. and Mitsubishi Heavy Industries listed as potential beneficiaries of China boosting green energy investment - Japanese press

- Hitachi Plans to manufacture all of is controller boards for data storage in Japan to improve manufacturing efficiency; Would like to increase sales in FY15 to ¥400B from ¥304B in FY09 - Japanese press

- Casio Computer May report Q1 Op Profit ¥2.5B (loss ¥1.5Be), first quarterly profit since Q3 of 2008 - Japanese press

- Mitsubishi Under new President Kobayashi Mitsubishi plans over 3 years to invest ¥2.5T in acquisitions in resource and energy areas - Japanese press

Korea

- LG Display reportedly to invest KRW618B in LCD capacity expansion

- Hyundai Motors reaches tentative wage hike agreement with workers

- Woori Finance: South Korea may announce plan to sell 57% stake in company valued as much as $6B as early as next week

- Posco purchasing a 20% stake in Brazilian Blast Furnace - Japanese press

- Samsung Electronics will produce a new flash memory chip by the end of the month that will be 1.6 times faster than the 40-nano DRAM chips developed by the firm last year - Korean press

- Posco is granted early FTC antitrust clearance to acquire Daewoo International

US

- ebay Reports Q2 $0.40 v $0.38e, R$2.22B v $2.2Be (+3.3% AH)

- qcom Reports Q3 $0.57 v $0.54e, R$2.7B v $2.6Be (+5.1% AH)

- nflx Reports Q2 $0.80 v $0.70e, R$520M v $524Me (-9.2% AH)

- rhi RHI: Reports Q2 $0.08 v $0.07e, R$769M v $759Me (-0.7% AH)

- sbux Reports Q3 $0.29 v $0.29e, R$2.6B v $2.6Be (-1.9% AH)


Commodities

- National Hurricane Center (NHC): Sees trough of low pressure associated with tropical wave nears SE Bahamas, 40% chance of cyclone formation; Separate area of low pressure moving WNW over Bay of Campeche at a rate of 10-15mph; 30% chance of system becoming tropical cyclone.

- (CH) China considering a carbon trading program in 2011-15 - China Daily