Asian Market Update: Nikkei225 at 15-month low, EUR/JPY at 2001-lows as prospects for intervention fizzle

As of 1:00amET:

- Nikkei225 -1.2%

- S&P/ASX -1.0%

- Kospi -0.1%

- Taiex -0.4%

- Shanghai Composite +0.9%

- Sept S&P Futures -0.3% at 1,062

- Sept Gold -0.4% $1,222/oz

- Oct Crude oil -0.4% $72.78/brl

- Sept Wheat -1.0% at $6.85


Economic Data

- (NZ) NEW ZEALAND Q3 RBNZ 2-YEAR INFLATION EXPECTATION: 2.6% V 2.8% PRIOR (lowest level since Q4 of 2009)

- (KS) SOUTH KOREA Q2 EXTERNAL SHORT-TERM DEBT: $152.1B V $154.5B PRIOR


Overview/Top headlines

- With the exception of China indices, Asian equity markets are in the red, tracking the final-hour risk sell-off in US. Light seasonal volumes continue to reign while ominous existing home sales data loom in the US - expectations of 4.7M in sales would mark the lowest level since mid-2009, portending intensifying double-dip in US housing. Meanwhile, little urgency from Japanese officials to forestall the advance of the Yen against the greenback overnight evidenced by no commitment to a symbolic PM Kan - BOJ Gov Shirakawa meeting kept the Yen pairs pressured. EUR/JPY fell below 107.30 - the lowest level since Nov 2001 - while USD/JPY approached 15-yr low around 84.70. In other key USD major movers, cable underperformed after comments from the newest BOE member Weale, warning of a "significant" risk of double-dip recession in UK, sending GBP to lowest level of the session against USD and EUR. Pessimism among monetary policy makers was also evident in a WSJ report suggesting Aug 10th meeting likely saw a rift in the FOMC, with some members calling for additional easing.

- Australia's national elections remained mired in further vote-count and an apparent race toward a pact with Independents by both parties to form a coalition govt. Opposition Leader took the podium the day after PM Gillard, stating it appears no party will have the necessary 76 seats to form a govt, while independent MPs planned to meet with Greens before meeting either Labor or Coalition leader.


Macro/FX

China

- (CH) Societe Generale thinks that China is likely to "tolerate" banks breaching the CNY7.5T loan target in 2010 to sustain growth in a slowing economy - BusinessWeek

Australia/New Zealand

- (AU) Australia Opposition Leader Abbott: Appears that neither party will have a majority required to form govt; Should not expect a speedy process, counting still has some ways to go

- (AU) Australia independent MP Windsor: 3 independents to meet on Tuesday; No meetings scheduled with PM Gillard or Opposition Leader Abbott; Australia independent MP Oakeshott: Need to discuss power sharing opportunities

- (NZ) New Zealand Finance Min English: Domestic recovery is still patchy

- (NZ) New Zealand Govt: Set up a working party to report in Jan. 2011 on taxation, retirement savings and government spending

Japan

- (JP) Japan govt spokesman Sengoku: Watching financial markets and speculative flows

- (JP) Japan Forex margin restrictions are slowing down trades from small lot investors - Nikkei; Daily average turnover -13% m/m at 78.8K contracts - Okasan Online Securities

- (JP) Japan PM Kan to meet with business leaders to discuss Yen strength and its impact on economy - Sankei

- (JP) Japan's MoF sold ¥1.0T in 1.6% 20-yr bonds (1.8% prior); Bid-to-cover 2.86x v 4.46x prior

Korea

- (KS) South Korea Defense Ministry to increase surveillance of North Korea military activity such as artillery fire - Korean press; Japan may take part in South Korea naval exercises in October - Nikkei

Other

- (UK) BOE's newest member Weale: Sees "significant" risk of double-dip recession in UK - Times

- (EU) EU's Rehn: Slowdown in Asia likely to have big impact on EU economy

- (VN) Trade activity between China and Vietnam may rise to $25B in 2010 from $20B in 2009 - Vietnam press

- (SI) According to Singapore consumer credit bureau, mortgage default rates declined about 50% in the past two years due to strong property market and stable employment conditions - Business Times


Equities

Australia/New Zealand

- MCC.AU: Reports FY10 Net A$125M v A$123Me, Rev A$670.5M v A$672Me; Entering into a binding term sheet to paying A$334.4M cash to MCG Group; CEO: Would consider M&A in coking coal; To sell about A$400M in shares to buy land in Queensland (about 13% of market cap) - Australian Financial Review

- FGL.AU: Reports FY10 Net A$711M (ex-items) v profit A$682Me, Rev A$4.5B v A$4.3Be; Evaluation of devaluation progressing on schedule; Planned for H1 2011; Sees strong fundamentals for Australia beer market.

- MGR.AU: Replaces Lihir Gold on the S&P/ASX All Australian 50 after the close of trading on August 30th

- AWB.AU: Reportedly to offer formal support for A$1.2B takeover by Agrium

- GNC.AU: Looking to negotiate with Agrium to become part of a joint bid for AWB - The Australian

Japan

- Toyota Motor Corp: U.S. National Highway Traffic Safety Administration is upgrading its probe of the 2005-2007 Matrix model over possible engine defects; If recalled there would be 1.2M vehicles in the US involved - Japanese press

- Japan Tobacco Inc: Company meeting with Japan Finance Ministry in stronger opposition to further rise in tobacco tax

- Sumitomo Trust: Merger deal with Chuo Mitsui Trust Holdings expected to boost profits by about ¥56B/yr starting in 2015 - Nikkei News

China

- AIG: Confident that it will receive regulatory approval for the $2.2B sale of the Taiwan unit Nan Shan Life to a group led by China Strategic; No plans to sell the unit to any other party

- HSBC: Given 2 weeks to make a formal offer for a controlling stake in NedBank - FT

- EDF.FR: Cheung Kong Infrastructure Holdings (CKI) offers £5.8B for a 40% share of an EDF UK power unit

Korea

- DNX.UK: Reportedly, KNOC said it is not planning to raise its bid for Dana

Other

- BP: Findings from an internal audit show that there were 390 overdue maintenance problems on the Horizon rig when it was authorized to be used in the Gulf - FT


Commodities

- POT: Rio Tinto is said to be considering a partnership with a Chinese player to bid for Potash - Globe & Mail; Chinese private equity fund Hopu Investment Management is considering a bid for Potash - WSJ

- ACH: Reports H1 global alumina output 40.2M tons, +13% y/y; global consumption 40.7M tons, +19% y/y

- YZC: Accelerating expansion plans to meet 2015 capacity target of 200M tons; Move comes after Shandong Gov't ordered a consolidation of the coal industry into 2 large groups - South China Morning Post