Asian Market Update: Risk-on flows tempered ahead of US jobs data, while AUD sinks after drop-off in trade surplus

As of 1:00amET:

- Nikkei225 +0.6%

- S&P/ASX +0.6%

- Kospi +0.3%

- Taiex +0.7%

- Shanghai Composite +0.9%

- Sept S&P Futures -0.4% at $1,077

- Oct Gold +0.1% $1,248/oz

- Oct Crude oil -0.2% $73.78/brl

- Dec Wheat -0.1% at $7.07


Economic Data

- (AU) AUSTRALIA JUL TRADE BALANCE (A$): 1.9B V 3.1BE

- (JP) JAPAN AUG MONETARY BASE Y/Y: 5.4% V 6.1% PRIOR

- (BR) BRAZIL CENTRAL BANK (COPOM) LEAVES SELIC TARGET UNCHANGED AT 10.75%; AS EXPECTED


Overview/Top headlines

- Asian equity markets are in the green across the board, even though the gains are just remnants of the outsized rally seen in US hours. Nikkei225, opening up about 1.5%, has since retreated to more modest gains coming out of its midday break. Investors remain unimpressed over the greenback's limited gains against JPY in risk-on environment, with critical ¥86 level remaining elusive. With non-farm payrolls looming in the wake of disappointing ADP data, front-month S&Ps are pointing to a lower open.

- Key economic datapoint out of Australia exacerbating retreat in risk flows saw July trade surplus well below prior month's record level. Exports fell 4% m/m as imports rose 2%. Overall exports to China as well as exports of both iron ore and coal declined modestly.

- On the monetary front, Brazil central bank paused its rate tightening campaign, leaving Selic rate unchanged at 10.75% while signalling a potentially protracted pause. In contrast, South Korea monetary authorities reiterated they would be more inclined to target price stability, implying additional tightening as early as the coming meeting.

- Hurricane Earl is making a final approach toward the North Carolina coast, with landfall expected early AM local time on Friday. Back at Cat 4, the storm is also responsible for warnings and watches in the mid-Atlantic as far North as Massachusetts, and could impact the busy driving and back-to-school shopping long-holiday weekend.


Macro/FX

China

- (CH) PBOC Deputy Gov Hu: Use of yuan in trade and investment helps reduce forex risks; SDRs should be included in global currency system

- European Union Chamber of Commerce in China called for a more level playing field for members in the Chinese market; Some of the complaints included: Discrimination in favor of Chinese firms when enforcing environmental and labor laws; compulsory certification requirements that unduly restrict market access for foreign firms.

- (CH) China Banking Regulatory Commission (CBRC): Encouraging domestic banks and private and foreign investors to take over rural credit cooperatives

Australia/New Zealand

- (AU) Australia Opposition Leader Abbott: Pledges to deliver bigger budget surplus than the one proposed by Labor; Stand behind projections

- (AU) Australia Dept of Foreign Affairs and Trade Sec Richardson: Mining companies are projected to invest A$20B in African mines; Currently AU companies are involved in 500 projects in 40 African nations - The Australian

- (NZ) Fonterra's online dairy auction saw prices rise 16.9% - New Zealand Herald

- (NZ) South Canterbury Finance collapse attributed to large investors pulling out cash to get below new limits for Gov't deposit guarantee scheme - Dominion Post

Japan

- (JP) Japan former Sec-Gen Ozawa: Wants to change the economy so that it is not dependent on external demand; Wants big companies to pay more for employees; In favor of fresh set of negotiations with US military and Okinawa prefecture govt about location of the Air Force base

- (JP) 41 prefectures in Japan have set their hourly wage ¥10-30 higher starting this fall - Nikkei

Korea

- (KS) South Korea Fin Min: Will tackle inflation expectations and take steps to keep prices stable; Will closely monitor food prices ahead of upcoming holiday

- USD/KRW: South Korea FX authorities reportedly intervene to prevent excessive KRW strength

Other

- (TH) Thailand Central Bank Tarisa: Will watch for speculation in the Bhat but current measures are still sufficient; Bhat is still catching up after political turmoil

- (TH) Thailand Fin Min: Asks central bank to keep an eye on bhat speculation; Central bank already has tools to curb any speculation


Equities

Australia/New Zealand

- WPL.AU: A$1.3B Browse LNG project remains on track even though the Western Australian Govt forcibly acquired land required for the project

- RIO.AU: Pilbara project is on the agenda; Brockman iron ore mine could double production, current capacity it 22M tons/year

- NUF.AU: Blames later than expected product sales for causing A$170M in debt and the resulting 7% loss in share price; Increase of debt has breached its covenants - Australian Financial Review

Japan

- Toshiba Corporation: Unit Westinghouse Electric and GE will spend a combined $10B to build 2 nuclear reactors in India - Financial Express

- TM: Posted 57% in "conquest sales" in August - customers switching from another brand - the highest since 2009 - WSJ

- Suzuki Motor Corp: Company has cancelled its plans to develop an industrial park for affiliated autoparts makers because of sluggish demand - Nikkei News

- Mitsui Osk Lines Ltd: Extended LNG ship depreciation term to 20 yrs from 13 yrs; Move to lift pretax profit for FY10/11 by over ¥5B - Nikkei News

China

- CNOOC: Plans to invest up to CNY250B-300B to boost offshore oil production - Shanghai Daily citing senior executive

- PTR: Completed construction of first LNG wharf in Dalian; Plans to sell its 75% stake in the project to Kunlun Energy, No financial terms disclosed yet

- Ping An Insurance: Announces plans to acquire an additional 32% stake in Shenzhen Development Bank for CNY29.1B in private placement - WSJ

Korea

- Kia Motors Corporation: Union workers will vote on proposed deal with management that could avert a strike; Would be the first time in 20 years a strike was averted

Other

- AIG: Primus Financial still hopes for a favorable solution to the AIG bid; Delighted to move any offshore parts of transaction to Taiwan if it helps the bid

- SMC.PH: Unit San Miguel Energy may invest as much as $8B in a project that will intergrate LNG facility with power plants

- GOOG: Reportedly, has not received any notification from authorities in India related to servers

- GM: Reports China Aug Sales at 181.6K units, +19.2% y/y v 176.6K prior

- GM: Considering reopening Indonesian production plant; Will decide within 90 days if going to make the $150M investment; Current Asia market share is 1.9%


Commodities

- WSJ comments on the disparity in rice prices between China and Thailand; CNY2.9K/ton and CNY2.2K/ton respectively and the growing smuggling trade resulting

- (CH) China agricultural experts: Surging corn prices are only temporary and do not pose a major threat to China's food security - China Daily

- RIO.AU: CEO: Expects iron ore prices to fall to $127/ton in Q4; Iron ore prices have declined 13% in Q3 - Speaking at Brockman 4 Mine Opening

- GLD: SPDR Gold Trust ETF holdings rise by 1.5 metric tons to 1,304.0 metric tons as of Sept 1st