Asian Market Update: Fleeting Australia mining tax uncertainty bolsters August jobs report, lifts AUD to 4-month high; Bank of Korea unexpectedly on hold

As of 1:00amET:

- Nikkei225 +0.8%

- S&P/ASX +0.8%

- Kospi flat

- Taiex -0.1%

- Shanghai Composite -1.0%

- Sept S&P Futures -0.2% at $1,097

- Oct Gold flat $1,256/oz

- Oct Crude oil flat $74.65/brl

- Dec Wheat -0.3% at $7.09


Economic Data

- (AU) AUSTRALIA AUG EMPLOYMENT CHANGE: 30.9K V 25.0KE; UNEMPLOYMENT RATE: 5.1% V 5.2%E; PARTICIPATION RATE: 65.4% V 65.5%E; - Full Time Employment Change: 53.1K v -4.2K prior; - Part Time Employment Change: -22.1K v 27.7K prior

- (KS) BANK OF KOREA LEAVES 7-DAY REPO RATE UNCHANGED AT 2.25% (NOT EXPECTED); - Current rate of 2.25% is not the most desirable level or appropriate. (Gov Kim); - More accommodative policy designed to sustain growth levels; - Inflation has been accelerating.

- (NZ) NEW ZEALAND Q2 MANUFACTURING ACTIVITY Q/Q: 3.1% V 1.4% PRIOR (2-yr high)

- (JP) JAPAN Q3 BSI LARGE ALL INDUSTRY Q/Q: 7.1 V 4.0 PRIOR; BSI LARGE MANUFACTURING: 13.3 V 10.0 PRIOR (1-year high)

- (PH) PHILIPPINES JUL TOTAL EXPORTS Y/Y: 35.9% V 28.5%E

- (TH) THAILAND AUG CONSUMER CONFIDENCE: 72.8 V 71.4 PRIOR

- (KS) South Korea AUG PPI y/y: 3.1% v 3.4% prior

- (MA) Malaysia JUL Industrial Production y/y: 3.2% v 5.7%e; Manufacturing Sales Value y/y: 9.3% v 14.1% prior

- (IN) INDIA AUG LOCAL CAR SALES: 160.8K UNITS V 158.8K UNITS M/M


Overview/Top headlines

- Asian equity markets are trading mixed despite some modest gains in the US and EU bourses, even as the most heavily beaten down Nikkei225 is seeing some reprieve. Tokyo equities opened up by over 1.1% before paring some of those gains despite further escalation in intervention rhetoric by Japanese officials. Finance Minister Noda said some simulations on various FX intervention action have been conducted. Furthermore, Vice Fin Min Minezaki expressed concern about China's JGB purchase level - attributed in part to higher JPY - noting it is unfair that Japan cannot buy China debt. Comments from BOJ Governor Shirakawa downplaying central bank willingness to expand its JGB purchases outweighed those statements however, sending USD/JPY lower from ¥84 handle while signaling late session Nikkei225 retreat.

- Australia benefited from a much stronger than expected August jobs report as well as lower unemployment rate, with mining tax compromise lifting some of the uncertainty in the industry.
Particularly notable was the full-time job creation component, greatly outpacing part-time sector. AUD/USD rose about 50 pips to 0.9230 after the release - the highest level since early May.

- Bank of Korea surprised the markets with a hold at 2.25% against consensus expectations for a 25bp hike - the 2nd hike in 3 meetings. BOK seemed to have telegraphed a tightening bias in prior decision and remained hawkish on inflation going into the meeting, but pointed to ongoing global turmoil for remaining cautious. BOK gov Kim said it was important to sustain growth levels, even though 2.25% rate was NOT appropriate or desirable level of interest rates, reinforcing BOK could move once again as early as the next decision.


Macro/FX

China

- (CH) Reportedly, China to apply an expanded property tax

- (CH) Sales of home appliances in China's rural areas continued to gain sharply in August, rising about 126% y/y to CNY17.1B on rural subsidy program; Also up from CNY16B m/m - China Daily

- (CH) China Sovereign Wealth Fund (CIC): China should allow domestic investors to invest overseas more freely

Australia/New Zealand

- (AU) Reserve Bank of Australia (RBA) Assist Gov Debelle: Dislocation on decline in Australian markets still hasn't returned to pre-crisis levels - Speaking at a conference in Sydney

- (AU) Australia Employment Min Crean: Jobs data is good news; Showing strength in the economy

- (AU) Credit Union Australia is calling for Labor Gov't to extend the guarantee on retail deposits below A$1M due to expire in Oct. 2011; In order to maintain present level of competition - Sydney Morning Herald

- (AU) Australia mining companies continued to invest during the height of the controversy over the "super profits tax" during the June quarter with spending on exploration rising 7.7% to A$611M - Sydney Morning Herald citing Bureau of Statistics

- (NZ) New Zealand Fin Min English: Earthquake will lower GDP next 3 months and may buoy GDP over the next year; Cost may be upwards of NZ$4B but still a very prelim estimate

Japan

- USD/JPY: Japan Fin Min Noda: Risks to economy more dire because of currency problem; Conducting simulations on various FX intervention action;- Japan has unrealized loss of ¥32T on fx account.

- (JP) Japan Vice Fin Min Minezaki: Government is very interested in China buying JGB debt; Looking to have close communication with China on JGB buys

- (JP) BoJ Gov Shirakawa: Credit expansion wasn't aimed at the currency markets; Could take 1-2 years to gauge effect of the policy; Reaffirms ready to take action if needed; BoJ is not necessarily acting to deal with FX and stock market moves.

- (JP) Japan PM Kan: Ending deflation is a priority; Told Gov't to take strong comprehensive steps with the BoJ to beat deflation

- (JP) Japan private sector economists lower GDP forecast to 1.9% from 2.5% previously estimated in August - Nikkei

Other

- (JP) US Treasury Sec Geithner declines comment on Japan intervention policy; China has not allowed the Yuan to move 'very much'

- (PH) Philippine Fin Min Purisima: Market sentiment is very positive; Objective to peso sale is to lengthen maturities and flatten the "bunching up"

- (SI) Gov't of Singapore Investment Corp. is in advanced talks to buy a 15% stake in Brazil Banco BTG Pactual for $4.2B - WSJ


Equities

Australia/New Zealand

- AXA.AU: ACCC still opposed to NAB A$14B takeover; Recent steps have not addressed competition concerns

- AMP.AU: Pleased with ruling by the ACCC ruling on the NAB and AXA merger; Maintains that AXA is still a good strategic target - STO.AU: Sells 15% stake in Gladstone LNG for A$650M to Total

Japan

- ORIX Corp: Purchasing regional South Korean bank Pureun Mutual Savings Bank No. 2 for ¥8.5B - Nikkei

- NSANY: Aims to more than double Thailand parts exports this FY

- KDDI Corp (JP): Not planning to enter into mobile phone broadcasting content; Leaving the market for NTT DoCoMo - Nikkei

China

- Wharf: Purchases a site in Shanghai for CNY4.8B or CNY88.2K/square foot in land auction

- Metallurgical Corporation of China Ltd: Cape Lambert Resources launched a lawsuit with the Australian Supreme Court seeking A$80M owed from Metallurgical for the sale of its iron ore project - Australian Financial Review

Korea

- Doosan Heavy: Awarded a KRW4T order to build a power plant in Saudi Arabia

- Hyundai Motor Co: Will produce its first electric cars starting in 2011 with a goal of producing 2.5K in 2012

- Samsung Electronics: Aims to become the largest distributor of home appliances in European markets - Korean press


Commodities

- API PETROLEUM INVENTORIES: CRUDE: -7.3M V +1ME; GASOLINE: +650K V

-1ME; DISTILLATE: +1.3M V +500KE; UTILIZATION: 86.2% V 86.7%E

- (CH) China's top 100 retailers have cut about 1.63M tons of carbon emissions in 2009 - China Daily