Thin markets exaggerate early Asia moves but recent ranges still intact


MAJOR HEADLINES – PREVIOUS SESSION

  • JP Mar. Corporate Price Index out at -0.2% m/m, -2.2% y/y vs. revised -0.5% m/m, -1.6% y/y prior


THEMES TO WATCH – UPCOMING SESSION

  • CA BoC Business Outlook Survey (1430)

  • NZ Retail Trade (2245)

  • UK RICS House price balance (2301)

Market Comment:

An abridged version today with many centres across Europe still out for the long Easter weekend.

Markets had their predictable flurry in ultra-thin early hours of trading after the long weekend. AUD triggered a run of stops and touched the 0.73 mark against the USD while the EUR eased off to a 1.3125 low, reportedly on the back of an article in Ireland’s Sunday Business highlighting growing speculation that the state would take a majority shareholding in Allied Irish following the purchase of property loans by the new National Asset Management Agency. After the early action, prices settled into familiar ranges.

Japan markets remained open throughout the Easter-period and the Japanese government released details of a JPY15.4 tln stimulus package on Friday. Today, Reuters carried news that the BOJ was examining boosting its capital to guard against possible losses incurred from its purchases of commercial paper and corporate bonds as part of its recent QE activities. Current laws say the BOJ sets aside 5% of profits as capital and pays the rest into state coffers. The BOJ is considering raising this ratio to 15%, according to the report, which can be approved by the finance minister.

On today’s data front (the only one in Asia), the Japan domestic corporate price index fell 0.2% m/m and 2.2% y/y in Mar, their biggest annual fall since 2002 and represented the seventh straight month of declines. The breakdown shows weak steel prices were the main drivers forcing the index lower, with soft agricultural, fishery and forestry prices also helping. Higher prices for gasoline, oil and oil products, non-ferrous metal and textile prices could not turn the index around.

China data will feature heavily in this week’s agenda with Q1 GDP numbers the highlight on Thursday. Ahead of this, the China Securities Journal reported that China is planning a new economic stimulus package targeted at boosting consumption. Over the weekend, Chinese Premier Wen Jiabao commented that the economy was in better shape than expected, with March industrial output growth above forecast, but still faced big challenges. The PBOC also confirmed it would continue to implement a relaxed monetary policy stance and keep sufficient liquidity in the banking system.
This assurance came after weekend data showing new Yuan loans amounted to 1.89 tln Yuan, an annual rise of 29.8% y/y, in March and brought the q1 total up to 4.58 tln Yuan.

Across in Europe, German finance minister Peer Steinbruck said that he had devised a master plan to help struggling German banks, but was opposed to creating a single “bad bank” for problem loans saying the respective banks and their shareholders would have to take on the highest possible degree of responsibility for their own toxic assets. Details of the plan were not released, but the government is expected to discuss it with business leaders on April 21.