Asian Market Update – 3/11/10
Thursday, March 11th, 2010Asian Market Update: Weak China Feb industrial production, downplayed inflationary pressure weigh on risk trade; RBNZ, BOK on hold with an eye on future policy action; Aussie jobs disappoint, weigh on April RBA outlook
ECONOMIC DATA
- (NZ) RBNZ LEAVES RATES UNCHANGED AT 2.50% AS EXPECTED
- (NZ) NEW ZEALAND FEB BUSINESS NZ PMI: 53.3 V 52.1 PRIOR (highest level since Nov 2007)
- (NZ) NEW ZEALAND FEB FOOD PRICES M/M: -1.3% V 2.1% PRIOR (4-month low)
- (JP) JAPAN Q4 FINAL GDP Q/Q: 0.9% V 1.0%E; ANNUALIZED: 3.8% V 4.0%E; NOMINAL Q/Q: 0.1% V 0.2%E; GDP DEFLATOR Y/Y: -2.8% V -3.0%E
- (AU) Australia MAR Consumer Inflation Expectation: 3.2% v 3.2% prior
- (AU) AUSTRALIA FEB EMPLOYMENT CHANGE: 0.4K V 15.0KE (lowest since Aug 2009)
- (KS) BANK OF KOREA (BOK) LEAVES RATES UNCHANGED AT 2.00% AS EXPECTED
- (CH) CHINA FEB INDUSTRIAL PRODUCTION Y/Y: 12.8% V 19.0%E (5-month low)
- (CH) CHINA FEB NEW YUAN LOANS CNY: 700B V 600BE (-50% m/m and -36% y/y)
- (CH) CHINA FEB CPI Y/Y: 2.7% V 2.5%E (highest since Oct 2008)
- (CH) CHINA FEB PPI Y/Y: 5.4% V 5.1%E (highest since Oct 2008)
- (CH) CHINA FEB RETAIL SALES Y/Y: 22.1% V 18.1%E (highest since Sept 2008)
- (CH) CHINA FEB PURCHASING PRICE INDEX Y/Y: 10.3% V 8.5%E (highest since Oct 2008)
- (CH) CHINA FEB FIXED ASSETS INVESTMENT URBAN: 26.6% V 25.6%E (11-month low)
- (CH) CHINA FEB MONEY SUPPLY M0: 22.0% V -0.8% PRIOR (highest since Jan 2008); M1: 35.0% V 39.0% PRIOR; M2: 25.5% V 26.0% PRIOR (10-month low)
- (TH) Thailand FEB Consumer Confidence: 70.9 v 71.9 prior
- (PH) Philippines Jan Budget (PHP): -37.1B v -26.0B
- (MA) Malaysia JAN Industrial Production y/y: 12.7% v 11.7%e
- (MA) Malaysia JAN Manufacturing Sales Value y/y: 28.8% v 16.2% prior
- (MA) Malaysia Q4 Current Account Balance: MYR27.3B v MYR25.3B prior
- Weak industrial production data from China and an unexpected decline in Australian job growth, combined with some words of caution from central banks of New Zealand and South Korea in their rate decision statements, are weighing on sentiment, with indices trading lower after two days of sideways action. Shanghai Composite is impacted most directly, falling 0.6%. In the final hour of Tokyo trade, Nikkei225 is still up 0.6%, but much lower than in early session. Taiwan, Korea, and Sydney are both down 0.2%, while front-month S&Ps are down 0.4% ahead of CPI and Philly Fed data in Thursday US session.
SPEAKERS/PRESS
- New Zealand: Reserve Bank of New Zealand left rates unchanged as expected at 2.50% and reiterated its commitment to withdraw policy stimulus in mid-2010 as previously forecasted. Kiwi dollar traded weaker across the board however after RBNZ warned that domestic recovery is still sluggish, business spending cautious despite improved confidence, and households remain cautious. Subsequently, Gov Bollard also noted the central bank can afford to “wait and watch” before raising interest rates and that neutral rate could be lower than it has been in the past, further weighing on the Kiwi.
- South Korea: Bank of Korea also left rates unchanged at 2.00% as expected and reiterated it would maintain accommodative policy for the time being. Later, BOK Gov Lee said some adjustment may be required in the near future to contain “excessive” levels of household loans, but acknowledged it was difficult to build consensus for gradual tightening. Regarding the economy, Bank of Korea said considerable uncertainly remained globally, but domestic growth would likely be sustained in coming months. Inflation was also expected to pick up in the 2H, rising toward 3% from 2.5% along with pickup in the economy.
- Australia: Disappointing February report saw 0.4K new jobs v 15K expected, and jobless rate ticked up to 5.3% from 5.2%. Job growth was skewed in favor of full-time employment, while the prior month was revised in favor of part-time growth, with seasonal and stimulus-infused construction activity slowing. Following the jobs data, fixed income market probabilities for April RBA 25bp tightening fell about 10% below 30%.
- Japan: Japan government spokesman Hirano responded to press speculation the cabinet may upgrade its overall view of the economy for the first time since July 2009, noting that conditions are still severe despite the return to growth. Earlier, Japan’s Q4 GDP was revised to 0.9% from 1.1% q/q and 3.8% from 4.6% y/y. In terms of components downgraded, CAPEX was cut to 0.9% from 1.0%, domestic demand to 0.4% from 0.6%, and inventories to -0.1% from +0.1%
- China: February economic data saw the pace of growth in industrial production slowing to a 5-month low, but inflation printing hotter on CPI and PPI basis – the highest pace of increase since October 2008. New Yuan loans fell 50% m/m and 36% y/y to CNY700B from January’s CNY1.4T. Chinese officials subsequently downplayed the deviations, attributing extreme changes to seasonality of the lunar New Year holiday falling on different months in 2009 and 2010. Chinese stats bureau also commented on inflation, noting that CPI would decline in March from February as weather improves, with much of the pricing pressure coming from food shortages and overheated housing. The stats bureau also suggested economic recovery would spark labor shortages, with exports as well as domestic consumption remaining key growth drivers.
EQUITIES
- In individual shares, Japanese press reported Toyota may meet union demands to pay workers a bonus equivalent to 5-months salary and ¥100K next fiscal year, with the struggling automaker increasingly concerned to about retaining employees. Also in Japan, FT reported Shinsei Bank may be looking to raise $830M and was no longer interested in a merger with Aozora. In energy, Idemitsu Kosan was said to idle 3 refineries and cut FY10 output to 28.3M, 0.7% below former forecast.
- Outside Tokyo, Hynix creditors reportedly selected six lead managers for the plan to sell a 7% stake in a block trade. Also in Korea, LG Electronics was seen targeting 1M 3D TV sales in 2010 after Sony aimed for 2.5M in FY10/11. In Sydney, local press said CEO of Rio Tinto would travel to Beijing for talks with Chinalco on renewed JV opportunities, and Myer Holding posted H1 profit A$115M (+38% y/y), Rev A$1.8B (+2% y/y).
CURRENCIES/FIXED INCOME/COMMODITIES
- US dollar and Japanese Yen firmed up modestly along with some selling pressure in equities as markets digest China and Australian economic data along with rate decisions in NZ and South Korea. EUR/USD traded down below 1.3630, GBP/USD briefly fell below 1.4950, while Swiss franc approached the critical 1.46 handle ahead of the SNB decision. Commodity FX was weaker against USD and on a relative basis. AUD/USD traded down toward 0.9110 after weak jobs data – down about 80 pips from US session high – while NZD/USD fell over 100 pips below 0.70 on a more cautious stance from the RBNZD decision and subsequent Gov Bollard comments. Japanese Yen benefited from some risk aversion as well as speculation of govt economic assessment upgrade, with USD/JPY falling to 90.20 from 90.80 US session high.
- Today’s commodities trading session was headlined by China’s Feb industrial production data, which missed analyst expectations and hit a 5-month low. The slowdown in industrial production came after China’s Feb PMI manufacturing figures hit a 1-yr low, as some factories in the country were closed in observance of the Lunar New Year holiday break. Additionally the slowdown in China’s Feb production, tracked the decline in Feb bank lending. In terms of the components of China industrial output, power output rose by 7.9% y/y to 269.6B KWH (+25.9% prior), crude oil output +5.8% y/y to 15.1M tons (+2.3% prior), crude steel output +22.5% y/y to 50.4M tons (+26.6% prior), coal output +11.9% y/y to 210M tons (+25% prior), copper output +6.5% y/y to 358K tons (+28.1% y/y prior) and gas output rose 12.3% y/y to 7.6B cubic meters (+8% y/y prior).
- Following the Chinese data, most commodities have moved off of the session’s best levels. Crude oil is lower and trading below $82/bbl. In oil market news, the IEA’s Chief Tanaka stated that the oil demand situation has not changed much from the agency’s last monthly report. IEA’s Feb report revised its 2010 global demand estimate higher by 170K bpd to 86.5M bpd. OPEC, in its March monthly report, raised its 2010 world oil demand estimate by 120K bpd to 85.2M bpd. In the US, the Department of Energy disclosed on yesterday’s session that crude and gasoline inventories were lower than expected (DOE CRUDE: +1.4M V +1.8ME; GASOLINE: -3M V +100KE).
- Spot Gold is little changed and trading near $1,109/oz. During the NY session, gold declined to a two-week low, after the $1,110 and $1,118 support levels were breached. Copper prices are lower on the session on the weaker than expected Chinese industrial production data.
- In other commodities news, ArcelorMittal said it was looking to raise its iron ore production by 50% to approximately 100M metric tons by 2015. Back on March 8th, ArcelorMittal was quoted as saying that FY10 contract iron ore prices may rise by up to 80% y/y. In Australia, government agency ABARE said Q4 mineral and energy exports rose by 1.3% q/q to A$31B, driven by record export volumes of iron ore and coal.
Written by Trade the News
