Asian Market Update – 3/2/10
Tuesday, March 2nd, 2010Asian Market Update: RBA raises cash rate by 25bps to 4.00% as expected, reiterates concern over “legacy of financial crisis”; Japan jobless rate at 10-month low, but household spending falls; USD extends gains
ECONOMIC DATA
- (JP) JAPAN JAN OVERALL HOUSEHOLD SPENDING Y/Y: 1.7% V 2.5%E (3-month low)
- (JP) JAPAN JAN JOBLESS RATE: 4.9% V 5.1%E (10-month low); JOB-TO-APPLICANT RATIO: 0.46 V 0.47E
- (JP) Japan FEB Monetary Base y/y: 2.2% v 4.9% prior (lowest since Dec 2008)
- (AU) Australia JAN Building Approvals m/m: -7.0% v 1.0%e (first decline since Aug 2009, lowest level since May 2009), Y/Y: 47.6% v 59.8%e
- (AU) AUSTRALIA JAN RETAIL SALES M/M: 1.2% V 0.5%E
- (AU) RESERVE BANK OF AUSTRALIA (RBA) RAISES CASH RATE BY 25BPS TO 4.00% (AS EXPECTED)
- (TH) Thailand FEB CPI m/m: 0.6% v 0.4%e, y/y: 3.7% v 3.4%e
- (KS) South Korea Feb CPI m/m: 0.4% v 0.5%e (11-month high), y/y: 2.7% v 2.7%e (3-month low); Core CPI y/y: 1.9% v 2.1% prior (lowest since Jun 2006)
- Asian equity markets have extended modest gains seen in the prior session, tracking strong results from the consumer and tech space in Monday US trading. Entering the final hour in Tokyo, Nikkei225 is up 0.3% after briefly paring early gains to negative territory. Korea’s Kospi is leading the region with 1.2% catch-up rally after yesterday’s market holiday, and S&P/ASX finished the day up 0.3%. Shanghai Composite is down a marginal 0.2%, while Taiwan is trading by similar margin to the upside. Ahead of Tuesday US trading, front-month S&Ps are near unchanged at 1,114.
SPEAKERS/PRESS
- Central bank decision in Australia and economic data on housing and consumption took center stage in the session with mixed results. As expected, the RBA tightened policy by 25bps to 4.00% after surprising decision to hold in prior month, noting that growth in global economy makes it appropriate for rates to be closer to average. Australian dollar saw some slight downside on the announcement however on further caution regarding ongoing expansion in major economies as well as elevated sovereign credit risks. The central bank also reiterated that inflation is consistent with 2010 target. In a notable deviation from last month’s statement, the RBA omitted specific reference to China looking to reduce its stimulus, and also upgraded its assessment of resource sector investment to “very strong” from “strong”. Speaking after the RBA decision, Treasurer Swan said that while higher rates are tough on family budgets, low rates cannot stay at emergency levels forever. In economic data, building approvals was worse than expected at lowest level since May of 2009 at -7.0%, however retail sales topped estimates at 1.2% V 0.5%E.
- Japan had its own mixed set of economic data, with household spending falling below estimates to a 3-month low and jobless rate dropping below 5% for the first time in 10 months. Speaking after the data, Fin Min Kan said the jobs data suggest trends in economy are improving, but the gap in supply/demand is still very large. The cabinet also maintained political pressure on the Bank of Japan for further liquidity. Banking Minister Kamei said the BOJ should examine directly underwriting government bonds, and PM Hatoyama noted the central bank should conduct monetary policy appropriately.
- Over in China, the local press addressed conditions in the wake of yesterday’s disappointing manufacturing PMI. Shanghai Securities News said Feb CPI may only rise 2% y/y – below prior forecasts of 3%, with PMI data indicative of lower than feared inflationary pressure. On the housing front, Shanghai Securities News said policymakers may announce a property tax during parliament sessions in early in March to slow the sharp gains in property prices. On a related note, IMF Deputy Managing Director suggested it was appropriate for China to withdraw some monetary stimulus.
EQUITIES
- In individual shares, the Toyota president Toyoda extended his tour to contain the recall crisis to China, affirming local press that the region is extremely important to the company. Separately NY Times reported that sudden acceleration complaints may be issued to the popular Camry brand going before 2007. Also in Japan, Asahi Glass was said to have halted its plan to grow its Taiwan market after the govt allowed investment in LCD plants in China and Fujitsu delivered the world’s fastest supercomputer for use by Japan Atomic Energy Agency.
- Elsewhere in Asia, Australia’s Nufarm put FY10 estimate at A$80M-100M (including items) v A$164Me, and local press reported that Telstra could be negatively affected by the govt’s plans for National Broadband Network (NBN). In South Korea, Kia reported Feb sales +46% y/y and -15% m/m (138.8K units), and KEPCO was said to potentially receive access into real-estate development market.
CURRENCIES/FIXED INCOME/COMMODITIES
- In currencies, despite the RBA rate hike, the Aussie dollar fell about 30 pips against the greenback on ongoing concerns over sovereign and moderate global growth risks before returning to unchanged levels. Australian 10-yr bond yield also shed over 4bps after the decision, falling below 5.40% for the first time since Feb 10th. Elsewhere in commodity FX, USD/CAD consolidated in 1.0410-40 range and NZD/USD fell over 40 pips below 0.6960. In European majors, RBA mention of sovereign risks also punished the EUR and GBP against the greenback to 1.3512 and 1.4902 respective session lows. USD/JPY widely tracked risk appetite in equities and overall greenback buying interest, rising nearly 30 pips toward 89.40.
- Spot Gold prices are lower and trading near $1118/oz on the rebound in the US dollar. During yesterday’s NY session, spot gold declined by more than $0.50 and ended at around $1,118.30/oz. Most of the action for gold continues to be on the crosses, as XAU/GBP and XAU/EUR are sitting just below fresh record highs. In terms of the technical outlook for gold prices, one dealer sees resistance between $1,125-1,130/oz. Overall, spot gold has been quiet as markets await Friday’s US employment report. After closing yesterday’s session below $80/bbl, oil prices are lower and trading below $79/bbl.
- Shanghai Copper prices are declining on profit-taking, after the metal rose by the 5% daily limit on yesterday’s session due to Saturday’s earthquake in Chile. In terms of the outlook for commodities, the Australian Bureau of Agricultural & Resource Economics (ABARE) said it expected the country’s 2010-11 commodity exports to rise by 15% y/y to A$187B, as the group sees the value of mineral and energy exports rising by 20% y/y. Also, ABARE expects iron ore exports to register annual growth of 9.1% through 2014-15. In other commodity related news, an IMF Deputy Managing Director said he believed that China’s demand for commodities may slow this year because restocking has been completed.
Written by Trade the News
