Asian Market Update: Strong US consumer sentiment data push Asian equities higher - Australia Q4 PPI index rose inline with expectations (Q4 PPI QOQ: 0.2% V 0.2%E; YOY: 3.5% V 4.0% PRIOR). Following the release the AUD rose to session highs, where it is currently holding, as trader placed bullish bets ahead of this week's CPI report. Continued capacity constraints and wage pressures in the Aussie economy is fuelling speculation that strong inflationary pressures will force the Reserve Bank of Australia to hike rates at its next meeting, supporting the Aussie dollar. - The JPY traded near session lows across the board on rate differentials. There were several press reports that the G7 meeting would not discuss the weak yen. Traders reacted to the lack of verbal intervention by selling yen. Insofar as politics will exert a greater impact on Bank of Japan policy-making, the present low interest rate environment is likely to persist, providing continued support for short-yen carry trades. - Equities: The Nikkei 225 rose by more than 0.75% to hold above the 17400 level on gains in technology shares and exporters. The broader Topix index also rose by nearly 0.70%. The Kospi opened higher, but is now trading near 2-week lows led by declines in shares of KT Freetel. The ASX 200 rose to a new intraday all-time high (above 5700) on strong gains in mining shares. The Hang Seng index hit a new record high as blue chips gained and HSBC extended gains. - Forex: The Kiwi was weaker against the USD on profit taking ahead of this week's Reserve Bank of New Zealand rate decision. The consensus estimate is for rates to remain on hold at the 7.25% level. The Korean Won is trading near session lows against the JPY and USD on speculation that the Bank of Korea intervened in fx markets. The CAD is weaker across the board despite a sharp rebound in oil prices. The USD is weaker on profit taking following Friday's better than expected University of Michigan's Consumer Confidence release, the highest reading since 2004. The Thai Baht is sharply lower against the USD, after the Thai Central Bank alluded to future intervention to slow the rise of the Baht. The Hong Kong dollar gained slightly as some expect the rising Yuan to elevate inflation levels in Hong Kong. - Bonds: Japanese bond prices continued to gain as rate hike fears have subsided following last week's Bank of Japan meeting. - Commodities: Following Friday's sharp rise, crude oil rose to above the $52.50 level on forecasts of cold weather in the US's northeastern region. Spot gold is slightly higher and above the $636 on USD weakness. ---------------------------------------------------- Copyright 2007 © Trade The News. For a free 1 week interactive trial to our audio broadcasts, research on demand, and real-time headlines please apply for a FREE TRIAL
Asian Market Update: Chip related stocks decline on fears that the industry has past its peak - Equities: Asian equity markets declined, tracking the lower close on Wall Street. Tech stocks traded lower as traders chose to book some profits after record closes in Japan and Australia yesterday. Cyclical chip related stocks declined on fears that the industry has past its peak, while weaker than expected guidance from Texas Instruments also led to cautious trading. South Korea's Kospi index is little changed after SK Corp reported weaker than expected sales and net profit for Q4. The ASX 200 index declined, but remained above the 5700 level. Losses on the ASX 200 were driven by mining and banking shares. - Forex: Currencies continued to trade in tight ranges in the absence of key economic data releases. The NZD is slightly lower in Asian trading against the USD and is meeting strong resistance at the $0.7000 level ahead of this week's Reserve Bank of New Zealand rate decision. The GBP/JPY is trading near 8-yr lows. The Korean Won and Taiwan Dollar are weaker against the USD, tracking weakness in the USD/JPY pair. The Thai Baht is weaker against the USD, as the Bank of Thailand alluded to more rate cuts. The Hong Kong dollar is gaining against the USD, after December inflation rose more than expected as some believe that the rising China Yuan will put inflationary pressure on the Hong Kong economy. - China's economy could rebound while most analysts expect a slight slowdown: The NDRC, a Chinese government think tank, warned about a possible rebound in the growth of Chinese fixed asset investment for 2007 and stressed its concerns over China's rising trade surplus. Some analysts now suggest that increasing domestic demand in China could counterbalance the impact of reduced demand for Chinese exports, leading to an acceleration of Chinese growth. - Bonds: Japanese bond prices rose for the 2nd consecutive session as traders become less worried about the Bank of Japan and as Japanese equities declined. Shorter-dated notes (more sensitive to changes in the rate outlook) outperformed other maturities. - Commodities: After rising above the $53 level in US trading, crude oil is pulling back in Asian trading to below the $52.50 level on profit taking. Spot gold is little changed as the USD is trading mixed. Shanghai Copper is rising for the second consecutive session on signs that China's demand for the metal is improving. ------------------------------------------ Copyright 2007 © Trade The News. For a free 1 week interactive trial to our audio broadcasts, research on demand, and real-time headlines please apply for a FREE TRIAL
Asian Market Update: Aussie Q4 CPI falls for the first time in 8yrs - The highly anticipated Australian Q4 CPI data led to selling of the Aussie dollar. Q4 CPI fell for the first time in 8 yrs, rising less than expected on both a qtr/qtr and yr/yr basis. The CPI data caused the AUD/USD to fall from above $0.7900 to below $0.7850, as traders scaled back expectations for a Feb rate hike. The Aussie dollar's yield still looks attractive, and some analysts have suggested that the sell-off has been overdone. - As the Bank of Japan waits for stronger data before proceeding to hike rates, Japan's November all industry index came in at -0.2% m/m v 0.0%e. Bank of Japan governor Fukui was indecisive over monetary policy in a press interview. He said that rate hikes could ultimately benefit the economy but the Bank of Japan would rather err on the side of caution as long as data are mixed. When asked about the carry trade, he said that the Bank of Japan cannot guide policy without keeping in mind the risk of an unwinding of imbalances. - Forex: EUR/JPY and GBP/JPY pairs are pulling back off of all-time highs, while USD/JPY is in positive territory. NZD trading was dominated by a mix of local client demand and the momentum-driven demand of model-based funds. The Korean Won is sharply higher against the JPY and USD on demand from exporters. The Taiwan dollar is gaining against the USD on USD weakness and demand for Taiwanese equities. The Chinese Yuan was set at a new post revaluation high, which failed to lead to the strengthening of the Hong Kong dollar as some believe that the Hong Kong Monetary Authority is intervening in markets to protect its USD peg. The USD is trading weaker against the EUR and GBP, as rising oil prices are seen as a negative to the US trade balance. President Bush's State of the Union address failed to trigger substantial movement in foreign exchange markets. - Equities: Nikkei 225 was driven to near a 6-yr high and above the 17500 level, as energy related shares gained. Steel shares gained on reports that rising auto demand caused Japan's crude steel production to rise for the 7th consecutive month. Also technology shares benefited as investors were impressed by profit reports from Yahoo and Sun Microsystems. US technology earnings and a rebound in the US leading index led to strong gains on the Kospi and Taiex. Australia's ASX 200 is trading near record levels as mining and energy related shares are gaining. The ASX 200 extended to session highs following the release of weaker than expected CPI data. - Commodities: Crude oil rose sharply during US trading to above the $55 level on reports that the US will add to its strategic petroleum reserves, which is coupled with China's recent decision to add to its strategic petroleum reserves. Oil is currently slightly below the $55 level in Asian trading on profit taking. Shanghai Copper rose for the 3rd consecutive session as traders make bets that copper demand will increase in the US and China. - Pres Bush State of the Union address: Bush focused on issues popular with Democrats. He shunned issues he previously bought before the more friendly Republican majority, such as broad tax cuts. Bush pledged to focus on the aggressive shift to alternative fuels such as ethanol, and corn prices are likely to rise as a result of the speech. ________________ Copyright 2007 © Trade The News. For a free 1 week interactive trial to our audio broadcasts, research on demand, and real-time headlines please apply for a FREE TRIAL
Asian Market Update: BoJ's Suda says that the BoJ is spending too much time looking at data - The JPY is strong across the board, but expectations for upcoming soft data is capping gains. Speculation that the G-7 meeting will call for a stronger JPY drove gains in the JPY. Also, the JPY's rise was coupled with speculation that the Bank of Japan's Suda, rumored to be one of the 3 board members who voted for a January rate hike, would deliver hawkish commentary. Ahead of Suda's speech the yen gained, but failed to extend gains after Suda's (as expected) hawkish comments. - BoJ Suda is the first BoJ member to talk in public since the BoJ left rates unchanged at last week's meeting: Suda said that the BoJ is spending too much time checking data and that it should not hesitate to hike rates. She said that there is a risk of being too late in raising rates, forcing the BoJ to step up the pace of future rate hikes. - Japanese trade surplus widens: Forex markets largely ignored news that Japan's trade widened on lower oil imports (DEC MERCHANDISE TRADE BALANCE: ¥1.11T V ¥1.19TE; ADJUSTED: ¥658.1B V ¥870.8BE), while the prior figure was revised lower. Exports to China and the European Union advanced to the highest ever, showing that Japan is becoming less dependent on exports to the US. The sluggish level of import growth reflected in the trade surplus data could be a sign of slowing domestic demand. - The Reserve Bank of New Zealand decided to leave rates unchanged at 7.25%, but the RBNZ governor Bollard hinted at future rate hikes, causing the Kiwi to rebound from its initial sell-off. - Q4 Chinese GDP data (on a constant price basis) came in stronger than expected (CHINA Q4 GDP CONSTANT PRICE: 10.4% V 10.2%E; China's 2006 GDP is 10.7%). There was a strong gain in Chinese CPI, but most analysts agree that CPI gains are of a seasonal nature (CPI in December was artificially inflated by grain and food prices and it is still uncertain whether this trend will continue). Exports data shows that China is taking market share in high-tech exports, and this could sustain strong demand for Chinese exports during 2007. - Forex: The AUD continued to trade lower across the board following last session's much weaker than expected CPI data. During today's session, the AUD/USD pair is trading below the $0.7800 after breaking the $0.7900 level during the prior session. The yen continued to gain on short covering ahead of the G7 meeting, as traders dismiss the possibility of softer than expected CPI data (scheduled for release tomorrow). The Taiwan dollar is tracking the stronger JPY. - Equities: Strong US data and recovering oil prices helped the Nikkei to trade in positive territory for most of the session, but dipped into negative territory in the afternoon session, falling below the 17500 level. Gains on the Nikkei were driven by shares of Sony and Toyota. The ASX 200 index rose to an new all-time high for the 2nd consecutive session, but could not rise above the 5800 level. Gains were led by miner BHP following its production update. Aussie banking shares gained following the sector being upgraded at UBS. - Japanese bond prices are in negative territory on hawkish commentary from the BoJ's Suda and as equities gained during the morning session. Also, Japan's 20-yr bond auction received weaker demand than the prior auction. - Commodities: Crude oil and spot gold are declining in Asian trading on profit-taking, following strong gains during the US session. Shanghai Copper rose for the 4th consecutive session on speculation of supply shortages in China. --------------------- Copyright 2007 © Trade The News. For a free 1 week interactive trial to our audio broadcasts, research on demand, and real-time headlines please apply for a FREE TRIAL
Asian Market Update: Japan core CPI rises less than expected on lower oil prices, YoY core rises for the first time in 8 years - Japan's December core CPI y/y rose by 0.1% v 0.2%e, causing the JPY to initially sell-off across the board. 2006 annual CPI rose for the first time in 8 yrs. Leading up to the release, the BoJ said repeatedly that it won't allow a soft CPI reading to change its rate outlook. After initially weakening, the yen recovered some losses. Japan's Chief Cabinet Secretary Shiozaki conveyed that monetary policy should take forex rates into account. Stats from Credit Suisse show that traders are now pricing in a 36% chance of a February BoJ rate hike. - Forex: The AUD is stronger against the USD as crude oil prices are rising in Asian trading. The Kiwi is tracking gains in the AUD. The Reserve Bank of New Zealand's Bollard said that he underestimated the strength of the NZ housing market and economy. These comments followed Bollard alluding to more future rate hikes earlier during the week. The Korean Won is sharply lower against the USD and JPY on sharp declines in equities and on speculation that the Bank of Korea may sell the Won to aid exporters. The Taiwan dollar is sharply lower against the USD for the second consecutive session on declines in equities and JPY weakness. The WSJ Fed watcher Greg Ip said that the Fed is likely to reaffirm its "bias" toward raising rates when it meets next week, citing inflation concerns, and is almost certain to leave rates unchanged. - Equities: All Asian equities are in negative territory following sharp declines in US equities. The Nikkei 225 is down by more than 0.5%, while the Kospi, Taiex and Hang Seng are lower by more than 1%. Chinese equities are also sharply lower on fears that the People's Bank of China may raise rates in the next 6 months. - Commodities: Spot gold is pulling back in Asian trading after gaining during the US session, but is holding above the $650 level. Crude oil is rising on colder weather forecast, and is hovering around the $54.50 level. Shanghai Copper rose for the 5th consecutive session as supply concerns persists.
Asian Market Update: BoJ rate hike expectations fade as Japanese consumption data continues to disappoint - Japanese December retail sales yr/yr came in slightly better than expected (-0.3% v -0.6%e), while the mnth/mnth reading came in worse than expected (-0.2% v 0.0%e). Large retailers and department stores led the decline. The data also showed that winter bonuses rose close to 3%, but disposable income hasn't increased. The JPY traded in negative territory as consumption data continues to disappoint, with the JPY falling to 4 yr lows against the USD. Most surveys suggest that traders do not think the BoJ will hike rates during February. Despite the December mnth/mnth decline, Japanese full year retail sales rose for the 2nd consecutive year, as the BoJ continues to believe that consumption will recover in 2007. - The Chinese PBoC governor Zhou said that the bank will continue to closely watch China's property markets. The Chinese government warned about a possible rebound in fixed asset investment. The NDRC, a leading Chinese government think tank, said that 2006's GDP growth was too high, but the group remains hopeful that growth will slow in 2007. The Thai Baht is sharply lower against the USD after the Bank of Thailand requested that banks not execute non-deliverable forex forwards with foreigners. - Forex: The AUD is weaker against a broadly stronger USD as inflation expectations in Australian continue to decline. The NZD/USD pair is currently showing resistance at the $0.6955 level ahead of this week's building permits and trade balance data. NZ building permits have been on a downward trend since August of 2006. The Korean Won is stronger against the USD and JPY on demand from Korean exporters. The USD remain well supported on expectations that a Fed rate cut will be further delayed. Former Fed Chairman Greenspan's said that the US housing market has bottomed and is supporting the USD's strength. - Equities: The Nikkei 225 is currently in positive territory, led by gains in shares of JFE Steel and Softbank. Resource stocks were boosted by chatter that Posco will become a takeover target. The stronger Won is pulling the Kospi into negative territory, with losses being driven by shares of semiconductor stocks, after the DRAM and NAND markets were downgraded by independent research firm iSuppli. The iSuppli downgrade also led to declines in Taiwan technology shares, and the Taiex is currently lower by more than 0.45%. Japanese power companies like Tokyo Electric are expected to be distributing some good dividends and that's being factored into the stock prices. The Hang Seng is slightly lower on fears that China may seek to slow its economic growth in the near future. The ASX 200 index is declining as shares of BHP and Rio Tinto are tracking declines in metals prices. - Bonds: Japanese bond prices are in negative territory on profit-taking ahead of upcoming bond auctions. Japanese bond prices are also tracking declines in US Treasuries. - Commodities: Crude oil is higher on colder weather in the Northeastern region of the US and on reports that Iran may be seeking to install more centrifuges in order for it to boost its uranium enrichment. Spot gold prices are tracking gains in crude oil and are holding above the $652 level. Shanghai copper rose for the 6th consecutive session on signs that Chinese demand for the metal will rise. --------------------------------------------- Copyright 2007 © Trade The News. For a free 1 week interactive trial to our audio broadcasts, research on demand, and real-time headlines please apply for a FREE TRIAL.
Asian Market Update: USD looks vulnerable to profit taking ahead of FOMC meeting - Japan's December jobless rate and overall household spending came in worse than expected, as the Bank of Japan and Japanese government continue to wait for signs that wages are boosting consumption. Underlying employment data suggested that Japanese companies are still willing to hire more workers to meet increased production amid demand for Japanese made goods, especially hybrid cars. (This was confirmed by data showing Japanese Vehicle Production increased strongly during December). Most analysts feel that the employment situation in Japan is likely to improve over the coming months, given that the cost-cutting efforts at Japanese companies have begun to ease. - Japan's preliminary industrial production for December rose more than expected, but think tank METI said that Japanese companies expect January industrial production to decline by 2.8% m/m. Even with signs that production remains solid, many feel that the Bank of Japan won't be able to raise rates at its February meeting. The fact that there was a strong 2yr JGB auction shows that bond traders do not expect a Feb rate hike from BoJ, as short end bonds are more sensitive to changes in rate outlook. - New Zealand building permits declined by 4.9% m/m, continuing declines which began in October. However, the release only led to a moderate decline in the Kiwi as building permits ex-apartments actually rose by 2.8% m/m. In addition, the Reserve Bank of New Zealand's governor Bollard recently said that he has underestimated the strength of the NZ housing market. - Forex: The Aussie dollar remains supported due to its yield, as many feel that the Aussie dollar has been oversold in recent sessions. The Korean is weaker across the board ahead of today's industrial production data. The USD was slightly weaker as caution takes over ahead of the FOMC meeting, where the Fed is expected to keep its bias toward resumption of rate hikes. The USD looks vulnerable to profit taking ahead of the FOMC meeting. Although the yen was weak during Asian trade, there was some buying interest after the EU's Juncker said that he was getting concerned about yen weakness and the current volatility in the currency. - Bullish outlook for the UK economy: UK GDP growth seen at 2.8% in 2007 and 2.4% in 2008 - National Institute of Economic and Social Research. The NIESR has become more bullish on the UK economy. On 10/07 they urged the BoE to leave rates unchanged, but changed its opinion as recent data point to strong GDP reading. The NIESR said that the BoE is likely to raise its key rate to 5.5% in Q2, adding that there is a risk of an additional BoE hike to 5.75% in H2. - Equities: The Nikkei 225 is higher by more than 0.35% and above the 17500 level. Gains are being driven by consolidation in the steel sector and better than expected preliminary industrial production data. Expectations of strong upcoming earnings also boosted the Nikkei. Japanese tech firms may have gained over the last quarter due to the weakening yen, as many of them estimated USD/JPY in the 113 - 114 range with prior guidance. The Kospi, Hang Seng and Taiex are little changed in cautious trading ahead of comments from the US Fed. The ASX 200 index is rising and nearing a new all-time intra-day high, driven M&A activity. - Bonds: Japanese bond prices are rising following strong demand for today's 2 yr bond auction. Soft Japanese data failed to inspire activity. - Commodities: Crude oil traded in tight ranges, and is currently below $54. Spot gold is lower and below $650 in a thin trade. Shanghai Copper fell for the first time out of the past 5 sessions, tracking the London Metals Exchange contract lower.
Asian Market Update: Asian equities fall ahead of key US data that may highlight labor market inflationary pressures - The Nikkei 225 traded down by more than 1.0% as traders took profit ahead of the afternoon earnings releases and key US data. Due to the uncertain outlook for the yen, foreign demand for Japanese is waning. In pre market trading, foreigners placed more sell orders than buy orders for the first time in 13 sessions. Automakers, utilities, food and construction companies led the declines on the Nikkei. Oil related stocks were trading in positive territory. The 3day straight decline in prices of zinc led to the decline in Australian market, as Zinifex traded down by 2.71%. Despite stronger than expected earnings from Hynix Semiconductor, the Kospi is lower by more than 0.80%. - German finance minister Steinbrueck reiterated that G7 finance ministers will discuss the fall of the yen at their meeting in Essen. The French remain vocal over the issue, as the ECB's Noyer (from France) said that the recent yen move is a concern. Forex options trading shows that traders are starting to prepare for big swings in the yen (One-month implied volatility on yen options was up 7.40% during yesterday's session, up more than one percentage point from 6.05% on Dec. 25) - In Japanese data, December labor cash earning fell more than expected (-0.6% v 0.5%e), with the prior figure being revised higher to 0.2% from -0.2% prior. What is more notable, December labor cash earnings declined while the average monthly total hours worked per regular employee in December were up 0.5%. With wages failing to accelerate, recovery in Japanese private consumption becomes more unlikely. - New Zealand's December trade deficit narrowed slightly more than expected, but this release had a muted affect on NZD trading. Increased imports add to signs consumer and business spending may be strengthening. - Forex: The USD is stronger against the European majors ahead of the FOMC meeting and key US data. The employment cost index for Q4, due for release in the US session, is expected to highlight labor market inflationary pressures. The Korean won is stronger against the USD on exporter demand and despite South Korea's December current account surplus narrowing sharply from the prior month. The Thai Baht gained against the USD after its Finance Ministry said that the Baht is now at a level that is manageable following the implementation of capital controls. The Hong Kong Dollar is near session highs against the USD after the Hong Kong Monetary Authority said that the Hong Kong dollar is no longer used as a proxy to the Yuan and denied that it is intervening in the markets. The Indian Rupee is gaining sharply against the USD following India's debt being upgraded by S&P. - Bonds: The yield on the benchmark 10-year Japanese government bond was flat Wednesday morning amid lack of fresh incentives. Japanese bonds were well supported after the strong auction of 2yr JGBs during the previous session, with the latest issue's relatively high coupon generating healthy demand from investors. - Commodities: Following gains in US trading on announced Saudi Arabian output cuts, crude oil is seeing profit taking in Asian trading. There is increasing speculation that U.S. crude supplies will be adequate to meet winter demand. There remain doubts over additional cuts from OPEC. Some analysts suggest that the capacity constraints that were driving the oil market last year just aren't an issue this year. Spot gold is higher above $650, despite the broadly stronger USD. Shanghai Copper is rising on concerns that a strike at BHP's Cerro Colorado mine in Chile will cause supply disruptions. ----------------------------- Copyright 2007 © Trade The News. For a free 1 week interactive trial to our audio broadcasts, research on demand, and real-time headlines please apply for a FREE TRIAL
- Foreign exchange: The USD came under pressure after the FOMC statement hinted that inflation pressures are likely to moderate. USD gains against the yen is expected to be limited ahead of the G7 meeting due to the event risk currently being priced in by traders. A major newswire, citing an unnamed Japanese government source, said that a big complaint on the yen is unlikely at the formal G7 meeting. The official added that the "cheap yen" issue may be raised at the sidelines of the meeting. During the US session, US Treasury Secretary Paulson said that they were watching the yen "very, very closely". Many suggest that traders used Paulson's comments to sell the USD, as many are nervous about a low reading in the national ISM manufacturing survey for January. Chicago PMI's sub-50 points figure has increased the risk of a soft ISM manufacturing reading, and this could lead to USD weakness ahead of payrolls data on Friday. The Korean Commerce Minister expressed concern about the strength of the Korean Won against the yen, saying that it may hurt exporters. - Japanese GDP expectations: Japanese GDP is expected to be sharply above Japan's potential growth rate, according to a Nihon Keizai Shimbun survey of 14 research institutions. The survey added that nominal growth may have exceeded real growth for the first time in eight quarters. Japanese GDP is slated for release on February 14. - Asian equities: The Nikkei 225 is trading higher, as tech gains are offsetting losses in banking shares. Japanese insurance and oil-related stocks also gained. The Kospi index is higher by more than 1% on gains in technology shares. South Korean exporters also gained after national exports rose at the fastest pace in nearly 2 yrs. Taiwan's Taiex is higher by more than 0.40%, led by technology shares. The ASX 200 index is higher by more than 0.60% as metals prices rebound. Aussie retailers are trading mixed. The Hang Seng index is higher by 0.50% following last session's sharp declines. - Fixed income: Japanese bond futures edged up slightly, tracking gains in treasuries after the FOMC statement noted the improved inflation outlook. The FOMC statement had a rather muted impact on Japanese bonds, as a soft landing scenario in the U.S. (as expected in the BoJ scenario) seems more likely at this point. Japanese bond price gains were capped by the strong performance of Japanese equities. - Commodities: Crude oil is lower in Asian trading on profit taking, and currently trading below the $58 level. Gold prices are higher, ignoring a recommendation that the International Monetary Fund sell some of its gold reserves. Shanghai copper is higher for the second consecutive session on strike concerns and the possibility of increased demand in the U.S.