Asian Market Update by TradeTheNews staff

Discussion in 'Trading' started by TradeTheNews, Feb 11, 2007.

  1. TradeTheNews

    TradeTheNews ET Sponsor

    Further weakness in JPY expected as G7 fails to single out the weak currency

    - No specific mention of yen weakness in G-7 final statement: The G-7 group failed to single out the weak JPY, but the ECB's Trichet did warn of the risks associated with the build up of carry trade positions. G-7 ministers once again said that exchange rates should reflect economic fundamentals and the Japanese economy is recovering at a steady pace. The failure by the G-7 to single out the weak JPY drove EUR/JPY to all-time highs near 158.80 and USD/JPY flirted with 122.00. Traders now await the Japanese GDP data. Many analysts suggest that there is a high possibility Japanese consumer spending will have a big rise in Q4 because it fell so much in Q3, and a strong GDP reading is expected. The market is expecting for Japan's Q4 GDP to rise by 0.9% quarter over quarter, which compares to a 0.2% rise in Q3.

    - China's trade surplus narrows from $21 billion in December: China's January trade surplus rose to $15.88B ($15.40B expected), with exports rising by 33.0% y/y (26.5% expected) and imports climbing 27.5% (18.5% expected). The Chinese trade surplus has now narrowed for the third month in a row.

    - Aussie dollar sinks as RBA says inflation pressures are contained: The Reserve Bank of Australia (RBA) cut its inflation forecast for 2007, but still said that wage growth is high, while the pace of wage growth has slowed. The medium term outlook for the AUD looks bearish after the currency broke through key support levels. Analysts had warned for some time that markets were being too aggressive in pricing in inflationary pressures from tight labor market conditions down under.

    - Most Asian equities track Friday's Fed driven sell-off in US equities. With the Nikkei 225 closed for the observance of a Japanese holiday, the KOSPI is lower by more than 1.3% as shares of Samsung weighed on the index following a negative outlook report from Micron. The Micron news also weighed on the Taiex, causing the index to fall by more than 1%. Taiwan banks also weighed on the Taiex . Australia's ASX 200 index is lower by more than 0.15%. The Hang Seng is lower by more than 0.65% as shares China Mobile fell on speculation that Vodafone may sell its stake in the company. Shares of HSBC continued to fall after yet another analyst downgrade at Nomura (3rd downgrade since Feb 7). Chinese equities rose by more than 2.0% after PboC governor Zhou downplayed inflation concerns.

    - Commodities: Shanghai copper prices rose for the 2nd consecutive session on increased demand from Chinese buyers. Copper markets are also being supported by fears of a labor strike at a southern Peru copper smelter, which processes 1.2M tons of copper concentrates per year. Crude oil is below the key $60 psychological level and trading near session lows after Saudi Arabia's Oil Minister alluded that OPEC may not need to make further production cuts. Spot Gold opened higher, but is trading near session lows tracking the declines in crude oil.