Asian Market Update by TradeTheNews staff

Discussion in 'Trading' started by TradeTheNews, Feb 22, 2007.

  1. TradeTheNews

    TradeTheNews ET Sponsor

    Asian Market Update: Japanese and Aussie equities end the week with a rally

    - Japan's January corporate service prices rose by 0.6% yr/yr vs. 0.2% expected, the fastest rate of increase in 10yrs. Gains were driven by strong Tokyo office rents and strong demand for ocean freight transportation.

    - The Bank of Japan Governor Fukui reiterated prior comments that the central bank would like to keep raising rates to help sustain the economy's growth. Markets seem to have come to the consensus that the Bank of Japan is likely to hike rates every six months, and the soft stance on carry trades is pushing GBP/JPY, AUD/JPY and NZD/JPY higher (but upside seems limited in these pairs given bearish divergence on weekly MACD and RSI). Fukui reiterated the "forward-looking monetary policy" idea to normalize Japanese interest rates (In recent sessions he said that a key rate of 0.5% is low for an economy growing at 2.0%)

    - Equities: The Nikkei 225 opened the session higher and is currently above the 18,100 level. Towards the end of the afternoon session the index managed to take out 18,140 resistance and is currently trading at 18,190. Earlier gains in the Nikkei were driven by semiconductor equipment makers, steel companies and property stocks. The biggest decliner on the Nikkei was Sanyo Electric, which fell more than 25% on reports that the company may have manipulated prior financials. The broader Topix index is higher and adding to 15yr highs. The Kospi index is little changed as gains in shares of Posco Steel offset losses in shares of chip stocks on concerns about falling DRAM memory prices. The ASX 200 index hit a new all-time high and is well above the 6000 level on M&A related gains in shares of retailer Coles Group. The Hang Seng index is lower by more than 0.75% on profit taking. Shares of HSBC led declines after it said that it will cut its mortgage rates in Hong Kong.

    - Asian Currencies: The Korean Won and Taiwan dollar are both gaining against the USD, tracking the firmer yen.

    - Major Currencies: EUR/JPY is continuing to hold near record levels. Both the Kiwi and AUD are lower on profit taking in commodities. The EUR is being weighed down by components of yesterday's German GDP report showing slowdown in domestic consumption. Some traders chose to close long EUR positions ahead of the Ifo survey. The EUR looks sensitive to downside surprise given the lack of upside momentum. French, Italian and Belgium business confidence were all stronger than expected, hence a soft German Ifo reading can do great damage to EUR (Belgium business outlook survey tends to have a strong correlation with the German IFO report). With little in the way of meaningful releases due today (with the exception of the pound) it looks as if we will see a quiet end to the week.

    - Commodities: Gold was slightly softer, but bullish technicals and geopolitical concerns are providing support to prices. Any renewed USD weakness could see traders try push gold past $700. Iranian tensions continue to support crude prices, with crude trading just below $61.