Asian Market Update by TradeTheNews staff

Discussion in 'Trading' started by TradeTheNews, Mar 13, 2007.

  1. TradeTheNews

    TradeTheNews ET Sponsor

    Asian Market Update: Worries over U.S. subprime housing market lead to unwinding of carry trades

    - Kiwi retail sales come in much stronger than expected: (NZ JAN RETAIL SALES MOM: 0.5% V 0.2% expected; EX-AUTO: 1.0% V 0.2% PRIOR). Analysts were quick to point out that the monthly data series is extremely volatile, warning investors not to read too much into the data. Trends in both total retail sales and ex-auto are still slowing down.

    - Forex: EUR/USD upside remains limited below 1.3185 cluster resistance (the 61.8% retracement of 1.3258 to 1.3070 at 1.3186). The USD remained steady on thin volumes ahead of the U.S. retail sales release. There is a great deal of event risk surrounding the U.S. retail sales release - there are no other major indicators scheduled for the same day, which would allow a surprise sales number to influence the market for the entire session. There is some downside risk to the reading (February was one of the coldest months on record and Wal-Mart has already missed its sales forecasts as a result). There was some unwinding of carry trades as concerns grow over the U.S. subprime housing market and the possibility that lender New Century Corp could file for bankruptcy.

    - Chinese CPI will worry the PBoC: A few days after PBoC governor Zhou warned that CPI is a key factor in deciding on rates, Chinese Feb CPI came in at 2.7% v 2.8% expected. There remains some upside risk to Chinese inflation - analysts point out that food prices in China are being driven by global food prices, which China can't do anything about. China's 1 yr bill yield climbed to a 7 month high following the CPI data.

    - Aussie business confidence remains strong: (AU Feb NAB Business Confidence 12 (10 month high) v 6 prior; Business Conditions: 18 v 17 prior). The rise in Aussie business confidence came amidst stability of interest rates and gas prices. The NAB survey showed that the Aussie economy is running near capacity, and this could worry the RBA (NAB survey shows that Feb capacity utilization came in at a new record level of 83.9%)

    - Strong Aussie labor market could boost consumer spending in the months ahead: (AU Feb ANZ Job Advertisements MoM: 3.4% v -0.1% prior). The ANZ Job Advertisement Series measures the number of jobs advertised in the major daily newspapers and internet sites covering the capital cities each month.

    - Asian equities: With no economic data to provide direction, the Nikkei traded in negative territory despite the stronger close on Wall Street. Gains in the USD/JPY pair and uncertainty with respect to upcoming U.S. retail sales data caused declines in shares of exporters. Profit taking was also seen in steel-related shares following recent gains. Japanese brokers traded higher on takeover speculation and after banking shares were initiated at HSBC with an overweight rating. Electric power shares added on reports that J-Power may be force to more than triple its dividend. The ASX is rebounding from sessions lows after failing to rally above the 5,900 level. Shares of miner BHP are lower despite sharp gains in metals prices on the LME. Shares of Qantas Airways are lower for the second consecutive session on reports that top shareholders my block the company's buyout. The Kospi is lower by more than 0.20% on declines in shares of Korea Exchange Bank, which was downgraded by UBS. Traders said that local institutions were selling Korean large caps. The Taiex is higher by more than 0.75% on gains in electronics shares and dovish commentary from the Taiwan central bank.

    - Commodities: Crude oil is higher above the $59 level in Asian trading after declining during the US session on warmer weather in the US Northeast. The gold market remains heavily long despite some liquidation of longs over last few sessions, with many analysts suggesting that this maintains the likelihood of further downside. Copper fundamentals look bullish after yesterday's Chinese trade balance data showing a surge in imports. The Rio Tinto chairman said that "China's strong, growing demand for metals and minerals, which has been a key driver of market strength, seems set to continue."