Thursday, October 15, 2009
Asian Market Update: RBA Governor steers policy to target sustainable expansion; NZD lifted after Business PMI expansion, 12-month high in CPI; China
Posted by About this Blog at 11:31 PM
- (NZ) New Zealand Sept Business PMI: 51.7 v 48.7 prior (First expansion since April 2008 and highest level since Feb 2008)
- (NZ) New Zealand Q3 CPI Q/Q: 1.3% v 0.8%e (highest level since Q3 2008); Y/Y: 1.7% v 1.1%e; Food Prices: -0.7% v -0.9% prior
- (AU) Australia Oct Consumer Inflation Expectations: 3.5% v 3.5% prior
- (AU) RBA FX Transactions: A$830M v A$576M
- (KS) South Korea Sept Export Price Index M/M: -1.8% v 0.2% prior; Y/Y: -7.2% v -1.1% prior
- (KS) South Korea Sept Import Price Index M/M: -1.9% v 2.1% prior; Y/Y: -10.8% v -7.0% prior
- (PH) Philippines Aug Overseas Remittances: 2.8% v 9.3% prior; Total: $1.37B v $1.49B prior
- (CH) China Sept FDI Y/Y: +18.9% to $7.9B v +7% in Aug; Sept Actual FDI YTD Y/Y: -14.2% v -14.4%e
- (JP) Japan Aug Final Industrial Production M/M: 1.6% v 1.8% prior; Y/Y: -19.0% v -18.7% prior; Capacity Utilization: 2.31% v 3.9% prior
- (SI) Singapore Aug Retail Sales M/M: 5.2% v 4.3%e; Y/Y: -5.2% v -8.9%e
- Asian equity markets are in the green once again, as risk appetite theme permeating the week's trading was upheld in the US hours on Dow Jones piercing the 10,000 milestone with a triple-digit rally. Leading the regional advance in Tokyo, Nikkei225 is entering the final hour off session highs but still up 1.5% on strength in financials, tech, and consumer names. S&P/ASX is up 0.7%, Taiex is up 0.2%, and the Kospi is up 0.4% - all Asian bourses trading below their best levels on the day but clinging to gains. Ahead of the earnings-rich Thursday session on Wall St., front-month S&Ps are unchanged at 1,087. Traders will tune in to Q3 results from key financials Citi and Goldman pre-open, followed by tech notables IBM and Google afterhours.
- Steady flow of strong economic data and upbeat policymaker sentiment continued from the Asia-Pacific markets. In New Zealand, September Business PMI registered its first expansion since April 2008 at 51.7, while Q3 CPI rose to its highest q/q level since Q3 of 2008 at 1.3%. Over in Australia, RBA Governor Stevens called the end to the period of economic weakness, noting that overall the downturn was fairly mild and the feared economic risks failed to materialize. Going forward, Stevens said policymakers must not delay in withdrawing stimulus, steering future RBA policy to target sustainable expansion. Following these hawkish comments, bond markets have begun pricing in about a 35% chance of a 50bp rate hike at the next RBA rate meeting. Australia's Finance Minister affirmed that optimism in monetary policy, stating that interest rates remain significantly below peak while forecasting a similar withdrawal in accommodation to fiscal conditions.
- Elsewhere in Asia, Chinese Commerce Ministry officials saw signs of recovery both domestically and abroad, citing retail sales gains this year as evidence that stimulus was effective as well as improvement in global demand. Looking ahead, the commerce officials noted China may see positive Y/Y growth in some months in Q4. Chinese FX regulator SAFE warned about the excess liquidity in the system, pointing to the substantial amounts of quantitative easing measures employed by the developed world sparking inflationary trends.
- Bank of Korea's monthly report to Parliament reaffirmed commitment to growth-oriented monetary policy, pledging to keep rates low for some time but also to monitor asset prices. Korean central bank had been rumored to be among the short list of G20 names to follow RBA's tightening suit. BOK Governor Lee saw 2009 GDP in the 0% to -1% range, noting Q4 expansion may be below that of Q3 but still positive on Q/Q basis. South Korea President Lee said the labor market was still in serious condition, with employment challenges persisting for the next several years. Moreover, officials saw the recent growth in mortgage loans pausing on tighter regulation and higher interest rates.
*** EQUITIES ***
- In individual equities, Korea's Posco and LG Display were the notable gainers on the Kospi. The former posted much better than expected top and bottom line Q3 results, calling for further recovery in steel demand through 2010. LG Display, on tap to post results after-hours, announced it would form a $4B venture in China for manufacture of LCD panels. In tech sector notables on the Nikkei, Elpida leaped higher after guiding narrower than expected H1 loss on higher than anticipated sales, and Sony was said to look to cut its LCD TV sales target for FY09/10 to 14M units from 15M units. In analyst actions, Barclays initiated Sanyo at Underweight and raised Pioneed to Equal-weight.
*** CURRENCIES/FIXED INCOME/COMMODITIES ***
- In currencies, the dollar extended its rapid decline across the board. EUR/USD rose to within striking distance of 1.50, GBP/USD reversed its losses above 1.60, and USD/CHF fell to 1.0120. Commodity FX fared even better, with AUD/USD breaking above 0.92 and NZD/USD rising to 0.7480 - fresh 14-month highs. Japanese Yen continued to trade in a narrow 89.00-90.00 range against the greenback, as finance minister Fujii retained his non-commital view on the currency.
- Crude oil prices are higher by more than 0.50% and trading comfortably above $75/bbl. Oil prices continue to receive support from the weaker dollar. Additionally, the unexpected decline in the earlier released US API weekly crude and gasoline inventories has also added upside pressure to oil prices (API PETROLEUM INVENTORIES: CRUDE: -170K V +1ME; GASOLINE: -2.66M V +1ME). Later today, the US Department of Energy will release its weekly inventories data. Spot Gold prices are higher by more than 0.10% and have so far traded in a tight $3 range around $1,065/oz.