Asian Market Update

Daily Forex Fundamentals | Written by Trade The News | Aug 29 08 04:21 GMT |

Oil rises, USD falls on reports that Russia will cut off oil flow to West

Oil prices moved higher after The Telegraph newspaper reported that Russia may cut off oil flow to Western Europe over the coming days, in response to the threat of E.U. sanctions and NATO naval actions in the Black Sea. 'Reports have begun to circulate in Moscow that Russian oil companies are under orders from the Kremlin to prepare for a supply cut to Germany and Poland through the Druzhba (Friendship) pipeline,' wrote Ambrose Evans-Pritchard. 'It is believed that executives from lead-producer LUKoil have been put on weekend alert.' In a related development, the Wall Street Journal reports that the U.S. is considering an end to talks with Russia on nuclear arms curbs. Nymex crude oil gained +1.15% between 18:00 EDT and 0:14 EDT, last trading at $116.93/bbl.

Forex: U.S. stocks have had a decent week, and the bears are trying their best to put a negative spin on Thursday's U.S. GDP data. Equity bears will also try and undermine the credibility of this week's price action, pointing out that volume on the NYSE failed to break one billion shares for the ninth straight session. Admittedly, it is very hard to judge the credibility of the move in these thin conditions, but it's worth pointing out that risky currencies have failed to make progress despite triple digit gains in U.S. stocks. The USD was sold for the third consecutive Asian session, with several analysts suggesting the currency looks overstretched.

South Korea's current account deficit at a 6mnth high: (KS JULY CURRENT ACCOUNT: -$2.45B V $1.82B prior; GOODS BALANCE: $301M V $3.48B prior) The dramatic deterioration of South Korea's current account has been widely expected, and continues to weigh on the KRW. In July, the Bank of Korea tripled the country's current account deficit forecast for this year to $9.0B from their previous forecast of $3.0B. The KRW fell after the report, on track for its biggest monthly decline since August 1998, and some analysts expect more bad news for the currency over coming months. 'We may see another deficit in August as it takes about one month for the recent drop in oil prices to be reflected in import costs,' said Go You Sun at Daewoo Securities. 'The outlook depends largely on exports, especially to China, our biggest market.'

Japanese inflation continues to rise: (JP JULY NATIONAL CPI YOY: 2.3% V 2.2% expected, 2.0% prior; CORE: 2.4% V 2.3% expected, 1.9% prior) The rise in core inflation matches a figure set in October 1997, and is the highest since a 2.5% rise in June 1992. The data marks the 10th straight month of increase for the core consumer price index.

Japan's manufacturing PMI drops for 6th consecutive month: (JP AUG NOMURA/JMMA MANUFACTURING PMI: 46.9 V 46.0 expected, 47 prior (a reading below 50 denotes contraction); Input price component 78.4 v 78.5 prior) 'Operating conditions within the Japanese manufacturing sector continued to deteriorate during the month, amid fears of a global economic slowdown,' said Alex Hamilton, an economist at Markit.

Japanese exports to Asia support industrial production during July: (JP JULY PRELIMINARY INDUSTRIAL PRODUCTION MOM: 0.9% V -0.3% expected, -2.2% prior; YOY: 2.0% V 0.6% expected, 0.0% prior) Analysts said that the industrial production data may not be strong enough to alleviate concern that the U.S. slowdown is spreading around the world, threatening Japan's economic growth.

Japan's unemployment rate unexpectedly falls in July: (JP JULY JOBLESS RATE: 4.0% V 4.1% expected, 4.1% prior; JOBS-TO-APPLICANT RATIO: 0.89 V 0.90 expected, 0.91 prior)

Japan's household spending falls for a fifth consecutive month: (JP JULY HOUSEHOLD SPENDING YOY: -0.5% V -1.8% expected, -1.8% prior)

Japanese retail sales increase in July, helped by increased spending on fuel and food: (JP JULY RETAIL TRADE YOY: 1.9% V 1.3% expected, 0.3% prior; MOM: 0.0% V -0.1% expected, 0.0% prior)

New Zealand building permits rebound in July: (NZ JULY BUILDING PERMITS MOM: 4.7% V -20.1% prior) Analysts said that low levels of building approvals suggest residential construction is contracting.

Recent rate hikes, combined with a slowing economy, hurt new home sales in Australia: (AU JULY HIA NEW HOME SALES MOM: -7.2% V 0.5% prior) Housing Industry Association (HIA) said in a statement that declining residential construction activity highlighted the 'absolute need' for the Reserve Bank of Australia to lower interest rates. 'Budgeted sales levels are well down on expectations and that runs the clear risk of the next step being a shedding of labor in the industry,' said the organization.

Private sector credit expands in Australia: (AU JULY PRIVATE SECTOR CREDIT MOM: 0.5% V 0.5% expected, 0.4% prior; YOY: 11.2% V 11.0% expected, 11.8% prior) Business credit rose 0.7% in the month, and increased 15.0% over the year.

Equities: At 0:12 EDT Japan's Nikkei is +1.84%, the S&P/ASX200 is +1.36%, South Korea's KOSPI is +0.07%, Hong Kong's Hang Seng index is +1.92%, and the Shanghai composite index is +1.18%. The S&P500 futures index lost -0.24% since the U.S. close, last trading at 1,295. Asian stocks tracked Wall Street's gains, with the upward revision to U.S. Q2 GDP emboldening bargain hunters. Exporters and financials added to most of the upside in Tokyo, while banks also traded higher in Sydney. South Korean stocks failed to maintain early gains, while steelmakers and best of breed financials traded higher in Shanghai.

Trade The News Staff
Trade The News, Inc.

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