Asian Market Update

Daily Forex Fundamentals | Written by Trade The News | Oct 22 08 06:55 GMT |

The GBP and Nikkei declines lead carry trades sharply lower Historic levels of volatility put in by equity markets last week do not appear to be abating any time soon with major US indices storming back to session opening levels only to sell-off sharply once again in the last hour of trading. Dow Industrials ended the session down 2.5%, S&P shed 3% and Nasdaq dropped over 4%, reversing extreme investor appetite on display yesterday. Earnings reports from widely-followed Yahoo and Apple highlighted after-hours trading where buyers seemed to pay closer attention to current quarter performance than near-term outlook. Yahoo met expectations of $0.09 per share but lowered forecasts going forward due to deteriorating growth trends seen in Europe and Asia while also announcing cost cutting measures via a sharp 10% reduction of its staff. YHOO was up 5% in after-hours trading at $12.70 after a 6% decline in regular market hours. Apple has handily beat expectations of $1.11 per share with $1.26 result in Q4, but guided Q1 at $1.06-1.35, significantly below former estimates of $1.65. Nonetheless, traders cheered rising iPhone shipment results that were referred to as a 'blowout' by company CFO, sending AAPL up 13% post earnings. Among other large cap notables, BRCM was up 8% on soaring profit while NSC gained over 5% on notable resiliency in raw materials transportation. In Tokyo, investors continued tracking US trading with Nikkei accelerating its losses after the mid-session break declining by over 5%. Mitsubishi was sharply down on reports of severe decline in earnings, while Sony was heavily sold on currency impact of a rising dollar with substantial portion of company sales found in European markets. In Seoul, Finance Minister Kang continued to call present conditions 'more severe' than those seen during 1997 crisis. Korea's central bank has announced measures to reignite business investment by raising the ceiling on special loans for smaller companies for the first time since 2001, however the Kospi is tracking regional weakness giving up just under 3%. Australia reported the session's most notable economic data, with Q3 CPI beaning consensus estimates. Quarterly figure was seen at 1.2% and yearly at 5.0%, prompting banking official forecast of Q3 inflation representing the peak in price pressure. Subsequently, Treasury Secretary Gruen stated that 2009 rate of growth in the economy was seen 'starting with 2'. S&P/ASX was off by over 3% in mid-session trading, giving up 130 points. In currencies, the US Dollar has clearly accelerated its gains vs the majors across the Atlantic as foreign exchange flows continue to favor safe-haven status of US treasuries. The yields on 2yr and 10yr notes dropped by a comparable full decimal point to 1.60% and 3.73% respectively. Meanwhile, after finding initial support at psychologically key $1.30 handle, EUR/USD has taken $1.20's territory for the first time since early 2007 by storm, falling below $1.28 with little technical support seen before $1.2430 level following a test of $1.2850 minor support. British Pound decline against the greenback was relatively sharper as indicated by renewed strength in EUR/GBP, helping GBP/USD to a decline of more than four big figures since the start of the Asian session to multi-year low just under $1.65. Sterling is now trading at lows not seen since 2003 with market sentiment further dimmed by BOE Governor Mervyn King, who confirmed the likelihood of a full-blown UK recession. Swiss franc is also at 2008 lows against USD, piercing technically significant former USD/CHF support turned resistance figure of 1.16. Japanese Yen is still the only major currency outshining the greenback, testing ¥100 figure against USD while falling below ¥130 vs EUR - 2004 low - and ¥165.50 vs GBP - lows not seen since late 2000. Among commodity driven FX, AUD was briefly supported after the better than expected CPI data, rallying above A$0.68, but has since fallen back on overall dollar strength. CAD remains weak on sharp declines in crude prices as it tests 1.22 session high in USD/CAD. EM Asian currencies are once again seeing heavy selling pressure with USD/SGD rising to 2008 highs above 1.4940 and USD/KRW finding fresh weekly high above 1,360. Much attention will be given to New Zealand dollar in coming hours, as RBNZ prepares for a projected 100bp rate cut and has since signalled a press conference following the rate announcement. Commodities: Crude oil prices are declining by more than 3.25% and trading below $70.00/bbl. Oil prices are tracking the declines in Asian equities and the stronger USD. Overall, crude is lower for the first time in 4 sessions as markets await this week's expected emergency output cut by OPEC. Spot Gold is lower by more than 0.50%, but currently outperforming oil prices. The stronger dollar is weighing on gold prices on the session. In other metals trading, Shanghai copper and zinc are both lower by their respective daily limits. Additionally, the LME copper contract is sharply lower Trade The News Staff Trade The News, Inc. Legal disclaimer and risk disclosure All information provided by Trade The News (a product of Trade The News, Inc. "referred to as TTN hereafter") is for informational purposes only. Information provided is not meant as investment advice nor is it a recommendation to Buy or Sell securities. Although information is taken from sources deemed reliable, no guarantees or assurances can be made to the accuracy of any information provided. 1. Information can be inaccurate and/or incomplete 2. 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