Asian Market Update

Daily Forex Fundamentals | Written by Trade The News | Mar 20 09 06:00 GMT |

Investors Shift Out of Financials and into Materials amid USD Weakness as Backlash on Bank Bonuses Reaches Fever Pitch; Asian Bourses Retreat from Highs, while S&P Futures Sink in Extended Correction; EUR, GBP Consolidate Gains The day after the Fed announced a shift in policy to expand its balance sheet, extended pronounced greenback sparked investor flight from the recently outperforming financials to flock to the materials/commodity pastures. During the US session, XLF broke a string of consecutive rallies with an 8% fall, while IYM - the Basic Materials ETF residence of the likes of Newmont and Freeport-McMoRan - jumped 3.6%. A similar dynamic unfolded in Asia, where traders took profits on the gains in financials in favor of the depressed commodity names. In Sydney, BHP and Rio Tinto traded up as much as 5% and Woodside Petroleum was higher by 2.7%, while banking sectors' NAB and MacQuarrie, were lower by 2.4% and 8% respectively. Likewise, Korea's Woori Finance traded down 2.5% and HSBC in Hong Kong pared its initial 3% rally to trade around unchanged levels, whereas Korea's steelmaker Posco outperformed. Broader indices in Asia were weaker across the board from the initial strong open, with S&P/ASX falling 0.4%, Hang Seng down 1.6%, and Kospi trading off session highs at +0.8%. Japan's indices were closed due to a national holiday. Front-month S&P futures approached the last trading session of the week on the down side, falling by nearly a full percentage point. Economic data was light over the Asian hours, however a spattering of statements from European officials crossed the wires earlier. EU's Barroso noted the EU had sufficient resources to help struggling economies, calling for G20 round to oppose protectionism. In the UK, BOE Chief Economist Dale expressed optimism by noting that the UK is a long way through the recession, with much of contraction to have taken place by the end of the first half of 2009. In currencies, European majors extended their gains against the greenback earlier in US hours, but mainly flatlined through the Asian session amid TOkyo holiday-thinned markets. EUR/USD was contained by 1.3680, while GBP/USD staged an over-150pip correction from intra-day high around 1.46. The Swissy has remained firm across the board, but struggled with the 1.12 USD/CHF support for much of the session after a brief test earlier. Commodity currencies - infused with dollar weakness-driven strength in the commodity sector - outperformed notably. AUD/USD and NZD/USD are targeting 0.69 and 0.56, while CAD is lagging in the commodity FX sector ahead of tomorrow's retail sales data as USD/CAD broke back above 1.24 handle. Japanese Yen received a boost on the broad dollar weakness, with USD/JPY contained below 95.00 and EUR/JPY unable to retest 130 level. Crude oil prices are lower, after rising by more than 7% in NY trading. During the NY session, the NYMEX front-month crude contract rose above $50/bbl for the first time since Jan 6, as the Fed's decision to buy bonds has been supportive for commodities prices at the expense of the dollar. In terms of oil supplies, Tanker Tracker disclosed that in the 4 weeks to April 4, OPEC's exports are seen at -770K bpd vs. the prior survey of -350K bpd. Overall, oil prices are on track to rise for the 5th consecutive week, as the April NYMEX crude contract expires on Friday's session. Spot Gold is lower, after gaining sharply during the NY session. Gold, like oil, has benefited from the recent measures announced by the Fed. The SPDR Gold Trust ETF once again increased its holdings of gold to a new record of 1,103 tons by buying approximately 19 tons on March 19. This is the 4 time during the week that the ETF has increased its holdings of gold. Gold is currently set to close the week higher, for the first time in 1 month. 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. Information can be mistakenly re-released or be delayed, 3. Information may be incorrect, misread, misinterpreted or misunderstood 4. Human error is a business risk you are willing to assume 5. Technology can crash or be interrupted without notice 6. 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