Asian Market Update

Daily Forex Fundamentals | Written by Trade The News | Apr 20 09 06:08 GMT |

Asian Bourses Pare Early Weakness, Return toward Unchanged Levels in Quiet Session ; Australia Q1 PPI Unexpectedly Contracts to Multi-Year Lows; EUR Extends Slide Below 1.30 as ECB's Trichet Grows More Cautious; Gold ETF Holding Contract for 2nd Session Asian equity markets appear to be tracking the absence of any meaningful directional bias exhibited in final day of trading in the US last week, where earnings season is set to shift into higher gear on Monday with the last large Financial in BAC and the next blue-chip tech in IBM. In Tokyo, the Nikkei had entered mid-day break down about 0.9% at session lows before recovering toward unchanged levels as trading entered the final hour. Korea's Kospi and Australia's S&P/ASX traded comparably, falling by just over 1% in opening hours before paring those losses to decline just over 0.5% ahead of close. The absence of substantially meaningful macro theme is also translating into diminished volatility. Light economic calendar saw data limited to Australia's Q1 PPI which came in at -0.4% Q/Q v +0.6% expected, surprisingly registering the first negative print for the first time since Q2 of 2003. This could potentially cement the case for a further RBA cut in early May, particularly if subsequent CPI figure to be released on Wednesday (Tuesday 9:30pmET) confirms hints of disinflationary trends. Statements from a handful of notable speakers in today's session and earlier over the weekend also painted a mixed picture with varied assessment of current conditions and prospects for economic recovery. IMF's Managing Director Strauss-Kahn, interviewed by Handelsblatt, signaled a continued bearish stance, planning to restate his outlook for 2009 global growth to the downside beyond -0.5% to -1.0% in the coming week. ECB's Trichet, in characteristically opaque address, suggested that 'measured' additional rate cuts were still possible even though a zero interest rate policy was out of the question. MOre notably, Trichet confirmed May 7th as decision date to implement and subsequently explain the governing board's plan on use of 'non-standard' easing steps, warning against 'over-interpreting' of other members' comments. ECB member Bini Smaghi's stance was more hawkish as he warned against overemphasizing the threat of deflation in policy decision, urging clearly expressed exit strategy for central bank's innovative measures. Statements coming out of Asia's Boau Forum this weekend are also mixed as markets grapple with last week's poor Q1 GDP from China against some tentative evidence of a bottoming process in the region. Vice Head of Policy Research Zheng thinks the economy has hit bottom in Q1 and target 7.0% growth in Q2, but does suggest that achieving 8% 2009 target would be difficult. Likewise, PM Wen sees the results of implemented stimulus response as better than expected amid stabilizing industrial production. However, PBOC's Zhou sees China economy still struggling on impact of global crisis and shattered export demand, looking for continued policy adjustment to reflect the weak environment. In notable company developments, Japanese press speculated on a number of corporate earnings and equity offering with a predominantly poor outlook. Toshiba was one of the bigger names in play as it was rumored to plan a capital raise of ¥500B, sending its shares down 6% despite denial of the rumor by company spokesman. In Tokyo Financials, Sumitomo Trust fell 4% on media speculation of lowered FY net forecast by over 80%, while in Materials, Marubeni and Nippon Steel were also forecasted to post lower than expected Net income figures. Additionally, Nikkei speculated on TDK and Mitsui OSK falling short of FY09 and FY10 net respectively on tech and materials sector slump. In notable gainers, Fuji Electric picked up 4% on speculation the company would develop power components for hybrid cars, improving their mileage per hour by as much as 10%. In Sydney, Fortescue Metals was sharply higher on speculation of investment talks with China's sovereign wealth funds for the company's widely coveted Pilbara iron ore mine. However, other materials names traded weaker, with OneSteel reopening well to the downside following a A$559M equity raise and Rio Tinto falling on reiterated non-communication with BHP and denial of 'Plan B' equity offer in the event of failed Chinalco deal. In currencies, the dollar and JPY are notably stronger despite the absence of greater conviction by equity sellers. EUR/USD fell below 1.30 for the first time since March 18th, GBP/USD was at lowest level in a week just above 1.47, and USD/CHF extended its rally above 1.17 - also highest level since pre-Fed quantitative easing. USD/JPY fell as low as 98.60s, while EUR/JPY saw its lowest level in April, bottoming around 128.20. In commodity FX, USD strength vs AUD was magnified after poor Q1 PPI from Australia, as the pair reached its lowest on session level around 0.7150. USD/CAD saw its best levels around 1.2180, technically pivotal resistance seen early last week. Crude oil has moved below $50/bbl and is lower by more than 1% on today's session. The losses in oil prices are coming as US equities futures are trading lower. With respect to crude oil options, the May crude contract expires tomorrow. At the time of writing, spot gold prices are little changed, despite the declines in equities. In terms of investment flows, the SPDR Gold Trust ETF announced that as of April 17 its holdings declined by 13.5 tons and this was the second consecutive daily decline reported in the ETF's gold holdings. In other metals news, some dealers are noting that Silver broke below its 200-day moving average, which was seen around $12.30/oz, and this could imply further weakness for the metal. 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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