Asian Market Update

Daily Forex Fundamentals | Written by Trade The News | May 08 09 06:50 GMT |

US Banking Stress Tests Quantify Capital Needs but Hardly Pack Sufficient Punch to Live up to Name; Toyota Shares Fall on Profit Speculation by Press; RBA, Treasury Downgrade Australia's GDP Forecasts; USD Majors Drift Pre-NFP Asian equity markets have shrugged the weakness in US indices on Thursday after the widely dreaded stress-tests for US financials proved to be far more innocuous than initially feared. Nikkei225 finished a stellar week with a gaining session of 0.5%, S&P/ASX traded up 0.1%, and Kospi rallied 0.8%. Front-month S&P futures spent much of the latter part of Asian trading at session highs, up 0.8%. Much of the findings proved to be confirmation of the known developments as 10 of the 19 banks were said to require additional capital in aggregate of $74.6B. Bank of America required the biggest chunk of that sum at $33.9B, pledging to initiate a common equity raise of about $17B made up of ATM offering commencing on Friday with $1.5B and also conversion of non-govt preferred into common equity. Most notably, BAC conference call revealed a healthy Tier 1 capital ratio, with equity request stemming from shoring up the low common value. Additionally, BAC suggested the Fed scenario assumed greater deterioration of economic conditions than previously experienced and was out of line with trends of recovery. Other banks told by the Treasury to raise capital included Citigroup, Fifth Third Bancorp, GMAC, KeyCorp, Morgan Stanley, PNC, Regions Financial, SunTrust and Wells Fargo. Citigroup was instructed to raise $5.5B, below the $10B speculated. The company planned to expand public exchange offers by $5.5B to $33B and much like BAC, rejected the notion of requiring additional bailout funds. Shares of both traded much firmer on the heels of the stress test findings, as the banks will have until June 8 to come up with a plan to raise the needed equity. Asian economic calendar was limited to central bank quarterly monetary policy statement from Australia. RBA cut its Q2 GDP estimate to contraction from +0.25% to -1.25% while targeting 2009 GDP at -1% and 2010 GDP at +2%. Annual core inflation was raised slightly to 3.25%, but subsequent year's pricing pressure was downgraded through 2011 on forecast of a more gradual and protracted price slowdown. Furthermore, RBA forecasted return in rising unemployment, but did anticipate a more gradual approach to monetary easing amid signs of stabilization in global slowdown with existing monetary and fiscal stimulus supporting domestic demand going forward. Australia's Treasurer Swan echoed RBA's sentiment, noting the upcoming budget plans would see a lower economic growth forecast. In notable Nikkei names, Toyota traded over 2% lower going into midday break after Japanese Press speculated the company may miss its FY09 operating target, forecastig a ¥500B loss vs a loss of ¥464B expected. Subsequently, Toyota's actual Operating loss actually fell beyond those estimates by ¥682.5B, as auto sector malaise bemoaned in controversial US industry bailout was evident in the global production leader. In tech, Konica Minolta cheered an upgrade to buy from Nomura with a 7% rally, while Sharp contracted 2% after S&P revised the outlook on the firm to negative. In financials, the sector leading this week's Nikkei advance to 6-month highs and once again outperforing other sectors, Mitsubishi Corp was one of the laggards after missing FY09 Net profit estimate of ¥401.2B with a ¥15.2B result while also missing the top line forecast of ¥23.09Te with ¥22.4T figure. Asian industrials saw earnings updates from Japan's Fuji Heavy and Korea's Doosan. Fuji Heavy beat on the top line, but missed slightly on net profit and cut is operating profit view for current year well below estimates, falling 6.5%. Korea's Doosan traded off by as much as 3% after missing Q1 net profit estimates of KRW28.6Be with a KRW179B loss. In Sydney, telecom Telstra reaffirmed FY09 guidance of 3.4% sales growth and traded slightly higher after announcing resignation of its CEO. Miners Rio Tinto and BHP fell 1-2% on consolidation in metal prices coupled with risk caution seen over the US session. In currencies, USD moved lower late in the session as Asian equities cautiously moved to their best levels on the day. EUR/USD recovered 1.34 handle while GBP/USD moved above 1.50 after falling broadly in the aftermath of expanded BOE quantitative easing. In commodity FX, AUD consolidated gains after backtracking from 0.76 intraday high, and CAD advanced below 1.17 against USD as front-month crude contract moved back above $57. Japanese Yen traded in narrow range against the greenback, but was sold more firmly against EUR as EUR/JPY moved to session high above 133 in late trading. 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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