Asian Market Update

Daily Forex Fundamentals | Written by Trade The News | May 15 09 06:34 GMT |

Japan Machine Orders Recover, but Government Officials Remain Cautious; Rio Tinto Recovers on Bilateral Confirmation of Commitment to Chinalco Deal; New Zealand Retail Sales Take a Tumble as IMF Urges More RBNZ Easing Asian equity markets are tracking Wall St. recovery in the wake of the retail sales selloff the day before, while also cheering improving fundamentals at home. In Tokyo, Nikkei225 entered the final hour trading around session highs just below the 9,260 level, up 1.6%. Earlier, Japan reported machine orders for the month of March beating consensus estimates of -4.6% at -0.4%. On a yearly basis, -22.2% March figure vs estimates of -27.1% was also the highest level for machine order activity since October. In second-tier Japan data, corporate goods price index for April was below estimates of +0.2% at -0.4%, while Y/Y figure came in at a multi-year record low of -3.8% - also missing forecasted -3.0% - in a reminder of the feeble state of consumer inflation. In the prior session, Japan's media speculated that the government would consider raising its economic assessment in May for the first time in over 3 years, however Finance Minister Yosano negated those rumors, suggesting that domestic economy is not on a path of recovery just yet but merely showing signs of a slower decline. In corporate developments, financials and consumer/tech led the broader Nikkei index, with the former awaiting earnings afterhours and the latter responding to better than expected results in the prior session. Sony, Sanyo, and Tokyo Electron were all up 6% and Konica was up 8% at midday break on narrower loss expectations in the current year, as traders reacted to overstated expectations of demand slump. In financials, Mizuho is reportedly considering an equity raise composed of ¥600B in common stock and approximately ¥200B of preferred securities - about 31% of the company's market cap. In Sydney, S&P/ASX traded off session highs but was still up over 1.3% just ahead of close. Miners Rio Tinto and BHP drove the gainers with the former rising 8% on stated joint commitment to Chinalco deal from both sides. Rio Tinto management, who in contrast to shareholder base is seeking to finalize the tie-up, noted there was little reason for recent decline as the company remained committed to the deal. Similar sentiment was subsequently heard from Chinalco VP, who was said to be looking forward to getting the deal passed through regulatory bodies. On a related note, BHP was rumored to help Rio finance its rights offering if it chose not to proceed on Chinalco tie-up. In other Aussie names, Santos continued trading higher in the wake of the A$1.75B institutional share sale, along with US session strength in crude prices. RBA Corbett suggested that domestic economy should be allowed to enter a recession, with excessive stimulus leading to steep global inflation down the line. New Zealand retail sales fell unexpectedly in March, declining 0.4% on headline basis but rising 0.5% minus autos. Q1 ex-inflation retail sales fell 2.9%, the worst decline on record since at least 1995. Earlier, IMF suggested that while the announced stimulus would cushion the economy, additional monetary policy easing below the current 2.5% rate may be warranted. Additionally, PM Key suggested that further RBNZ reductions were possible even as initial "green shoots" in the economy were visible. Elsewhere in Asia, Hong Kong's Chief Executive Tsang implied that the govt may soon downgrade its 2009 GDP forecast. In contrast, South Korea's Finance Minister Yoon said the economy was unlikely to suffer another quarterly contraction, having skirted a recession with a positive Q1 figure after a 5.1% drop in Q4 GDP. In currencies, US dollar drifted before rallying on the heels of a worse than expected GDP from Germany. EUR/USD fell below 1.36 and USD/CHF rose toward 1.1080. Late session risk aversion also lifted Japanese Yen, with USD/JPY falling below 95.60 after trading around 96.20 at best session levels. In commodity FX, NZD was hurt by poor retail sales data, trading down to 0.59 from intraday highs of 0.5985, while AUD/USD traded in a narrower range of 0.7580-0.76, and USD/CAD rose to session highs above 1.1720. Crude oil prices are little changed at the time of writing, after rising by more than 0.50% during the NY session, inline with the increase in US equities. In terms of fundamentals, the IEA, in it its monthly report, lowered its oil demand forecast for the 9th consecutive month, after OPEC did the same thing in its monthly report which was released on 5/13 . The IEA added that in April, global oil supplies rose by 230K bpd and OPEC crude supplies increased by 270K bpd. Spot Gold is little changed and has been range bound ahead of tomorrow's release of US April CPI and March net long-term TIC flow data. Overall gold prices are on track for their second consecutive weekly gain. 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. Trading decisions are the responsibility of traders, not those providing additional information. Trade The News is not liable (financial and/or non-financial) for any losses that may arise from any information provided by TTN. Trading securities involves a high degree of risk, and financial losses can and do occur on a regular basis and are part of the risk of trading and investing.