Asian Market Update

Daily Forex Fundamentals | Written by Trade The News | Jun 04 09 06:40 GMT |

Australia Prints First Trade Deficit in 9 Months as Officials Continue to Downplay GDP Surprise; Asian Markets Track US Risk Aversion Lower; Euro, Sterling Consolidate ahead of Central Bank Decisions Asian equities are trading weaker across the board entering the final hour of the session as caution from Fed Chairman Bernanke and continued malaise in US employment seeped into Far East investor sentiment. Nikkei225 was off by 0.5% just below 9,700, with downside also driven by poor Q1 capital spending data. In Sydney, S&P/ASX fell over 2% on surprising decline in Australia's Terms of Trade and general weakness in commodities amid broad dollar bounce higher. Hong Kong's Hang Seng led the regional decliners with a 2.4% slide, as China's markets were seen particularly impacted by the shock of uncertain demand conditions evidenced by Aussie trade data. Meanwhile, Korea Kospi also continued to underperform, shedding 2% on the session with Financials leading the slide after prior session's equity offering rumors from the sector. Australia's April Trade Balance was the key economic event in the session as terms of trade unexpectedly fell by A$91M against estimates of a surplus of A$1.7B - the first deficit since July of 2008. Notably, the decline was an indictment of external demand as exports fell 11% m/m while imports contracted 2%. Sobering economic data from Australia was also supplemented by officials continuing to downplay prior session's better than expected Q1 GDP. Finance Minister Tanner noted the economy was still in a serious downturn and further negative quarters of GDP were still possible, suggesting the threat of recession still hung above domestic economy as it struggled with downward pressure from labor market. Treasurer Swan saw business investment drying up while also warning about a future with lower trend growth than the economy has recently experienced. RBA Governor Stevens was also hardly hawkish, offering additional scope for further policy easing if warranted by deteriorating conditions. Specifically, Stevens cautioned about tight household credit lending and rising unemployment weighing on consumption, forecasting downbeat prospects for the 2nd quarter. On the upside, Stevens did reflect on improving residential investment and reawakened activity in mining picking up on deferred projects. In Aussie share-specific developments, Rio Tinto officials were rumored to be in talks with Chinalco Chairman visiting Australia for possible revision of the deal ahead of the May 15th decision deadline. In Tokyo, auto sector news directed attention toward fuel efficiency with both Mitsubishi and Fuji Heavy announcing plans to showcase a plug-in electric vehicle in coming weeks. Meanwhile, hybrids remained at the top of the best-seller list as new model of Prius replaced Honda's insight as Japan's most widely purchased car in May. In other corporate developments in Tokyo, Japanese press speculated that Nippon Steel earnings may reach a bottom in the current quarter, outperforming broader market going forward. Japan's Q1 Capital expenditure figures registered the worst y/y decline on record at -25.3% but did beat estimates of -30.0% expected. Bank of Japan's Shirakawa urged fiscal discipline to contain the rise in yields, warning that central bank's buying of debt is not intended to monetize fiscal debt. In other notable news from the Asia, Fitch was somewhat downbeat on the overall region, suggesting that growth is still dependent on demand for China's exports and "desperately" requires revived US and EU consumer markets. In South Korea, the Finance Ministry provided an outlook on department store sales and current account for May, forecasting the former rising 5.4% v 2.8% prior and Current Account above $4B v prior $4.28B. In currencies, the greenback consolidated gains made over the course of US session, briefly testing the upside of 1.42 against EUR and bouncing from 1.62 handle against Sterling. Commodity currencies were also firmer late in the session as AUD recovered above 0.80 and USD/CAD declined below 1.11 toward session lows of 1.1075. Japanese Yen was slightly weaker in line with more muted risk aversion, falling to 136.50 against EUR and 96.30's against USD - close to intra-day USD/JPY high in US hours. Commodity rebound was slightly more elusive, with crude remaining just above $66 and gold failing to recoup $970 handle. 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. 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