Reports » Asia

By Trade The News

- Despite the last-hour bounce in the US that saw indices turn in a positive close, Asian equities maintained a slightly more bearish tone amid further concerns of fiscal strains in Europe sinking emerging market demand. With just about 2 hours to go in Tokyo trading, Nikkei225 is the only gainer at +0.5% after rising by over 1% in the first hour. Taiwan and ASX200 are down about 0.1%, while Shanghai and Korea indices are off by over 0.5%. With a fresh set of US housing data on tap on Tuesday, front-month S&Ps are also down about 0.1% at 1,133 after initial rally to 1,138.

SPEAKERS/PRESS
- AUSTRALIA: Meeting minutes for the most recent RBA tightening decision were decidedly bearish in that not only did they confirm a hold for some time going forward but also suggested that policymakers may be less comfortable with that policy decision. Back on May 4th, the board judged that the limited contagion of European fiscal crisis on Asia merits addressing the mounting inflationary pressures. However the minutes suggested that policymakers now expect some time to pass before EU concerns are resolved, with the impact on Australia potentially being somewhat more pronounced. Hence, the RBA said policy is at appropriate levels, with early indications of higher rates impacting behavior through subdued retail sales and declining mortgage loan activity. To make matters worse, housing affordability index fell to its lowest level in 18 months, and Moody's flipped its position on the mining tax to one of greater impact, suggesting profit may be reduced by as much as 33% when the provision comes into effect in 2012.

- CHINA: Local press pointed to further signs of impact from govt policy of property price containment, stating that Shanghai sales of new homes fell 16% last week - the lowest level since 2005. Separately, China Securities Journal cited the Administration of Taxation official actually loosening the reins, suggesting that local govts may not reinterpret the scope of existing property taxes amid expectations of property levy shifting from commercial to residential realestate. Assets Supervision and Administration Commission warned the State Council could still "fine-tune" monetary and real estate policies, while the govt's economic planning body NDRC reaffirmed FY10 CPI target around 3%.

- JAPAN: Finance Minister Kan tried to calm the markets, noting that equities and Yen volatility would subside as understanding of EU cooperation on crisis measures spreads. Kan also said economic data points to continued recovery in Japan, just as March Tertiary industry index fell to a 1-yr low. On the fiscal front, Kan noted that despite the high levels of debt, Japan does not need austerity steps at this time, and may actually benefit from higher spending to stimulate the economy.

- EUROPE: With a day to go to Greek refinancing deadline, EU finance ministers ironed out the first tranche of loans in the amount of ?20B to be disbursed later today. Juncker further noted that Greek measures have placed the country on the right track to meeting its obligations and also cheered austerity steps in Spain and Portugal. EU's Rehn acknowledged that fiscal consolidation will likely take different shape in troubled states, which could potentially slow the overall recovery. In Germany, Fin Min Schaeuble saw progress on agreement regarding the EU special purpose bailout mechanism, suggesting that France and Germany were on the same page.

EQUITIES
- In individual names in Japan, local press speculated Mitsubishi UFJ could report a FY09/10 Net profit of ?370B, above ?299B consensus estimate. Also on the Nikkei, Sony was reported to target a 10% sales growth in Europe and Sharp was said to double LCD TV stores in China to about 10K during 2010.

- In Sydney, MacArthur fell sharply after rejecting a bid from Peabody energy which had been lowered to A$15/shr from A$16/shr to reflect the impact of the mining tax. AXA.AU warned it could terminate its merger plans with NAB if no agreement is reached by the end of the month and consider the AMP offer.

CURRENCIES/FIXED INCOME/COMMODITIES
- In currencies, the dollar traded higher against the European and commodity majors, with risk appetite from the early session failing to take hold. EUR/USD and GBP/USD fell about 80 pips to 1.2320 and 1.4420 session lows, while AUD was damaged by the RBA minutes, falling to 0.8710 vs USD and 1.2520 vs NZD. Japanese Yen was also slightly firmer, tracking modest risk aversion as USD/JPY fell below 92.40.

- In commodities, front-month crude consolidated US session decline with a brief rally to $70.80 before retreating to $70.50. Spot gold also came off its best level during the US session rally before rising once again amid the Asia selloff, gaining about $4 to $1,226. SPDR Gold Trust ETF daily holdings rose for the 3rd time in 5 sessions, hitting fresh record high of 1,217 metric tons.

ECONOMIC DATA
- (KS) South Korea APR Department Store Sales y/y: 8.8% v 4.6% prior; Discount Store Sales y/y: 0.3% v 1.6% prior
- (NZ) NEW ZEALAND Q1 PRODUCER PRICES-INPUTS Q/Q: 1.3% V 0.4% PRIOR; OUTPUTS Q/Q: 1.8% V -0.1% PRIOR (highest since Q3 of 2008 in both measures)
- (JP) JAPAN MAR TERTIARY INDUSTRY INDEX M/M: -3.0% V -1.5%E (1-yr low)
- (AU) Australia Q1 CBAHIA House Affordability: 118.8 v 123.8 prior (lowest since Q3 of 2008)
- (JP) JAPAN APR CONSUMER CONFIDENCE: 42.1 V 41.0 PRIOR; CONSUMER CONFIDENCE HOUSEHOLDS: 42.0 V 42E (highest since Oct 2007 for both measures)