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Asian stock market, economy and companies update (May 19, 2010)

Contributed by Trade The News

By Trade The News

- Asian equity markets tracked the renewed risk aversion that resurfaced in the latter half of the US session, sinking the Dow by over 1% and S&P500/Nasdaq by about 1.5% on disconcerting news of Germany banning naked short selling of govt debt and shares of financials. Nikkei225 fell to 3-month lows of 10,050 - a near 2% drop before recovering to a -1% decline entering the final hour. S&P/ASX and Kospi markets remained depressed around the lows made in the opening hour, falling 1.5%, while Taiwan's Taiex was down 0.6%. Respite in govt action on property sector and some bargain-hunting supported Shanghai Composite to a +0.3% gain. Ahead of the US Wednesday session and the release of CPI data - on the heels of a negative PPI print overnight - front-month S&Ps are down 0.7% around 1,112 after falling as far as 1,106.

SPEAKERS/PRESS

- NEW ZEALAND/AUSTRALIA: Asia Pacific was in focus on the session's economic calendar. New Zealand Central Bank Stability Report got the ball rolling, calling for lower NZD levels as well as raising the possibility of fiscal consolidation to meet the threat of higher cost of debt. Kiwi Dollar sold off sharply on the report, while the Credit Suisse OIS expectations for a June tightening fell about 8 points to 62%. Additionally, RBNZ stated that the outlook for financial system is improving but conditions remain fragile. On the upside, RBNZ said the forward indicators suggest that non-performing loans for the banking sector may be close to a plateau, with the outlook for bank profits improving. With the annual budget report from New Zealand on tap for tomorrow's session, Finance Minister English said the spending plan will mind the expenses, as tax changes encourage higher saving and investment levels. In Australia, RBA Assistant Gov Lowe noted the overall profitability of banks is not likely to be impacted by the decline in net interest margins in recent years. Aussie economic data cast a darker scenario just a day after a hawkish set of comments from the RBA meeting minutes, as consumer confidence and skilled vacancy figures registered multi-month low prints.

- CHINA/TAIWAN: China Ministry of Commerce researcher Huo Jianguo commented on the nation's exposure to the European fiscal crisis, suggesting export growth to EU may slow 6-7 points. On a related trade note, Commerce Secretary Locke called for lower trade deficit for the US with China ahead of next week's visit to the country. Treasury Secretary Geithner also said China should "level the playing field" for US companies by reducing subsidies for domestic interests as well as consider currency revaluation to "demonstrate it can act in its own interests". Ahead of tomorrow's release of Q1 GDP in Taiwan, Pres Ma said Q1 growth would be above 10%, with current estimates seen around 11%.

EQUITIES
- In individual names on the Nikkei, Japanese press reported Mitsubishi Motor may expand its export to China. In materials, press report said JFE Steel has called for a q/q increases of 10-20% ($100-150/ton) on steel price exports for Jul-Sept quarter. In tech, Hitachi, Toshiba, and Olympus were named among the companies working to commercialize a chip-production system that would reduce costs by up to 99% in 4 years relative to those incurred by the current technology.

- In Sydney, Fortescue metals fell sharply by over 4% after reporting that it has placed two mining projects on hold as a result of the new mining tax. Australian Financial Review also reported that BHP may consider cutting its dividend because of the tax, forcing Treasurer Swan to call for further talks with the company and the rest of the mining industry. In the energy space, Santos also said talks on Gladstone LNG investment are complicated by the tax proposal, even with demand from Asia perceived as a "game changer" for Australian gas companies. Elsewhere in Sydney, retailer David Jones posted Q3 SSS +1.4% y/y and reaffirmed 2H and FY11 guidance, Telstra reiterated expectations of lower Revenue, higher EBITDA FY guidance, and AWB reported H1 Net loss A$65M v profit A$19Me on Rev A$3.0B v A$3.0Be.

CURRENCIES/FIXED INCOME/COMMODITIES
- Overall risk aversion stemming from uncertainty in the EU and dovish central bank comments in Australia/New Zealand over the past two days weighed heavily on European and commodity majors. EUR/USD fell to 4-yr low below 1.2150, GBP/USD fell to 1-yr low below 1.4260, AUD/USD fell to a 9-month low below 0.8540, and NZD/USD fell to 3-month low below 0.63840 before a modest recovery in latter part of the session. Japanese Yen was also initially firmer, as USD/JPY fell about 70 pips to 91.55. EUR/JPY and GBP/JPY also fell as far as 111.40 and 130.50 respectively before bouncing back to 112.50 and 131.80.

- In commodities, spot gold was a notable decliner despite the Euro making new lows, as dealers saw profit-taking extend to a $17 drop from the start of the session below $1,210. Front-month crude shrugged a bullish API inventory report, -795K V +750KE, toward another sharp contraction of nearly 2% below $68 before bouncing back up to $69 in late trading.

ECONOMIC DATA
- (AU) AUSTRALIA MAY WESTPAC CONSUMER CONFIDENCE: -7.0% V -1.0% PRIOR (biggest decline since Oct 2008); CONFIDENCE INDEX: 108.0 V 116.1 PRIOR (11-month low)
- (AU) AUSTRALIA MAY DEWR SKILLED VACANCIES M/M: 1.0% V 1.5% PRIOR (6th consecutive decline, 11-month low)
- (AU) AUSTRALIA Q1 WAGE COST INDEX Q/Q: 0.9% V 0.8%E (highest since Q4 2008) ; Y/Y: 3.0% V 2.9%E
- (JP) JAPAN MAR FINAL INDUSTRIAL PRODUCTION M/M: 1.2% V 0.3% PRIOR; Y/Y: 31.8% V 30.7% PRIOR; CAPACITY UTILIZATION M/M: 0.6% V 0.0% PRIOR