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Asian stock market, economy and companies update (June 16, 2010)

Contributed by Trade The News

By Trade The News

- Rampant risk appetite of the US session is spilling over into the holiday-thinned Asian equity markets as investors continue to shrug more troubling signs of contagion in Europe. Overnight, EU commission called for France to outline its planned budget cuts, warning that bigger cuts or tax hikes may be needed to bring down its 8% deficit/GDP ratio to 3% by 2013. In turn, FT report that Spanish banks' borrowing from the ECB in May seen at ?85.6B - twice the amount lent before Lehman collapse and 16.5% net of EU loans offered by the central bank. Tech sector strength in the US boosted Nikkei225 by as much as 2%, while S&P/ASX and Korea's Kospi were up over 1%. Shanghai Composite and Taiwan's Taiex were both closed for trading - the last of the 3-day holiday in China. With US building permits on tap for the Wednesday US session - a data-point where weakness in the prior month coincided with retreat in risk appetite - front-month S&Ps are down 0.3%.

SPEAKERS/PRESS
- AUSTRALIA: After weeks of campaigning and threats of suspended projects by the mining industry, local press suggested the administration may finally become more flexible in its tax reform. Specifically, The Australian reported an exception can be made to exempt the coal-seam gas industry. Australia Resource Minister subsequently rejected that speculation, but PM Rudd, speaking later in the day, noted the govt will consider differing request from mining sector on taxes. Meanwhile, in new comments from mining giants, Rio Tinto said the mining tax destabilizes Australia's investment framework. Separately, a research report from Morgan Stanley put the spotlight on the $20-40B Olympic Dam uranium project as the next site of suspended investment.

- JAPAN: Local press said the Cabinet is aiming to achieve 1% annual price increase through FY20 as part of economic growth plan expected to be released at this month's G8 summit. Govt fiscal adviser Tomita said that without additional tax revenue, bond sales may exceed Kan-imposed ?44.3T ceiling at ?50T. BOJ monthly report largely reiterated commentary from yesterday's policy decision, maintaining economic assessment unchanged but pointing to signs of moderate recovery in CAPEX, improvement in consumption, and easing severity in the labor sector.

- BP: In a prime-time Oval Office address, Pres Obama said he will request that BP sets aside whatever resources needed to compensate Gulf workers and industries during today's meeting with company Chairman. Earlier, US govt raised its daily spill estimates to 35-60K/bpd from 25-30K/bpd estimated by USGS.

EQUITIES
- In individual names, Japanese press reported Toyota and Nippon Steel reached a pricing agreement for automaker to pay additional ?19.5-20K/ton for auto steel in Apr-Sept period. Also in materials, Rio Tinto iron ore chief Walsh warned he would cancel pricing contracts with China and move to spot market if Chinese steelmakers back out of quarterly pricing scheme. Shares of Nintendo were also significantly higher after the company unveiled a 3D gaming console. In Korea, Hyundai Heavy secured a KRW1.9T contract from Saudi Arabia.

CURRENCIES/FIXED INCOME/COMMODITIES
- In currencies, Kiwi dollar was a notable decliner after NZ Fin Min English reiterated RBNZ comments that this rate tightening cycle may not be of comparable amplitude to the prior phase. Other commodity majors traded in narrow ranges, with AUD/USD and USD/CAD supported by 0.8630 and 1.0250 respectively. European majors were similarly listless, consolidating US session gains, as EUR/USD was steady above 1.2310 and GBP/USD found consistent bid interest bid above 1.48. USD/JPY continued to struggle with 100-day MA at 91.70 despite the US session risk appetite. In commodities, spot gold consolidated US session gains around 1,232-1,235. Front-month crude tested the upside of $77 as supply concerns from deep-water drilling moratorium and risk flows outweighed bearish API inventories of CRUDE: +580K V -1.2ME.

ECONOMIC DATA
- (NZ) NEW ZEALAND Q2 WESTPAC CONSUMER CONFIDENCE: 119.3 V 114.7 PRIOR (update)
- (UK) UK MAY NATIONWIDE CONSUMER CONFIDENCE: 65 V 72E (11-month low)
- (AU) AUSTRALIA Q1 DWELLING STARTS Q/Q: 4.3% V 7.0%E (lowest since Q2 of 2009); Construction started on 42.4K new homes (near 6-yr high)
- (AU) AUSTRALIA APR WESTPAC LEADING INDEX M/M: 0.0% V 1.0% PRIOR (11-month low)
- (JP) JAPAN APR TERTIARY INDUSTRY INDEX M/M: 2.1% V 2.5%E (3-month high)
- (SL) Sri Lanka Central Bank leaves rates unchanged at 7.50% (as expected)