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Asian stock market, economy and companies update (June 23, 2010)

Contributed by Trade The News

By Trade The News

- Asian equity markets are decidedly bearish, tracking housing weakness-infused late-day US session selloff that sent Wall St indices to one-week lows. Nikkei225 is leading the slide with 1.7% decline, while Shanghai Composite and S&P/ASX are off by about 1%. Korea's Kospi and Taiwan's Taiex are also marginally lower by 0.2% and 0.4%. Ahead of the Fed decision on Wednesday, front-month S&Ps are up about 0.3% on expectations policymakers will reaffirm their commitment to exceptionally low rates for extended period, all despite the chatter that FOMC may also downgrade assessment to the economy, particularly in the wake of soft jobs, housing, and inflation data.

- Economic calendar was limited to an unexpected current account figure from New Zealand - the first surplus since Q2 of 2009. This may bode well for NZ Q1 GDP report on tap for tomorrow, potentially committing RBNZ to further tightening steps in months to come. In Singapore, May CPI also came in above expectations.

SPEAKERS/PRESS
- CHINA: PBoC's widely heralded currency reform announced this weekend saw a step back following overnight buying interest in the greenback. USD/CNY was set around 6.81 after prior session's setting below 6.80. Yuan was set stronger against both the Euro and Sterling at 8.35 and 10.09 respectively. Elsewhere in China, a Securities Regulator said the administration is considering allowing foreign firms to invest in China equities by raising CNY-denominated funds.

- AUSTRALIA: Australian Financial Review renewed speculation the govt is considering raising the threshold for super-profits mining tax from the proposed 6% while also scrapping its exploration penalty provision. A separate press report pointed to rising discontent among PM Rudd's Labor colleagues regarding the unpopular levy, while another feature in the same publication noted PM Rudd may have told party officials that substantial progress has been made in a revised compromise offer to the mining industry. A follow-up to yesterday's quarterly ABARE outlook saw the agency warn that demand from China may weaken in the 2H of the year but rise to higher levels beyond 2010, also expressing concerns about the debt crisis in Europe and subsequent impact on demand for commodity exports.

- JAPAN: Fin Min Noda reflected on greater flexibility for the Yuan as a positive for Japan economy and a necessity to repair of global imbalances. Noda also said the cabinet would like to lower new JGB issuance from FY12 after committing to FY11/12 at/below ?44T in the prior session's fiscal plan. Separately, Fitch commented on that plan as well, noting it was lacking in detail while acknowledging it was not reasonable to expect concrete steps ahead of next month's Diet elections.

EQUITIES
- In individual names, labor disputes in China continued to hamper Japanese automakers with another action at a Toyota parts plant. Supply disruptions related to strikes have also translated into halted production at a Honda facility. Among other Japan automakers, Nissan CEO said the company has received about 20K orders for Leaf electric vehicle model, up from 6K announced just 2 weeks ago. Company also said it is looking to enter India compact car market in competition with Suzuki. Among other notable share-specific developments in Tokyo, Toshiba traded higher after winning a contract to build motors for Ford electrified cars in the US, and Mizuho shareholder meeting was said to contain talks of a ?800B common stock offering. Outside Japan, Posco pulled out of its offer to buy Zaporizhstal after its largest shareholder Midland Group sold a 48% stake to a Russian bank. In Australia, Rio Tinto said the market for bauxite is trending higher as China volumes recover to pre-crisis levels in 2010, while that for alumina was seen as "finely balanced". Rio Tinto's estimate for aluminum demand from China was 18-20% - above the 15% overall global demand.

CURRENCIES/FIXED INCOME/COMMODITIES
- USD majors traded in narrow ranges against European and commodity FX ahead of the Fed decision. EUR/USD and AUD/USD consolidated mid-US session losses around 1.2260 and 0.8710 respectively. Cable - an outperformer across the board in the US following the release of the emergency budget - found consistent buying interest just above the 1.48 handle. Japanese Yen was also stronger in late trading as USD/JPY fell below 90.50, supported by risk aversion in equities and uncertainty over China's Yuan policy, where strength is generally expected to translate into weaker Yen. In commodities, spot gold traded narrowly around 1,240 despite a new record high in SPDR Gold Trust ETF holdings at 1,313.0 metric tons. Front-month crude was also weighed down by general investment caution along with a bearish API inventory data where Crude build-up rose +3.68M V -1ME. Also on a related note, FT reported PBR would postpone its $25B share offering until September.

ECONOMIC DATA
- (NZ) NEW ZEALAND Q1 CURRENT ACCOUNT BALANCE (NZ$) +0.2B V -0.6BE (first surplus since Q2 of 2009); ACCOUNT DEFICIT-GDP RATIO: -2.4% V -2.7%E
- (SI) SINGAPORE MAY CPI M/M: 0.6% V 0.3%E; Y/Y: 3.2% V 3.0%E