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Asian stock market, economy and companies update (June 17, 2010)

Contributed by Trade The News

By Trade The News

- After several days of global risk appetite in the face of fresh turmoil in the EU - namely rumors of Spanish banking system demanding a liquidity oriented ?250B credit line - Asian equity markets are finally exhibiting a more cautious tone. Nikkei225 dropped about 0.8% on the other side of midday break despite some M&A activity in the tech space. Sydney's S&P/ASX was off by 0.5%, Korea's Kospi and Shanghai Composite traded flat, and Taiwan's Taiex - returning from holiday - was up 0.9% on catch-up buying. A cautious tone adopted in US markets late in the day is also being felt in S&P futures. With CPI and Philly Fed data on tap for Thursday session, front-month S&Ps are down 0.5% below 1,104.

SPEAKERS/PRESS
- AUSTRALIA: Local press noted the top level talks between miners and Australian govt "failed to make progress" as CEOs of leading companies continue to demand higher concessions from the proposal. A separate early session report suggested the govt is constrained by its promise to bring the budget back into surplus over the next 3 years. Speaking to CNBC later in the day, Resources Minister Ferguson comments indicated the govt has the ""test of will" to persevere with reform to the benefit of the nation, and that the backlash of the resources industry in neither unprecedented nor unexpected. Regarding concerns over the impact of Australia's sovereign standing as a result of the tax, Ferguson said the country will remain attractive to investors despite the proposal.

- CHINA: Despite recent indication that local property market may be cooling as a result of govt measures targeting the sector, China Vanke - nation's biggest property developer - said demand is still strong and no cuts to development plans were expected. Likewise, China's FX regulator SAFE forecasted for capital inflow pressure to be relatively strong this year, driven by yuan rise expectations, interest rate differentials, domestic asset prices, which in turn bears monitoring of hot money inflows. Elsewhere, the Head of China Pension Fund, whose comments supported EUR and weighed on gold, reiterated he expects Euro to stabilize and the dollar to weaken in the long term.

- JAPAN: Japanese press speculated the ruling DPJ party may consider revising the nation's tax code with provisions calling for higher consumption tax. The measure is seen as a potential response to the threat of ?44.3T JGB issuance cap being insufficient relative to expected tax revenue intake and projected spending. Ahead of tomorrow's monthly cabinet report, a separate note suggested the govt may state the economy has entered a recovery phase.

EQUITIES
- Toyota was hit with a labor dispute in the increasingly discontent workforce in China - just days after a series of strikes suffered in the country by China. According to the report, workers at a parts plant in Tianjin may have been on strike since yesterday. Later today, Toyota said the workers reached an agreement with management to return to work. Elsewhere, Toyota unshelved plans to expand production capacity in Brazil as well as US. In tech sector M&A, Fujitsu and Toshiba confirmed a JV tieup in cell phone operations - the former taking a majority stake in a partnership starting in October. Outside Japan, China's Baosteel has reportedly accepted a 23% increase in iron ore prices from BHP and Rio Tinto for July. Separately, S&P raised its outlook on Rio Tinto to positive from Stable, citing improving credit metrics and plans for debt reduction. Also in China-Australia related developments, Bright Food reiterates it will reach a decision on A$1.75B bid for sugar division of Australia's CSR by the end of June.

CURRENCIES/FIXED INCOME/COMMODITIES
- In currencies, European and commodity majors are lower and testing US session lows as USD and JPY benefit from the moderate risk aversion. EUR/USD traded down to 1.2260, GBP/USD tested the downside of 1.47, while AUD returned to being the most punished major - AUD/USD fell below 0.86, AUD/JPY lost 70 pips to 78.30, and EUR/AUD was bid up 50 pips to 1.4280. Also in commodity majors, USD/CAD rose to 1.0280 despite reports of appetite for CAD from Russian central bank and NZD/USD fell 30 pips to 0.6950. Japanese Yen, broadly firmer across the board, also gained on USD, as USD/JPY fell to 91.20.
- In commodities, renewed focus on Europe sent safe-haven gold prices up $4 to $1,234/oz. Likewise, front-month crude tracked risk aversion down below $77/brl.

ECONOMIC DATA
- (AU) AUSTRALIA MAY RBA FOREIGN EXCHANGE TRANSACTIONS: A$446M V A$350M PRIOR
- (NZ) NEW ZEALAND JUN ANZ CONSUMER CONFIDENCE INDEX: 122.0 V 126 PRIOR; CONSUMER CONFIDENCE M/M: -3.2% V 3.4% PRIOR
- (JP) JAPAN APR FINAL LEADING INDEX: 101.7 V 101.7 PRIOR; COINCIDENT INDEX: 101.3 V 101.6 PRIOR
- (SI) SINGAPORE MAY ELECTRONIC EXPORTS Y/Y: 38.9% V 25.0%E; NON-OIL DOMESTIC EXPORTS M/M: -0.1% V 1.0%E; Y/Y: 24.4% V 25.7%E