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Asian stock market, economy and companies update (June 24, 2010)

Contributed by Trade The News

By Trade The News

- Asian equity markets are modestly higher, tracking the latter part of the session rebound in the US on dovish Fed rhetoric boosting expectations for lending rates to remain "exceptionally low" for longer than expected. Despite another horrific housing data - this time the more price-flexible new home sales - S&P500 was down just 0.3% and the Dow managed a marginal positive finish. Across Asia, Taiwan, Korea, Japan, Australia, and Shanghai markets are in the positive 0.3-0.5% range entering the final hour of Tokyo trading, while front-month S&Ps also point to modest uptick with a 0.2% gain to 1,090. Sydney markets were relatively stronger early on abrupt resignation of PM Rudd before incoming Labor leader Gillard reaffirmed her intention to pursue a (presumably, watered-down) mining tax.

SPEAKERS/PRESS
- AUSTRALIA: Outgoing PM Rudd spared himself the inevitable defeat in the Labor cabinet after Julia Gillard finally challenged the increasingly less popular leader, conceding the post through resignation. The first female PM in Australia, Julia Gillard said she intends to allow citizens to choose a PM by calling a vote in months to come. In the mean time, the new PM will "throw the doors open" to the mining industry leaders for further "consultation" but noted she still believes Australia is entitled to a more fair share of mining industry profits. In addition, Gillard said she will renew the push for carbon trading legislation - reform that had to be shelved by PM Rudd because of soft economy and lack of support from the Opposition party. Reacting to the leadership change, Opposition Leader Abbott said the problem is with Labor's policies and not its leader, further calling for mining tax reform to be scrapped.

- NEW ZEALAND: Q1 GDP was in line on both q/q and y/y basis, but components of the data showed a more troubling picture. Most notably, private spending q/q increase was 0.2% - a 1-yr low - while the 1.7% increase in govt spending was a multi-year high. Speaking after the data, Fin Min English said the economy is still faced with significant challenges requiring further steps to make growth sustainable.

- SOUTH KOREA: Finance Ministry raised its 2010 GDP growth forecast to 5.8% from 5.0%, but reiterated recent BOK statements that European debt problems may weigh on recovery. Separately, a Korea Central Bank Official noted policy will not be tight even if interest rates are raised, confirming speculation that the EU fiscal turmoil may be the primary factor in keeping BOK policy on hold.

- CHINA: PBoC daily Yuan policy setting was unchanged around CNY6.81 after "two steps forward, one step back" pattern in the last two days. Going into the G20 summit this weekend, US lawmakers appear to be prepared to keep the pressure on Beijing to appreciate the Yuan. A group of representatives said China's move is 'too little, too late', US Commerce Sec Locke said he's Concerned China's commercial direction is bad for US companies, and US Senator Schumer warned that Congress will move forward on currency legislation shortly.

EQUITIES
- In individual names, the strike at China parts supplier NHK Spring came to an end, as Toyota and Honda plants shut down earlier this week returned to normal operation. Later in the day however, Nissan reported its own labor-related production suspension after a Guangzhou facility went on strike. A Japanese press report suggested that the growing ease of obtaining labor action related information by Chinese workers is in part to blame for the frequency of strikes. Separately in the auto space, local press reported Honda's new hybrid vehicle going on the market in the fall will cost about ?1.5M, becoming the least expensive hybrid in Japan. Outside Tokyo, Aussie press reported the new CFO of Qantas will focus on cost-cutting, also reducing the number of cheap domestic flights, while Taiwan Semi said it may boost its CAPEX target from prior expected $4.8B.

CURRENCIES/FIXED INCOME/COMMODITIES
- European majors were modestly higher, extending gains against the greenback on dovish FOMC commentary. Most notably, Cable approached 1.50 handle for the first time since mid-May, outperforming relative to EUR following a voice of dissent in the BOE minutes released overnight. EUR/USD rose above 1.2340, while EUR/GBP fell to 0.82 earlier in US hours - lowest level since late 2008. In commodity FX, AUD/USD got up to 0.8770 on confirmation PM Rudd is stepping down before retreat below 0.8740. USD/CAD was unchanged below 1.04, and NZD/USD backed away from a 5-week high of 0.7150. Japanese Yen traded firmer against USD, boosted by dovish Fed and more stalling by the PBoC, as USD/JPY fell below 90.00 for the first time since late May. Spot gold and front month crude were near unchanged on the day, trading around 1,236/oz and $76.40/brl respectively.

ECONOMIC DATA
- (NZ) NEW ZEALAND Q1 GDP Q/Q: 0.6% V 0.6%E; Y/Y: 1.9% V 1.9%E (biggest increase since Q1 of 2008)
- (JP) JAPAN MAY MERCHANDISE TRADE BALANCE TOTAL: ?324B V ?480BE (4-month low); ADJUSTED: ?416B V ?627BE (8-month low)
- (JP) JAPAN MAY CORP SERVICE PRICE INDEX Y/Y: -0.8% V -1.1% PRIOR (19-month high)
- (AU) AUSTRALIA APR CONFERENCE BOARD LEADING INDEX: 0.1% V 0.3% PRIOR