Asian Market Update: South Korea trade exports improve, Finance Minister Yoon sees 2009 topping estimates; Spot gold falls below $1,000 as USD rallies
- Asian equity markets are trading thin and mixed to start the week but appear to be losing the upward momentum seen in recent sessions. With little meaningful economic data and a bank holiday in Tokyo giving investors little reason to sustain the rally, profit-taking was more prevalent in the other major Asian bourses. Taiwan's Taiex and S&P/ASX are down about 0.5%, led by the weakness in financials. In China, Shanghai Composite extended its Friday slide, falling over 3% for an overall 5.5% two-day decline, before paring some of those losses to enter midday break down 1.5%. Shanghai's largest declines were seen in the energy and basic materials sections. Korea's Kospi and Hang Seng are the regional outperformers, with the former trading flat and the latter gaining marginally. Ahead of the Monday opening bell in the US, front-month S&Ps are down by 0.2%, as investor attention shifts to this week's FOMC decision.
- Helping the Kospi outperform the regional markets, South Korea's Customs Agency saw local export levels falling at the slowest y/y pace in nearly a year, declining -10.4% v -20.6% prior. Earlier in the session, Finance Minister Yoon was also upbeat, forecasting 2009 GDP to exceed estimated 1.5% contraction in spite of further uncertainty into 2010. As such, Yoon called for a sustained accommodation in fiscal and monetary policy, noting that the exit strategy should be coordinated on a global basis. Several other secondary figures pointed toward an uptick in regional growth. In New Zealand, services PMI saw its second consecutive month of expansion at 51.3 and credit card spending fell at a slower pace of -1.9% v -2.1% prior. Australia saw its slowest pace of decline in auto sales in 13 months, falling -6.2% v -10.3% prior. Over in UK, September Rightmove House Prices data tracked the improvement seen in RICS results last week, with Y/Y coming in at -1.5% - the highest level since June of 2008.
- In notable equity movers, Hynix Semiconductor picked up 4% after a Morgan Stanley upgrade to Overweight. In Sydney's S&P/ASX, Harvey Norman fell 2% on a Credit Suisse downgrade, while Qantas annual report noted uncertainty in near term outlook with little evidence of improvement in underlying conditions. Wall Street Journal was upbeat on Australian mining and energy commodity sector, noting above-estimate trend in commodity demand created new jobs faster than companies could fill them. Similar sentiment was expressed by the New Zealand press, who warned local businesses to prepare for the return of a labor shortage.
- In currencies, market bias also appears to have shifted in favor of the dollar as greenback rose across the board for the second consecutive session. EUR/USD spent much of the session below 1.47 and USD/CHF rose above 1.03. GBP/USD was once again the weakest European major, falling below 1.6220 on fresh concerns in UK financials where RBS was considering an additional share issuance. In commodity majors, risk aversion weighed down AUD and NZD toward 0.8645 and 0.7065 session lows. Japanese Yen approached a week-long low, with USD/JPY briefly rising above 91.55. WSJ "Currency Trading" section also saw a brighter outlook for the dollar in the week to come, citing uncertainty ahead of the Wednesday FOMC decision leading to profit-taking in the overwhelming dollar short positioning.
- Crude oil prices are lower by more than 0.20% and have so far ranged between $72.20-71.58/bbl. Crude oil prices are being weighed down by the stronger US dollar and early decline in Chinese equities. Spot Gold has declined by more than 0.30% and has so far hit a session low of $999.45/oz. Like oil prices, the upside to gold has been capped by the stronger dollar. Additionally, on Friday's session, the IMF disclosed that its board approved the sale of $13B in gold. The gold to be sold represents about 12.5% of the IMF's total gold holdings and the organization expects to gradually sell the gold directly to central banks in order to limit market disruptions. In other gold market news, the CEO of gold producer Barrick Gold was quoted as saying the company's previously announced gold de-hedging plan did not push gold prices above $1,000/oz. In early Sept, Barrick announced that it would eliminate its gold hedges, which consisted of 3M ounces of fixed price contracts and 6.5M ozs of floating contracts. Shanghai Copper prices are declining on the session, tracking the weakness in Chinese equities. Additionally, on Friday's session the Shanghai Futures Exchange reported that weekly copper stockpiles rose by 7% to 104.4K metric tons.
