Asian Market Update: Japanese stocks move to a 4-month high on the weaker yen, US holiday retail sales and better than expected industrial production data Economic Data: - (KS) South Korea Dec Consumer Confidence: 113.0 v 113.0 prior - (JP) JAPAN NOV PRELIMINARY INDUSTRIAL PRODUCTION M/M: 2.6% V 2.5%E (largest rise since May and 9th consecutive increase); Y/Y: -3.9% V -4.3%E - (JP) Japan Nov Retail Trade M/M: 0.2% v 0.2%e; Y/Y: -1.0% v -1.1%e - (UK) UK DEC HOMETRACK HOUSING SURVEY M/M: 0.1% V 0.2% PRIOR; Y/Y: -1.9% V -2.9% PRIOR - (JP) Japan Nov Labor Cash Earnings Y/Y: -2.8% v -1.8%e - (CH) CHINA NOV INDUSTRIAL PROFITS YTD Y/Y: 7.8% V -10.6% PRIOR Speakers/Press: - On Sunday, China's Premier Wen was quoted as saying that his country refused to yield to foreign pressure for the yuan to appreciate, as he believes a stable yuan is a positive for the international community. Wen added that the government might take measures to reduce speculation in the property market, including taxation measures. Wen reaffirmed that China would continue in 2010 to implement macro-economic policies to support growth. - On Saturday, Peoples Bank of China (PBoC) adviser Fan Gang was quoted as saying that China's macroeconomic policy should be flexible in order to maintain economic stability. Also, Fan said policymakers should be "vigilant" for asset bubbles and hot money inflows in 2010. Additionally, Fan said in Q1 China's GDP might grow by as much as 11% y/y due to easy comparisons, and in 2010 exports may grow more than 10% y/y. - Earlier today, China's Vice Commerce Minister was quoted as saying China may pass Germany in 2009 to become the world's largest exporter. Also, the official noted a more challenging trade situation in 2010 as the yuan stability could complicate trade. - In terms of the US' holiday retail sales, a report from MasterCard/SpendingPulse disclosed that retail sales rose by 3.6% from Nov 1 through Christmas Eve vs. a 3.2% decline in the 2008 period. Equities: -The Nikkei 225 is gaining by more than 1% and trading near a 4-month high above 10,600. The index has been supported by the weakness in the Japanese yen and better than expected industrial production data. South Korea's Kospi has moved off of its best levels, as gains in shares of KEPCO (large contract award) were offset by weakness in shares of automakers. Taiwan's Taiex is gaining by more than 0.50% led by gains in technology shares. An earlier Taiwanese press report noted that the government might ease the restriction on investments related to display panel and chip plants in China. The Shanghai Composite has gained more than 1% in broad-based buying, as China's Premier Wen said the government would continue to support growth. Hong Kong's Hang Seng is higher by more than 0.40%, tracking the gains in China. Currencies/Fixed Income/Commodities: - The USD is broadly weaker against the commodity currencies (AUD/USD above $0.8850, NZD/USD above $0.7050 and USD/CAD below 1.0500). However, the greenback is firmer against the European major currencies (EUR/USD below $1.4400, GBP/USD near $1.5950 and USD/CHF above 1.0350). There has been speculation on today's session that US companies may be bringing some of their profits back home, which is seen as US dollar supportive. The Japanese yen is weaker across the board, with USD/JPY trading above ¥91.40, on improved risk appetite. In other currency pairs, EUR/GBP is marginally weaker and trading near 90 pence. An earlier report in the London Telegraph, cited the Center for Economics and Business as saying that the pound may fall below parity with the euro on the UK's fiscal outlook. - In the bond market, the US 10-year Treasury and Japanese 10-yr JGB yields are both sharply higher on the advance in equities and better than expected Japanese industrial production data. - Spot Gold has risen by more than 0.40% and is trading above $1,110/oz on the weakness in the US dollar against the commodity currencies. Additionally, separate press reports from the Wall Street Journal and London Times commented on the rising demand for gold among central banks. According to the World Gold Council, in 2009 about $28B of gold was bought by central banks vs. central bank gold sales of $12B. Crude oil has gained more than 0.30% and is trading above $78/bbl on the gains in equities . In Iran, a report disclosed that on Sunday at least 10 people, including the nephew of opposition leader Moussavi, were killed in protests in Tehran. In other commodities, Shanghai Copper prices are gaining in line with the gains in the NY copper contract. On Friday's session, it was reported that the Shanghai Futures Exchange copper inventories declined to 96.4K tons from 104K tons in the prior week. Additionally, a possible labor strike at Chile's Chuquicamata copper mine (world's second largest copper mine) could be supportive to copper prices.

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