Wednesday, August 11, 2010

China production slows for 6th straight month


Forex Special

Asia Market Update

Asian Market Update: China production slows for 6th straight month, while CPI rises to 2008 high; Dovish Fed boosting JPY as Nikkei225 falls to 2-week low
As of 12:30amET: 
- Nikkei225 -2.4% (2-week lows)
- S&P/ASX -1.6%
- Kospi -1.3%
- Taiex -1.2%
- Shanghai Composite flat
- Sept S&P Futures -0.6% at 1,113
- Sept Gold -0.1% $1,202/oz
- Sept Crude oil -0.5% $79.88/brl
- Sept Wheat +1.6% at $7.06

Economic Data

- (CH) CHINA JULY M2 MONEY SUPPLY Y/Y: 17.6% V 18.5%E 
- (CH) CHINA JULY NEW YUAN LOANS (CNY): 533B V 600.0BE (4 month low) 
- (CH) CHINA JUL FIXED ASSETS INV URBAN YTD Y/Y: 24.9% V 25.3%E 
- (CH) CHINA JUL INDUSTRIAL PRODUCTION Y/Y: 13.4% V 13.4%E (lowest level since Aug 2009) 
- (CH) CHINA JUL RETAIL SALES Y/Y: 17.9% V 18.5%E (7-month low) 
- (CH) CHINA JUL PPI Y/Y: 4.8% V 6.0%E (6 month low); PURCHASING PRICE INDEX Y/Y:% V 10.8% PRIOR 
- (CH) CHINA JUL CPI Y/Y: 3.3% V 3.3%E (highest level since Oct 2008) 
- (AU) AUSTRALIA AUG WESTPAC CONSUMER CONFIDENCE: 5.4% V 11.1% PRIOR; CONFIDENCE INDEX: 119.2 V 113.1 PRIOR 
- (JP) JAPAN JUL DOMESTIC CGPI M/M: -0.1 % V 0.0%E; Y/Y: -0.1% V 0.0%E (first decline in 3 months) 
- (JP) JAPAN JUN MACHINE ORDERS M/M: 1.6% V 5.4%E; Y/Y: -2.2% V 1.5%E (first decline in 4 months) 
- (KS) SOUTH KOREA JUL UNEMPLOYMENT RATE: 3.7% V 3.5% PRIOR (4 month high and second consecutive increase) 
- (KS) SOUTH KOREA JULY BANK LENDING TO HOUSEHOLDS: KRW419.3T V KRW417.9T PRIOR 
- (KS) SOUTH KOREA JUNE MONEY SUPPLY M2: 9.7% V 9.3% PRIOR; L: 9.5% V 9.8% PRIOR
- (TH) THAILAND JUL CONSUMER CONFIDENCE: 71.4 V 69.1 PRIOR

Overview/Top Headlines

- Asian equity markets are being sold off for second consecutive day despite some late session buying in the US, where traders saw the "QE Lite" Fed response of reinvesting principal payments from MBS and agencies into Treasuries as a positive. Technology sector is among the worst performers in Asia following a Baird downgrade on Intel and rising concerns regarding the durability of PC demand. That sentiment is echoed by monthly metrics from notebook stalwart Acer, whose July sales fell 38%. In Japan, Nikkei225 losses are exacerbated by USD weakness against the Yen, with a "warning shot" from the BOJ not measuring up to the policy tinkering by the Fed. USD/JPY fell within 40 pips of multi-year low, while Nikkei225 hit a 2-week low below 9,300. In Australia, banking sector was also notably lower following FY results from Commonwealth Bank. CBA said business momentum is slowing, credit is yet to improve, and caution over prospects for next year abounds.
- Monthly metrics from China saw little market reaction, but did reveal some further signs of slowing. Industrial production saw a 6th consecutive monthly decline to the lowest y/y pace since August 2009, while consumer price index was in line at 3.3% but at the highest level since October of 2008. New Yuan loans were also at a 4-month low, suggesting the govt policy to curb the property market volatility has been effective in reducing appetite for credit. Speaking after the release of data, National Bureau of Stats said higher CPI is the result of rising food costs, but also stated the slide in industrial output was a welcome development in the framework of slowing from above-average pace of growth.

Macro/FX

China
- (CH) China State Information Center researcher Zhang Monan: China is facing more "intense" trade friction in the coming 2-5yrs as protectionism and pressure for higher Yuan rise further - Shanghai Securities News 
- (CH) China banking regulators reportedly have ordered banks to transfer off-balance sheet loans onto their books and make provisions for those that may default by the end of 2011; off-balance sheet loans of Chinese banks may total £213B, which is about 10X levels seen in 2007 - London Telegraph 
- (CH) According to China economists, high trade surplus seen in July figures is likely to remain for the rest of 2010 as domestic demand remains muted by govt curbs on real estate - China Daily 
- (CH) US Sen Schumer: China trade surplus shows China must be pushed to end currency manipulation 
Australia/New Zealand 
- (AU) Australia Aug leading indicator of employment: -0.286 v -0.548 m/m 
Japan 
- (JP) Japan Vice Min: FX rates at critical juncture right now; Solo currency intervention by BOJ would have little effect 
- (JP) Senior Govt Official: Suggested that Japan will not intervene to curb the rise of the yen in the forex market without international coordination - Japanese press 
- (JP) Japan Fin Min Noda: Excessive and disorderly FX moves would hurt the economy; Watching forex moves closely 
Korea 
- (KS) South Korea Fin Min Yoon: Sees some external risks to economy such as global slowdown and higher grain prices - Korean press 

Equities

Australia/New Zealand
- TLS.AU: Analysts think that Telstra would benefit from the Coalition winning the up coming federal election - Australian Financial Review 
- CBA.AU: Reports FY10 Net A$6.1B v A$4.3B y/y, Rev A$11.9B v A$10.7B y/y 
- CBA.AU: CEO: To continue monitoring lending rate conditions; No decision on "out of cycle" with target rate increases 
Japan 
- Nippon Telegraph & Telephone Corp: Will purchase all Swedish digital information security firm Secode via for estimated ¥2B later this month - Nikkei 
- NTT DoCoMo Inc: May invest as much as $1B in Tata Teleservices, raises its stake up to 40% - Economic Times 
- Toppan Printing Co Ltd: Reports Q1 Net ¥1.9B v ¥1.1B y/y, Op Profit ¥6.2B v ¥1.6B y/y, Rev ¥377B v ¥351B y/y 
- Tokyu Corp: Partnering with Tokyu Land Corp to build a ¥51.2B on a 31 story commercial complex in Tokyo's Setagaya Ward - Nikkei 
China 
- Industrial & Commercial Bank of China: Offered to take its Hong Kong unit private for HK$10.8B to streamline operations - WSJ 
- China Construction Bank: Government has set up a fund to pay of CNY247B in bad loans siphoned off into a bond before its listing 
- China Unicom Ltd: To invest CNY10B in Chongqing over next 5 years to upgrade city's 3G service network - Chinese press 
Korea
- Doosan Heavy: Reports Q2 Net KRW78.1B v KRW58Be, Op KRW111.6B v KRW93Be, Rev KRW1.5T v KRW1.6Te 
- Hyundai Heavy Industries: To buy a controlling stake in Hyundai Oilbank after years of legal disputes with International Petroleum Investment - WSJ 
Other
- GENS.SI: (SI) Singapore Sec Min of Trade Menon: Newly opened casino-resorts have boosted tourist arrivals and provided more business for hotel and restaurants; However the government lacks statistical capacity to track their contribution to GDP - Straits Times 
- Acer Inc: Reports Jul sales NT$26B, -38% y/y (update)

Commodities

- API PETROLEUM INVENTORIES: CRUDE: -2.2M V -2ME; GASOLINE: -1.54M V +500KE;
- (CH) China Steel Group (CISA): Steel output in the final 10 days of July at 1.64M tons, flat from middle 10-days
- (AU) Australia is positioned to benefit from the worries over global wheat supplies since it is a major exporter of high quality wheat to Asia; Upside could be tempered quickly as Australia is experiencing dry weather and warnings about locust plague - WSJ 
- (CH) China July Commodity output summary:
- Electricity output: 377.6KWH (+11.5% y/y) v 346.66B KWH prior
- Crude oil output 17.2M tons (+6.4% y/y) v 16.88M tons prior
- Crude Steel output: 51.7M tons (+2.2% y/y) v 53.8M tons prior
- Coal output M tons: not reported v 283.9M prior
- Copper Production 398K tons (+16.0% y/y) v 422K tons prior
- Diesel output 13.45M (+4.0%)v 13.34M tons prior
- Natural Gas output: 7.19B (+3.6%) v 7.08B cubic meters prior

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