TradeTheNews.com Asian Market Update: China starts its slow decent into a soft landing, markets rally; BoJ announces new loan scheme after leaving rates unchanged

June 13 2011 by Milla Schmidt in Forex Release |No Comments

CHINA MAY CONSUMER PRICE INDEX Y/Y: 5.5% V 5.5%E
BANK OF JAPAN LEAVES TARGET RATE RANGE UNCHANGED BETWEEN 0.0% TO 0.10%; ; Announces new ¥500B credit line
JAPAN Q2 BSI LARGE ALL INDUSTRY Q/Q: 22.0% V 1.1% PRIOR; LARGE MANUFACTURING Q/Q: 23.3% V 3.2% PRIOR
UK MAY RICS HOUSE PRICE BALANCE: 28% V 20%E
CHINA MAY RETAIL SALES Y/Y: 16.9% V 17.0%E ; YTD Y/Y: 16.6% V 16.9%E
CHINA MAY FIXED ASSETS INVESTMENT YTD Y/Y: 25.8% V 25.2%E
CHINA MAY INDUSTRIAL PRODUCTION Y/Y: 13.3% V 13.1%E ; YTD Y/Y: 14.0% V 14.0%E
CHINA MAY PRODUCER PRICE INDEX Y/Y: 6.8% V 6.5%E
AUSTRALIA MAY NAB BUSINESS CONDITIONS: 1 V 5; BUSINESS CONFIDENCE: 6 V 7 PRIOR
NEW ZEALAND MAY FOOD PRICES M/M: 0.5% V 0.1% PRIOR
JAPAN APR FINAL INDUSTRIAL PRODUCTION M/M: 1.6% V 1.0% PRELIM; Y/Y: 13.6% V 14.0% PRELIM; CAPACITY UTILIZATION M/M: % V 21.5% PRIOR
New Zealand May Non resident Bond Holdings: 61.2% v 62.7% prior
SRI LANKA LEAVES REPURCHASE RATE AT 7.00%, AS EXPECTED

***Markets Snapshot ***
Nikkei225 +1.0%
S&P/ASX +0.2%
Kospi +1.5%
Taiex +1.3%
Shanghai Composite +1.0%
Hang Seng +0.2%
Straits Times Index +0.1%
S&P Futures +0.6% at 1,279
Spot Gold +0.3 at $1,519/oz
July Crude 0.1% at $97.18
July Copper +0.5% at $4.05

***Overview/Top Headlines***
After a mixed start in Asian all the markets rose, AUD and NZD strengthened as economic data from China showed slowing but steady growth. EUR/CHF traded near record lows as concerns that EU Fin Min meeting today will be unable to come to a resolution on Greece’s debt crisis in the wake of S&P giving a multinotch downgrade to Greece’s sovereign rating overnight. GBP/USD fell about 10 pips below $1.6365 on the worse than expected UK RICS housing data, which at 28% was a 4month low and 1st decline in 7months. Crude continued to fall with a low of $96.55 in the session despite comments that Saudi Arabia may be increasing output but will likely put it into reserves.

China industrial production slowed less than expected but matched at 6month low at 13.3% y/y; CPI was in line with expectations at 5.5%, China has warned that June will most likely be the peak for CPI before retreating to the target range in the second half. Retail sales came in at a 3month low of 16.9% v 17.0%e. Growth remains in China but a gradual slowing is starting to show. AUD/USD gained 25 pips above $1.06 and June emini S&P500 rose 5 pts above 1,276 on the data. A range of comments followed the data: China Stats Bureau Spokesman Sheng: China still faces large inflation pressures; Small m/m rise in May CPI indicates govt is control. PBoC Adviser Li Daokui reiterated that China should consider raising deposit rate. An unnamed China lawmaker said that China is not facing a “hard landing” but it facing stagflation and needs to focus on jobs, tighter fiscal policy and flexible monetary policy. UBS economist Wang Tao said the PBoC should raise interest rates based on the recently released data for May and Chinese press reported that China may not hike rates following low bill sale by the PBoC.

The other key bit of economic data for the session was the BoJ target rate which was left unchanged with a range of 0.0% to 0.10% as expected. Key developments included: Will extend 2year 0.1% loans for up to 4years to banks under new credit line of ¥500. Banks can roll loans over once. Each bank can borrow up to ¥50B for new category. Upgrades assessment of economy; Economy remains under downward pressure but showing signs of picking up.

Japan is slowly making progress on earthquake reconstruction, Japan Fin Min Noda has instructed by PM Kan to compile second extra budget by next month; Aims to submit budget to Diet in early July. New budget will not involve issuance of new debt. Japan Strategy Min Gemba: 2nd extra budget is likely to be smaller than the 1st, much different that the June 8th report saying that the government was believed to be planning a 2nd extra budget in the range of ¥1015T, well above the ¥4T initial extra budget. Just a reminder that PM Kan will step down after some of these key steps have been completed and Fin Min Noda is considered one of the leading candidates to replace him.

***Speakers/Geopolitical/In the press***
Fed’s Fisher: There is substantial liquidity in the system; Fed’s actions have worked; Fed should not monetize US debt
USD/KRW: South Korea Econ Min: Artificially adjusting forex rates to curb inflation is not desirable
Japan’s METI: A new Govt body will buy shares and bonds issued by Tepco
IMF: France’s Lagarde and Mexico’s Carstens are the only candidates for head position at IMF
China Energy Official Xu Yongsheng: China will accelerate coal power plant construction Chinese press
PBoC Advisor Zhou Qiren: China needs to stick with prudent monetary policy

***Equities***
IAG.AU: Affirms FY11/12 gross written premium growth of +35% y/y; Was on track for margin guidance before yesterday’s earthquakes in NZ
2888.HK: CEO Hung Picheng: HKMA plans to increase reserve requirements for banks; Most banks already have capital adequacy ratio of 16% HK Standard
Tepco 9501.JP: Japan Cabinet approves proposed compensation scheme; Japan Govt is considering allowing Tepco increase electricity prices by 16% in FY12 to help cover compensation charges Japanese Press

***FX/Fixed Income/Commodities***
PBoC sells 1yr bills at 3.3058% v 3.3058%
EUR/SEK: Analysts see the Krona as becoming a favorite currency for profiting from German growth but limiting exposure to European debt crisis financial press
Texas drought threatening oil and natural gas exploration in the state financial press
New Zealand Agriculture Min: Sees FY11/12 milk production +5.7% y/y; Chinese demand will encourage milk production
GLD: SPDR Gold Trust ETF daily holdings fall by 0.9 tons to 1,200.1 tons

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