Asian equities move off of their worst levels

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Asian Market Update: Asian equities move off of their worst levels, as official comments propel Chinese equities to more than 3% gains in early trading

- In Asian economic data, South Korea's Q2 GDP was revised higher and to the fastest pace since Q4 of 2003, due to strength in business investment and consumer spending (SOUTH KOREA Q2 FINAL GDP Q/Q: 2.6% V 0.1% PRIOR; Y/Y: -2.2% V -4.3% PRIOR). In Australia, the trade deficit widened in July to a higher than expected A$1.56B [(AU) AUSTRALIA JULY TRADE BALANCE (A$): -1.56B V -880ME (prior revised to -538M from -441M)]. Among the highlights of the trade data, exports declined by 1% m/m and imports rose by 4% m/m. Exports to China in dollar terms rose to A$3.7B from A$3.5B m/m, while iron ore export sales revenues rose to A$2.5B from A$2.3B m/m. In other Australian data, the Aug AIG performance of services index rose to 48.0 from 44.1 prior, driven by increases in inventories, deliveries and employment.

- In forex, the USD and JPY opened the session firmer against the European major and commodity currencies, but have since pared their gains, following the morning equity rally in Shanghai. Earlier during the session, USD/JPY moved below 92.00 for the first time since mid July, while GBP/JPY traded below 150.00 before rebounding. Currently, the yen is weaker across the board, and the best gainers among the yen crosses include NZD/JPY, AUD/JPY and CAD/JPY. The USD is declining against the EUR and CHF, but gaining marginally against the pound. Additionally, the USD is weaker against the commodity currencies.

- Most Asian equities are either higher or off of their worst levels. The Nikkei 225 is lower by more than 0.10%, led by financials and consumer goods companies. At the break, the Shanghai Composite ended up by just under 3.5% in a broad based rally, led by advances in gold miners and financials. Earlier during the session, the People's Bank of China's Shanghai branch was quoted as saying that the central bank would execute "appropriately loose monetary policy" and increase support for the economy. Australia's S&P ASX 200 has reversed most of the opening losses, led by health care and telecom companies. Taiwan's Taiex is gaining on shares of consumer companies and technology firms. South Korea's Kospi has moved off of the session's lows, supported by gains in shares of financials. The Hang Seng is higher by more than 0.50%, tracking the gains in China.

- Crude oil prices are higher and trading above $68/bbl, after ending marginally weaker in NY floor trading. Crude oil is tracking the advance being seen in Asian equities, particularly in Shanghai. Spot Gold is marginally lower after rallying sharply during the NY COMEX session. Of note, it was reported during the NY session that China plans to buy $50B in IMF Special Drawing Rights, as markets continue to look for signs that China is diversifying its forex reserves. (Note: All quotes are as of 01:01 EST)

Published on Thu, Sep 3 2009, 07:31 GMT