Asian markets ends October with optimism

Nikkei plunge by 5% despite a rate cut from BoJ while Sensex, Sydney ends the session higher


The stock markets across the Asian region closed mixed despite a positive lead from Wall Street. The Dow Jones Industrial Average ended the day up by 189 points, to 9,180. The Nasdaq Composite Index finished higher by 41 points at 1,698. S&P 500 finished higher by 24 points at 954.

Oil prices continued to fall on concern that the decline in the U.S. economy will curb fuel demand in the world's largest energy user. Oil retreated, taking this month's decline to 36%, after the U.S. Commerce Department said yesterday that gross domestic product contracted in the third quarter at the biggest annual pace since 2001.

Crude oil for December delivery fell as much as $2.61, to $63.35 a barrel. By 0855 GMT, Brent crude for December delivery was down $2.88 a barrel at $60.83. Oil's monthly decline may pass February 1986 as the worst month ever, when it dropped 30 percent to $13.26 a barrel.

In the currency market, the U.S. dollar was quoted in the upper 96-yen levels in late Tokyo deals, down from the lower 98-yen levels in early trade and the upper 98-yen range late Thursday.

The Australian dollar ended the local session down 2.2%, as weaker commodity prices and a decision by Japan's central bank to cut interest rates lowered demand for riskier currencies. The Aussie closed at US$0.6711-0.6716, down from Thursday's close of US$0.6859-0.6864.

The New Zealand dollar finished the domestic session lower at US$0.5880, after failing twice to push back above US$0.60 for the first time in a week, compared to Thursday's close of US$0.5925.

The South Korean won fell against the greenback for the first time in three days. The won finished the session at 1,291.0 a dollar compared to Thursday's close of 1,250.0 a dollar. Yesterday, the won posted its biggest gain against the greenback in a decade following a currency swap deal with the U.S.

The Philippines peso swinged back to the P48-to-the-dollar territory due to the US Federal Reserve’s hefty rate cut in its key policy rate, which followed that of China. Currently the peso was trading at P 48.92.

Coming back in equities, Asian stocks posted their biggest monthly fall in October, with commodity-related stocks being routed on worries over global demand. The Japanese market plunged 5.0% after the Bank of Japan announced its first rate cut in seven years, while the yen strengthened against the U.S. dollar. Hong Kong's Hang Seng index fell 2.5 per cent, but the stock markets in Australia and South Korea recovered to finish in positive terrain.

The Japanese stock market closed sharply lower, snapping a three-day winning streak. The market opened lower on profit taking following Thursday's rally and extended its losses in a late sell-off despite the Bank of Japan cutting its short-term interest rate for the first time in seven years. The financial markets in Japan will remain closed on Monday for a Culture Day national holiday.

The benchmark Nikkei 225 Stock Average plunged 5.01% or 452.8 points to 8,576.98, well below the key 9,000 level. The broader Topix index of all first-section issues also fell 32.3 points or 3.59% to close 867.12. Despite Friday's drop, stocks ended in positive territory for the week following Fed rate cut and a weaker yen. For the week, the Nikkei has gained a record 12% and the Topix rose 7%.

The Bank of Japan trimmed its key interest rate to 0.3% from a decade-high 0.5%, though the cut was by a split vote and was smaller than the market had expected. The move came under government pressure to join the global response to the worst financial crisis in 80 years.

Among a series of economic released today, the Ministry of Internal Affairs and Communications said that core consumer prices in Japan rose 2.3% on year in September, moving higher for the twelfth consecutive month. Core CPI, excluding volatile fresh food prices follows a 2.4% annual expansion in August. Overall inflation was unchanged in September at 2.1%. Tokyo core CPI for October, considered a leading indicator for the nationwide trend, climbed 1.5% on year after a 1.7% annual increase in the previous month. Minus food and energy costs, Tokyo CPI was up 0.4% after a 0.5% annual gain a month earlier.

Activity in Japan's manufacturing sector contracted in October for the eighth straight month, according to the latest survey from Nomura Holdings and the JMMA. The group's Purchasing Managers Index dropped to a seven year low of 42.2 in October, lower than the 50.0 reading that separates contraction in the sector from expansion. The accompanying PMI industrial production index fell in October to 39.7, also the lowest since December 2001.

Meanwhile, Japan's seasonally adjusted unemployment rate stood at 4.0% in September, down from 4.2 percent in August. The jobs-to-applicants ratio for September stood at 0.84; meaning 84 jobs were available per 100 applicants. The ratio, which matched a low hit in August 2004, compared with a consensus forecast of 0.85 and was down from 0.86 in August. The number of new job offers fell 13.4 percent from a year earlier after a 21.3 percent drop in August.

Soaring inflation and gaining unemployment affected the purchasing power of the people’s as overall household spending fell 2.3% in September from a year earlier in price-adjusted real terms, a smaller fall than the median market forecast for a 3.9% decrease. Compared with August on a seasonally adjusted basis, spending rose 1.7%.

The average household spent 281,433 yen ($2,856) according to data from the Ministry of Internal Affairs and Communications. Spending by wage earners' households fell 3.4 percent in September from the same month a year ago.

In Mainland China, the stock market closed sharply lower, reversing most of yesterday's gains on broad based sell off across the board amid persistent worries over corporate earnings after more listed firms posted weak third-quarter profits and on deepening domestic economic worries. The Shanghai Composite Index dropped 34.82 points, or 1.97%, to 1,728.78, off the day’s high of 1,765.50 and low of 1,721.77. The index lost 110.84 points, or 6.03%, in the week and 565 points, or 24.63%, in October

In Hong Kong, the Hang Seng Index extended losses by tumbling 2.52% or 361.18 points to 13,968.67, after adding more than 3,300 points in the previous three sessions, and the Hang Seng China Enterprises Index gave up 2.26% or 152.89 points to 6,611.15. on the month the Hang Seng index lost about 22% , the biggest monthly fall since October 2007.

In Australia, the stock markets closed session slightly higher. After starting off weak on the back of lower commodity prices, stocks saw some strength in the afternoon session and finished in positive territory. The benchmark S&P/ASX 200 index closed up 16.9 points or 0.42% at 4,018.0, extending its gains for the third consecutive trading session. The broader All Ordinaries index rose 25.40 points or 0.64% to finish at 3,982.70.

On the economic front, sales of new homes in Australia fell for a third straight month in September, though the Housing Industry Association (HIA) saw reason for optimism on the future given sharp cuts in interest rates since then. The HIA said total sales fell a seasonally adjusted 1.8 percent in September, on top of a 1.3 percent drop in August. Private detached house sales fell by 2.3 percent, outweighing a 1.2 percent rise in the volatile multi-unit sector.

In New Zealand, the stock market closed sharply higher, extending its gains for the third consecutive trading session. The benchmark NZX 50 index closed up 58.0 points or 2.10% at 2,820.9 and the broader NZX All Capital index rose 62.4 points or 2.20% to 2,868.8.

The South Korean stock market finished sharply higher after bargain hunting gathered momentum in the afternoon session. After remaining range bound in morning trade, stock saw some strength in the afternoon session and closed firmly in positive territory, extending their gains following yesterday's 12% jump. The benchmark Korea Composite Stock Price Index or Kospi closed up 28.34 points or 2.61% at 1,113.06. The index is down some 23 percent on the month but up 18.5% on the week, posting its biggest weekly gain ever.

On the economic front, a central bank report showed that South Korean manufacturers' confidence dropped to the lowest level in nearly five years in November, as companies expected a global economic downturn to hurt their business. The business survey index for manufacturers' expectations declined to 65 in November from 78 in the previous month.

Meanwhile, the National Statistical Office said that South Korea's industrial output grew at a faster pace in September on solid gains in exports of video-audio products and transportation equipment. According to the agency, industrial production expanded 6.1% year-over-year in September compared to a dismal 1.9% advance in August.

In Singapore, the benchmark Straits Times Index was 7.71 points, or 0.43%, lower to 1,794.20. On economic front, Singapore's jobless rate was unchanged at 2.2 percent in the third quarter after seasonal adjustments compared to the previous quarter, confounding expectations firms will cut hiring amid the financial crisis. Employment rose by 57,800 in the third quarter, lower than the 71,400 jobs created in the second quarter, the manpower ministry said in preliminary data on Friday.

In Taiwan the markets closed sharply higher as hopes for expanded transport and other links with China helped the market extend yesterday's upswing following a central bank rate cut. Negotiators from Taiwan and China will hold a fresh round of talks in Taipei next week, following which they may seal agreements for closer air and marine links.

Taiex, the weighted index closed up 187.02 points or 3.99% at 4,870.66, off a low of 4,659.67 and a high of 4,911.80. The market ended the week 6.36% higher, trimming its monthly decline to 14.84%.

In Thailand, the benchmark Set index gained by 7.23 points or 2.57% closing the day at 288.76. On economic front, Thailand's private consumption index rose 5.9% in September from a year earlier after a revised 4.2% rise in August and a 9.3% rise in July. The index rose 1.0% in September from August after a revised 0.3% fall in August and a 3.4% rise in July. In another data release, Thailand’s trade account showed a $142 million surplus in September after a $675 million deficit in August and a $762 million deficit in July.

In Philippines, the benchmark index PSEi escalated 4.62% or 86.16 points to 1,951.09, while the all share index was up 3.82% or 46.91 points to 1,272.57.

In India, bulls tightened their grip as key benchmark indices spurted to hit new intraday high in late trade on rally in index heavyweights. As per the provisional figures, the BSE 30-share Sensex was up 806.46 points or 8.92% to 9.850.97. The index jumped 825.91 points at the day's high of 9.870.42 in late trade. The Sensex rose 317.15 points at day’s low of 9,361.66 in early trade. The S&P CNX Nifty was down 208.20 points or 7.72% to 2,905.25 as per the provisional figures.

On economic front, the wholesale price index (WPI)-based year-on-year inflation dropped to 10.68% in the week ended 18 October from 11.07% in the previous week. Following the steady decline in headline inflation, economists expect inflation to enter single digit domain by end-November 2008.

In other regional markets, European shares fell, bringing an end to three sessions of gains, with warnings from U.K. telecommunications firm BT Group and cosmetics giant L'Oreal pacing the decline. On a national level, the U.K. FTSE 100 index dropped 1% to 4,248.47, the German DAX 30 index fell 0.6% to 4,839.48 and the French CAC-40 index declined 1.5% to 3,355.43.

On the economic front, in Italy the producer prices fell 0.5% in September compared with August and rose 7.3% year-on-year.

The weekly data release calendar will end today by releasing personal consumption expenditure for the month of September, which will be followed by quarterly employment cost index. It will be followed by the data on personal income and spending in the month of September. In the evening we will have Chicago’s purchasing managers index and Reuters consumer sentiment index for the month of October. Canada will release its monthly indicator showing the economic growth in the month of August.