October Snaps September Losing Streak

Asian Markets Starts The Last Quarter of 2008 With Positive Closing

The stock markets across the Asian region closed higher, except for South Korea, snapping a six-day losing streak. Speculation that the U.S. Senate will approve a $700 billion bank rescue plan to revive the credit markets boosted Asian investor sentiment. The stock markets in China, Hong Kong, Indonesia, Malaysia and Singapore remained closed on account of public holidays.

Yesterday on Wall Street the stocks rebounded following its biggest sell-off in years on Monday. The Dow jumped 485 points or 4.7% to finish at 10,850 after falling nearly 7% on Monday to its lowest close in nearly three years. The S&P 500 index gained 58 points or 5.3% to finish at 1,164, and the Nasdaq composite index climbed 98 points or 5.0% to end at 2,082.

Oil prices held steady above $101 a barrel in Asia on Wednesday. By 4:23 a.m. ET, oil was quoted at $101.86 a barrel, up $1.22. The contract for November settlement rose by $4.27 to settle at $100.64 a barrel on the New York Mercantile Exchange on Tuesday.

In the currency market, the U.S. dollar was trading in the lower 106-yen levels in late Tokyo deals, flat with its levels in early trade, but higher compared to the upper 104-yen range late Tuesday in Tokyo.

The Australian dollar closed at a two-week low as the multi-government rescue of yet another European bank encouraged traders to sell the euro and buy the US currency. The Aussie finished the session at US$0.7962-0.7966, down from Tuesday's close of US$0.8045-0.8048, recording the weakest close since September 16 when it finished at US$0.7886-0.7890.

The New Zealand dollar finished a quiet trading session at US$0.6703, flat with its opening quote at US$0.6702 and Tuesday's local close of US$0.6700.

The South Korean won rebounded from a 64-month low against the U.S. dollar on revived hopes that U.S. lawmakers will salvage a rejected bailout plan for the troubled financial sector. The won finished the session at 1,187 a dollar; up from Tuesday's close of 1,207.0 a dollar, recording its first gain in eight sessions. The won has lost about 21% against the dollar so far this year.

Coming back to Asian equities, the Japanese stock market rebounded Wednesday, but gains were limited due to weaker-than-expected tankan survey data released by the Bank of Japan. Exporters gained on the back of a weaker yen. The benchmark Nikkei 225 Index closed up 108.40 points or 0.96% at 11,368.26, ending a four-day losing streak. The broader Topix Index of all First Section issues gained 13.72 points or 1.3% to finish at 1,101.13.

The Bank of Japan's tankan corporate sentiment survey report showed that Japanese business sentiment has turned pessimistic for the first time in five years. Investors turned cautious after the headline diffusion index fell to minus 3 in September, recording the first negative result since June 2003. The index stood at 5 in the second quarter. The outlook survey for the fourth quarter was projected as minus 4.

Among other economic reports released today, the average cash earnings for workers in Japan dropped 0.3% on year compared to analysts' expectations for a flat reading and a 0.3% annual increase in July. Meanwhile, Japanese auto sales declined at a slower pace of 5.3% year-over-year in September compared to a sharp 14.9% fall in August.

The Australian stock market closed sharply higher, ending a four-day losing streak. Stocks started off firm, tracking a rebound on Wall Street overnight, and extended gains after Australia's regulator cleared BHP's bid for Rio. The benchmark S&P/ASX 200 index closed up 194.1 points or 4.2% at 4,794.6, recouping most of the losses that it posted on Tuesday. The broader All Ordinaries index jumped 183.2 points or 4.0% to finish at 4,814.5.

In economic news, manufacturing activity fell for a fourth straight month in September. The Australian Industry Group-PricewaterhouseCoopers Australian performance of Manufacturing Index rose 0.2 index points to 47.2 points in September.

Meanwhile, preliminary estimates for September indicated that the commodity prices index rose by 0.5% in SDR terms, following a revised 2.0% increase in August, according to the Reserve Bank of Australia.

The New Zealand stock market closed sharply higher, reversing most of Tuesday's losses. The benchmark NZX 50 index closed up 97.74 points or 3.16% at 3,187.96 after losing as much as 3.18% on yesterday. The broader NZX All Capital index jumped 100.40 points or 3.12% to finish at 3,214.87.

The South Korean market pared early gains and closed volatile session slightly lower. The Korea Composite Stock Price Index or Kospi closed down 8.39 points or 0.58% at 1,439.67, extending losses for the fourth straight trading session.

On the economic front, South Korea's trade deficit narrowed to US$1.9 billion in September from US$3.81 billion a month before, mainly due to falls in crude oil and raw material prices, according to a government report. Exports rose 28.7% from a year earlier, while imports shot up 45.8%, the Ministry of Knowledge Economy said Wednesday.

Meanwhile, the National Statistical Office announced that the Consumer Price Index increased 5.1% on year in September, slower than the 5.6% recorded in the previous month.

In India, a bout of volatility was witnessed on the bourses in mid-afternoon trade, with the key benchmark indices paring gains. The BSE 30-share Sensex closed up 196.24 points or 1.52% to 13,055.67. The S&P CNX Nifty closed up 0.78% to 3,951.7

Markets in China, Hong Kong, Indonesia, Malaysia, Singapore, the Philippines and Pakistan were closed for public holidays.

Elsewhere, Taiwan's Taiex closed up by 0.78% to 5,746.01 while Thailand Set plunged by 0.35% to 594.45.

In other regional market, European shares started the last quarter of the year on an upbeat note Wednesday, with deal hopes helping the mining sector and banks advancing amid fresh hopes that a U.S. bailout plan will succeed after all.

In the opening trade, the U.K. FTSE 100 index rose 1.2% to 4,961.39, the French CAC-40 index advanced 0.4% to 4,047.11 and the German DAX 30 index inched up 0.1% to 5,835.11. At 10.53 GMT, the U.K. FTSE 100 index was hovering around the same level as it was up by 1.2% to 4,960.81, the German DAX 30 index lost 0.4% to 5,805.34 and the French CAC-40 index gained 0.3% to 4,044.28.

On the economic front there was slew of economic events. Starting with Germany, the retail sales posted their biggest rise in nearly two years in August, offering a ray of light to Europe's largest economy as it battles to avoid recession.

Total sales including cars and turnover at gas stations rose by 4.6 percent on the month in August. The monthly rise, which followed two sizeable falls in the previous two months, was the biggest since December 2006 -- a month of unusually high spending that preceded a 3% rise in sales tax in January 2007. If we exclude December 2006, the monthly increase in August in German retail sales was the biggest since March 1998. On the year, sales fell by 0.6 percent in August.

In U.K, the manufacturing sector contracted much more sharply than expected in September, as activity levels wilted to their lowest level for 17 years. Data from market sources showed that the Purchasing Managers Index for the U.K’s manufacturing sector dropped to a reading of 41.0 in September from a downwardly revised 45.3 in August - the lowest reading since the series began in 1992.

Meanwhile, the U.K’s services output rose 0.6% on the month in July but stagnated in the quarter to July - the first time there was no quarterly growth in production since 2002. The 0.6% monthly rise in output comes after services output declined 0.5% in June and 0.4% in May. In the three months to June, services output had increased 0.2% and it climbed 0.4% in the quarter to May.

Looking at the whole region the unemployment rate showed an increased in August in the countries signaling that declining economy is starting to translate into lay-offs.

According to the latest employment survey by Euro stat the seasonally adjusted unemployment rate has ticked up to 7.5% from the 7.4% rate in the previous three months, once July’s reading has been revised up from the 7.3% previously estimated. Spanish labour market has suffered the largest impact from the crisis as the construction boom has come to an end, which has produced local unemployment to rise to 11.3% in August from 8.3% in August 2007. On the bright side, Germany, the largest EU economy, shows a rather healthy labour market, with its unemployment rate falling to 7.2% in August, from 7.3% in July.

Manufacturing activity in the euro zone contracted for the fourth straight month in September, as production and new orders fell at the sharpest rate since the fourth quarter of 2001. The PMI for the euro zone's factory sector fell to 45.0 in September from 47.6 in August. Output shrank faster than expected in Germany, France, Italy and Spain, adding to fears that the euro zone is already in recession and that the downturn is set to be deeper than expected.

Looking ahead the day is scheduled to release MBA weekly mortgage application data, which will be followed by ADP employment change for the month of September. In the evening we have statistics on the construction spending which will be followed by ISM manufacturing survey for the September.