Asian Markets finds little stress ahead of Stress Test

Nikkei catch up regional rally while Hang Seng, Taiex, Shanghai notched gains for a sixth straight session

Stock market in Asian region closed mostly higher on Thursday, 7 May 2009, as investors cheered better-than-expected news about U.S. jobs and banks. Shares of financials and properties led the market on growing confidence about the global economic outlook, while exporters and automakers zoomed as yen softened against greenback.

On Wall Street, the stock markets closed modestly higher with financials out in front; particularly those whose capital needs were in the stress test discussion. The Dow Jones Industrial Average climbed 101.63 points, or 1.2%, to 8512.28, while the S&P 500 rose 15.73 points, or 1.7%, to 919.53. The Nasdaq edged up 4.98 points, or 0.3%, at 1759.10.

The day started on a positive note, as ADP estimated that there were 492,000 jobs lost in the private sector in April, well below the 645,000 expected and a downwardly revised 708,000 in March. Financials were at the forefront of advances. The Financial Selects Sector SPDR, which tracks the financial stocks in the S&P 500, and the KBW Bank Index were higher by 8% and 11.5%, respectively, a day before the release of the so-called stress test results.

In the commodity market, crude oil traded little changed near $56 a barrel after rising 4.6 percent yesterday on a smaller- than-expected increase in U.S. stockpiles and as equities advanced to a four-month high. Overall U.S. crude supplies rose to 375.3 million barrels last week, the highest since 1990, the Energy Department said.

Gasoline supplies fell 167,000 barrels to 212.4 million in the week ended May 1, the Energy Department report showed. Supplies of distillate fuel, a category that includes heating oil and diesel, rose 2.43 million barrels to 146.5 million last week, the highest since October 2006, according to the department.

Crude oil for June delivery fell 16 cents to $56.18 a barrel on the New York Mercantile Exchange at 10:41 a.m. in Sydney. Yesterday, the contract climbed $2.50 to settle at $56.34, the highest settlement since 14 November 2009.

Brent crude oil for June settlement increased $2.03, or 3.8%, to end yesterday's session at $56.15 on London's ICE Futures Europe exchange, the highest since 10 November 2009.

Gold traded little changed in Asia as investment demand faltered after gains in equities dimmed demand for the precious metal as an alternative investment. Gold for immediate delivery rose 0.1% to $911.79 an ounce at 9:51 a.m. Singapore time, up 2.9% for the week.

In the currency market, commodity currencies extend recent rally on better than expected employment data from Australia and New Zealand as well as strong rally in Asian stocks.

The Japanese yen softened against its most major counterparts on Thursday on speculation U.S. banks need less new capital than was projected, sapping demand for Japan's currency as a refuge from the global financial crisis. The Japanese currency quoted at 98.45 against the US dollar.

The Hong Kong dollar was trading at HK$ 7.7502 against the dollar. Actually The Hong Kong dollar is pegged at HK$ 7.8 to the U.S. dollar but can trade between HK$ 7.75 and HK$7.85 to the U.S. dollar.

In Sydney trades, the Australian dollar shot up a US cent to a new seven-month high on Thursday after a surprise jump in employment threw into doubt the need for more interest rate cuts in the next few months. The Aussie soared as high as $US0.7563, compared to $US0.7468 before the data and a low of $US0.7333 on Wednesday. At the close, the dollar had pulled back to $US0.7519, but was still up 6% in the past seven sessions.

In Wellington trades, the New Zealand dollar got a lift today from better-than-expected unemployment data. The unemployment rate rose to a six-year high of 5 percent in the March quarter, but it was a smaller rise than economists forecast, which suggested to some that the Reserve Bank may not cut interest rates further. The NZ dollar rose from US58.30c to US59.10c on the news. It was back US58.85c by 5pm, which was still up from US57.75c yesterday.

The South Koran won ended at 1,262.3 won against the U.S. dollar, up 14.7 won from Wednesday's close, after the central bank said that the country's foreign exchange reserves rose by the largest monthly amount over three years in April to $212.48 billion.

The Taiwan dollar continued to rally further. The Taiwan dollar strengthened against the US dollar as it was trading higher at NT$ 33.1150, up by NT$ 0.650 from Wednesday's close of NT$33.180.

Coming back in equities, the Asian markets stretched their winning streak, with financials again leading as investors chose to look at the bright side of economic and earnings data while they await results of the stress tests on U.S. banks. Japanese shares surged, catching up as trading resumed for the first time this week after the Golden Week holidays. Hong Kong, Taiwanese and Chinese shares notched gains for a sixth straight session.

In Japan, the stock market finished the session sharply higher on the first day of trading after the country's "Golden Week" holidays, with broad based gain across the board, as investors cheered better-than-expected news about U.S. jobs and banks. Shares of financials and properties led the market on growing confidence about the global economic outlook, while exporters and automakers zoomed as yen softened against greenback.

The Nikkei 225 Stock Average index climbed 408.33 points, or 4.55%, to 9,385.70, while the broader Topix index climbed up 39.08 points, or 4.6% to 886.

On the economic front, the Bank of Japan said in the statement that the monetary base in Japan gained 8.2% in April, standing at 95.62 trillion yen, following a 6.9% annual gain registered in March. Banknotes in circulation were up 1% on year reaching to 76.48 trillion yen, while coins in circulation eased 0.2% to 4.52 trillion yen. Current account balances jumped an annual 81.2% to 14.61 trillion yen, including a 69.7% rise in reserve balances. Seasonally adjusted, the monetary base was up 17.4% on year in April, coming in at 95.597 trillion yen.

In Mainland China, shanghai stock market recouped morning losses to finish the choppy session marginal higher, endured gains for six days in row, with rebound in the shares of energy and financials after the People's Bank of China said the economy was “better than expected” in the first quarter and the central bank pledged to keep money flowing into the financial system to sustain growth.

The Shanghai Composite Index, which covers both A shares and B shares on the Shanghai Stock Exchange, rose 0.2%, or 4.92 points, to close at 2,597.44. The Shenzhen Component Index on the smaller Shenzhen Stock Exchange slid 0.4% or 40.13 points to close at 10,108.94 points.

On the economic front, the State Council said China would give 20 billion Yuan this year in interest rate subsidies on bank loans to help industries including steel; petrochemical and automobile companies upgrade their technology.

In Hong Kong, the stock market finished the session higher, extending winning streak for sixth day in row, as gains in the shares of financials stocks on bolstering expectations for a recovery in the Chinese economy would revive demand and after U.S. Treasury Secretary Timothy Geithner said bank stress- test results will reassure investors. Metal and energy stocks leaped as metal and crude oil prices ballooned amid optimism the global economy was on the recovery path.

The Hang Seng Index spurted 383.32 points, or 2.28%, to 17,217.89, while the Hang Seng China Enterprise Index, which tracks H shares of Chinese companies, rose 146.72 points, or 1.5% to 9,896.93.

On the economic front, Hong Kong's official foreign currency reserve assets increased by 3.81% in April amounting to US$193.4 billion at the end of April 2009 compared to US$186.3 billion in March.

Including unsettled forward contracts, the foreign currency reserve assets of Hong Kong at the end of April 2009 stood at US$194.0 billion (end-March 2009: US$186.3 billion).

In Australia, the stock market finished the session higher, touched six-month closing high buoyed by miners, materials and resources, and energy stocks as metal and crude oil prices ballooned amid optimism the global economy was on the recovery path. Financials spurted after their peers on Wall Street soared. Meanwhile better than expected third quarter earning from Newscorp's fueling the rally.

The benchmark S&P/ASX200 index has gained 71.60 points, or 1.85%, to 3,938.7, while the broader All Ordinaries rose 72 points, or 1.87%, to 3,912.10.

On the economic front, the Australian Bureau of Statistics said unemployment rate has dropped from 5.7% in March to 5.4% in April.

In New Zealand, the share market ended the day in the positive region for the fourth day in a row. The stock market rose today, after it held back its gains slightly yesterday following a surge for the first two days of the week. Most of the Asian markets were also trading in the green terrain although they lost momentum relative to the early days of the week.

At the closing bell, the benchmark NZX50 advanced 0.83% or 23.514 points to close at 2854.87. The NZX 15 was up 0.68% or 35.454 points to close at 5263.90.

On the economic front, New Zealand's jobless rate continued to rise in the first quarter, although less than expected, as per Statistics New Zealand. In seasonally adjusted terms, the labour market continued to weaken in the March 2009 quarter, with the number of people unemployed continuing to rise. The unemployment rate increased for the fifth consecutive quarter, to reach 5.0 percent. Both the labour force participation rate and the number of people employed fell.

In South Korea, South Korean stocks closed 0.55% higher after swinging in and out of positive terrain as investors took comfort from Wall Street gains on eased fears over the results of a stress test on U.S. banks. The benchmark Korea Composite Stock Price Index (KOSPI) advanced 7.63 points to 1,401.08, the highest level since the beginning of this year.

In Singapore, the stocks were finished the session higher, extending winning streak for sixth consecutive day, led by banks and properties. Metal and commodity stocks were firmer on the back of strong rally in commodity prices. Financial stocks outperformed after United Overseas Bank and Oversea-Chinese Banking Corporation reported yesterday first-quarter earnings that beat forecasts. Meanwhile, buying pressure was evident in manufacturing and multi industries issues. The blue chip Straits Times Index leaped 62.57 points, or 2.87%, to 2,241.60.

On the economic front, Singapore's central bank, which devalued the country's currency last month, said monetary policy remains “appropriate” amid signs the economy may be past the worst of its recession. The central bank expects consumer prices to remain unchanged or fall 1% this year. Inflation slowed to a 21-month low of 1.6% in March.

In Taiwan, stock market in Taiwan experienced a volatile trading day, as bourses managed to end the day slightly higher after slipping about 100 point lower during its intraday movement. Investors capped the gains as they locked in profits from the recent rally. Financial shares continued as leader while technology stocks showed some weakness.

The main Taiex share index crawl further as Taiex added 6.17 points or 0.09%, closing the day at 6572.87, highest closing since 8 September 2008 when market closed the day at 6658.69, bringing gains in the past six days to 976 points, the most since 18 January 1991.

On the economic front, the Cathay island-wide home sales index, collaboratively compiled by the Real-estate Center of the National Chengchi University (NCCU) and Cathay Construction Company, slid to 16.26 points in the first quarter, down 68.46% year-on-year with most regions hitting record lows since the second quarter of 2003.

In other economic news, the number of people on the dole declined to 114,000 in April after reaching a peak of 124,000 in March, indicating that the country's jobless situation is improving, the Council of Labor Affair's (CLA) said in a statement.

In Philippines, the stock market continued to take an uphill, buoyed by the hefty gains in the index-linked counter as investor's became optimistic by the overnight gains on Wall Street. At the concluding bell, the benchmark index PSEi escalated 1.48% or 32.69 points to 2,238.92, while the All Shares index rose 0.96% or 13.80 points to 1,436.63.

On the economic front, debt watcher Fitch Ratings has affirmed its Philippine ratings but warned that a downgrade was possible if the government failed to increase revenues and change its spending tack once the economy recovers. A sharp drop in exports, which will be "only partially offset" by weaker imports, plus a likely 6.8% drop in remittances means the county can expect to grow by just 0.1% this year, Fitch said.

Fitch noted the government's response to the global downturn — the P330-billion Economic Resiliency Plan — but said a drop in tax revenues could put pressure on the deficit, the target for which it said was P229 billion excluding privatization. Fitch noted that state revenues for the period were down 4%, the weakest in 22 years, which could lead to "fiscal policy adjustments" later in the year and below-target spending.

However, commenting on the growth forecast, the Philippines official's expects GDP to grow by 2 to 3% this year, a rate superior to anything in East Asia other than China and Vietnam, and a sharp contrast to the negative numbers elsewhere. The relatively strong performance this year will be largely due to what is also the Philippines' biggest long-term weakness — reliance on overseas worker remittances, which account for 10% of GDP and the bulk of foreign exchange earnings.

In India, firm global markets lifted the domestic bourses in what was a highly volatile trading session. Metal stocks surged on rally in global metal prices. Index heavyweight Reliance Industries was volatile. The BSE 30-share Sensex was up 164.19 points, or 1.37%, to 12,116.94. The S&P CNX Nifty added 58.85 points, or 1.62%, to 3,683.90.

Elsewhere, Malaysia's Kula Lumpur Composite index was down 0.05% or 0.49 points to 1023.47 while Indonesia's Jakarta composite index added 1.70% or 30.52 points ending the day at 1828.85.

In other regional market, European shares climbed on Thursday, as banks rose and investors welcomed updates from Unilever, Axa and others. In regional equity markets, the U.K. FTSE 100 index rose 1.4% to 4,459.07, the German DAX 30 index advanced 1.1% to 4,932.22 and the French CAC-40 index climbed 1% to 3,317.55.

Looking ahead for the day, all eyes will now turn to European Central Banks rate decision and press conference today. ECB is expected to slash its main refinancing rate by 25 bps to 1%. Emphasis has been put on the potential non-standard measures to be employed by ECB and these will likely be extension of refinancing maturity to 12 months from 6 months and enhancement of loan collaterals. Bank of England is expected to keep interest rate unchanged at 0.5% and continue working on the asset purchase program announced before.

Another major focus today will be Fed's announcement of announce result on bank stress test. Treasury Secretary Timothy Geithner stated earlier that while some banks will need to raise more capital, 'none of those 19 banks are at risk for insolvency' and 'the results will be, on balance, reassuring'. New said that Bank of America, Citigroup, Wells Fargo and GMAC are among the firms needing to raise capitals.