Asian markets awaits US non-farm payroll data

Nikkei, New Zealand continue losing while Sensex, Shanghai add up more gains

Stock market in Asian region closed mixed on Thursday, 2 July 2009, with the overnight surge on Wall Street and renewed hopes of an economic revival prompting investors to go in for some selective buying. Towards the end, the mood has turned a bit cautious in most of the markets as investors prepare for more news on the U.S. economy.

On Wall Street, the major indices closed modestly higher but off their highs of the session Wednesday as investors greeted a new quarter and a whirlwind of economic data ahead of the government's June employment report.

The new quarter kicked off with a new round of economic data. First, ADP estimated that there were 473,000 jobs lost in the private sector in June. However, job losses were down from a downwardly revised 485,000 in May and also marked the least number of estimated jobs lost since October 2008. ADP's report comes ahead of the government's unemployment data which is expected to show unemployment rose to 9.6% on Thursday.

Meanwhile, the National Association of Realtors said pending home sales increased by 0.1% in May, after an upwardly revised 7.1% increase the month prior.

Also, the Institute for Supply Management said its manufacturing index rose to 44.8 in June from 42.8 the month prior, although any figure less than 50 still represents a contraction.

The Dow Jones Industrial Average added 57.06 points, or 0.7%, to 8504.06, while the S&P 500 climbed 4.01 points, or 0.4%, to 923.33. The Nasdaq Composite tacked on 10.68 points, or 0.6%, to 1845.72.

In the commodity market, crude oil fell for a third day before a report forecast to show the U.S. unemployment increased last month, signaling the world’s largest energy user remains mired in recession.

Crude oil futures fell off earlier gains, ultimately losing 58 cents, to settle at $69.31 a barrel, after the Energy Department's Energy Information Administration reported that gasoline and distillate inventories increased more than expected last week. That overshadowed a report by The American Petroleum Institute late Tuesday that said U.S. crude inventories dropped by 6.8 million barrels last week, helping crude oil futures to rebound early Wednesday, gaining more than $1.50 before it moved into negative territory.

U.S. fuel demand in the four weeks ended June 26 fell 5.8 percent from a year earlier, while demand for distillate fuel including heating oil and diesel, fell 9.4 percent, according to a Department of Energy report yesterday.

Crude oil for August delivery fell as much as $1.14, or $1.64, to $68.17 a barrel in electronic trading on the New York Mercantile Exchange. It traded $68.23 at 10:41 a.m. London time.

Brent crude oil for August settlement declined as much as $1.09, or 1.6 percent, to $67.70 a barrel on London’s ICE Futures Europe exchange. It was at $67.97 a barrel at 10:38 a.m. in London.

Gold declined in Asian trading as a gain in the dollar curbed the precious metal’s appeal as an alternative investment. Gold for immediate delivery fell 0.3 percent to $938.11 an ounce at 3:16 p.m. in Singapore.

In the currency market, US dollar recovers strongly on supportive comments from China again but after all, financial markets are generally indecisively mixed ahead of key events of ECB rate decision and US Non-Farm Payroll report today.

The Japanese yen steady against major currencies on Wednesday Thursday. The Japanese currencies were quoted at 96.48 against the US dollar, down from Wednesday’s quote of 96.77-79 yen

The Hong Kong dollar was trading at HK$ 7.7501 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 trade, the Australian dollar closed weaker on Thursday after the nation recorded its largest trade deficit in 10 months. At the local close, the dollar was trading at $US0.8028, down from Wednesday's close of $US0.8062. During the local session, the unit moved between $US0.8095 and $US0.8030.

In Wellington trades, the New Zealand dollar was testing support at US63.80c late today with dealers citing Fonterra's latest Internet auction as a factor. The NZ dollar was US63.79c at 5pm from US64.44c at the same time yesterday. It fell during the Wednesday night session and traded in a range between US63.79c and US64.16c during the domestic session, ending at the bottom of the range.

Reversing earlier gains, the South Korean won ended at 1,269.5 won against the greenback, down 1.8 won from Wednesday's close, as importers snapped up the dollar to cover debts. In early trading, the Korean won rose to as high as 1,257.5 won to the dollar on reports that South Korea's foreign exchange reserves rose to a nine-month high in June

The Taiwan dollar weakened against the greenback. The Taiwan dollar fell against the US dollar as it was trading lower at NT$ 32.8210, down by NT$ 0.0360 from Wednesday’s close of NT$32.7850.

Coming back in equities, Asian shares ended mostly lower, with investors locking in profits ahead of U.S. jobs data due out later in the day.

In Japan, the stock erased early gains on cautious ahead of the release of the key U.S. non-farm payroll report that could shed light on the pace of recovery in the world's largest economy. At the closing bell, the Nikkei 225 Stock Average index erased 63.78 points, or 0.64%, to 9,876.15, while the broader Topix index fell 4.28 points, or 0.5%, to 924.

On the economic front, the Ministry of Finance said Japanese investors purchased a net 1.533 trillion yen in foreign bonds and also a net 150.5 billion yen worth of foreign stocks for the week ending June 27. Foreign investors sold a net 195.1 billion yen in Japanese stocks and also sold a net 666.7 billion yen in Japanese bonds last week.

The Bank of Japan said the monetary base in Japan expanded by 6.4% on year in June to standing at 93.639 trillion yen. The seasonally adjusted monetary base fell an annual 8.8% to 94.448 trillion yen. For the second quarter, the monetary base was up 7.5% on year.

In Mainland China, stock index spurted with gains in financials and energy as China’s manufacturing added to signs the global recession is easing and hopes record bank lending will revive the world’s third-largest economy and on report power demand in the nation’s manufacturing hub of Guangdong rose in June. Resources related shares zoomed on higher commodities prices

The Shanghai Composite Index, which covers both A shares and B shares on the Shanghai Stock Exchange, added 1.73%, or 52.1 points, to 3,060.25, while the Shenzhen Component Index rose 1.03%, or 121.97 points, to 11,970.72.

In Hong Kong, the stock market tumbled on first trading day of the third quarter, 2 July 2009, reversed morning gains, with losses from financials and properties as investors prompted for profit booking amid cautious ahead US non-farm payrolls tonight and second-quarter earnings season looms. The Hang Seng Index retreated 200.68 points, or 1.09%, to 18,178.05, while the Hang Seng China Enterprise Index leaped 9.28 points, or 0.08%, to 10,971.89.

In Australia, the Australian stock market pared back morning gains to finish the session higher, despite a positive lead from Wall Street, as gains from miners and resources were offset by losses from energy shares. At the closing bell, the benchmark S&P/ASX200 index added 3.3 points, or 0.09%, to 3,877.3, meanwhile the broader All Ordinaries rose 2.9 points, or 0.07%, to 3,875.2.

On the economic front, the Australian bureau of statistic said in a repot that Australia’s May Trade Balance plummeted to a deficit of A$556 million from a negatively revised deficit of A$282 million in April, performing five times worse than that which was expected as exports of coal, wheat and natural gas fell. Imports fell 4% to A$20.95 billion in May. Imports of capital goods, such as trucks and machinery, dropped 14% and imports of consumer goods slipped 1%. Exports declined 5% from April to A$20.39 billion.

In New Zealand, equities on the New Zealand stock market ended weak. The benchmark index registered its second consecutive decline in a row. The NZX50 ended down 0.44% or 12.18 points to 2768.19. The NZX 15 declined 0.67% or 34.07 points to close at 5086.57.

On the economic front, a 13.5 percent increase in the price of sawn timber in June helped counter a 3.3 percent decline in dairy prices in the ANZ Commodity Price Index .The ANZ Commodity Price Index increased 0.2 percent in June from the month earlier. This is the fourth consecutive monthly rise in the index. However, the index is down 27.9 percent on June last year.

In South Korea, stocks closed lower as investors await the release of U.S. job data for clues about an economic recovery. After volatile trading, the benchmark Korea Composite Stock Price Index (KOSPI) edged down 0.18 point to 1,411.48.

In Singapore, the stocks shrugged off early high as investors selling for profit on cautious ahead of nation’s PMI data for June and ahead US non-farm payrolls tonight and second-quarter earnings season looms. The blue chip Straits Times Index melted 31.73 points, or 1.35%, to 2,320.82.

In Taiwan, stock market consolidated its recent gains as it moved ahead for third straight session, led by gains in major LCD makers after stronger demand from China. Gains were also supported by the intensified efforts by the Financial Supervisory Commission (FSC) to strengthen cross-Taiwan Strait economic and financial exchanges; it decided to allow local financial institutions to offer wealth-management services to Chinese mainlanders.

The main Taiex share index carried its winning streak in third session as the Taiex index stepped up 88.56 points or 1.35%, closing the day at 6667.53, strongest closing since last 6 June 2009 when market closed at 6856.74.

In Philippines, the stock market rallied for the first time in the week, scaled up by gains in the index linked counters as investors sentiments was enhanced by the gains in Wall Street overnight. At the concluding bell, the benchmark index PSEi increased 0.21% or 5.15 points to 2,438.04, while the All Shares index fell 0.29% or 4.70 points to 1,562.47.

In India, the key benchmark indices provisionally ended with small losses in what was a choppy trading session. Fears the government may make dividend taxable in the hands of shareholders weighed on investors sentiment after the finance ministry's annual economic survey suggested a rationalization of the dividend distribution tax.

Suggesting sweeping tax reforms, the Economic Survey released ahead of Monday's (6 July 2009) budget announcement for the fiscal year ending in March 2010, asked for rationalising the dividend distribution tax (DDT) so that dividend is taxed in the hands of receiver. As per the current dispensation, a company pays tax on dividend declared to shareholders, which is called dividend distribution tax. The dividend is tax-free in shareholders hand.

The survey also called for a review and phasing out of surcharges, cesses and transaction taxes such as commodities transaction tax (CTT), securities transaction tax (STT) and fringe benefit tax (FBT).

The Economic Survey said economy could grow around 7% in the year ending March 2010 if the US economy recovers by September 2009. It further said economy could return to 8.5-9% growth in medium terms if reforms are pursued. It said government should free diesel and petrol prices at the earliest. The report said government should take advantage of the recent low price in oil costs to free petrol and diesel prices.

The Economic Survey has called for introduction of standardized credit default swaps on exchanges subject to strict contols, introduction of exchange traded derivatives such as interest rates swaps, foreign direct investment in multi format retail starting with food retail, raising foreign equity share in insurance to 49%, rationalising dividend distribution tax and revival of disinvestment plan to generate at least Rs. 25,000 crore annually. The survey has also called for reforms in petroleum, fertilizers, food subsidies to reduce leakages, ensure targeting. The survey also called for an auction of third-generation mobile phone spectrum.

It also called for implementation of a goods and services tax (GST) by April 2010 to maximise revenues and simplify the tax regime. It also called for "greater urgency" to removing hurdles to investment in infrastructure by government and the private sector. The survey said inflation is no longer a worry and called for an urgent return to the targeted fiscal deficit of 3%.

The survey said it be challenging to fund $500 billion of planned spending on roads and power plants over five years as the economic slowdown and the global financial crisis have made it difficult to raise funds

The survey has also called for passage of pending bills on pension, insurance and forward contract reforms. The BSE 30-share Sensex closed up 13.02 points or 0.09% to 14,658.75. The S&P CNX Nifty ended higher 7.95 points or 0.18% to 4,348.85.

Elsewhere, Malaysia's Kula Lumpur Composite index went down 0.06% or 0.69 points to 1078.71 while Indonesia’s Jakarta composite index ended the day higher at 2065.75.

In other regional market, European shares fell in early trading Thursday as investors awaited an interest-rate decision from the European Central Bank with crucial U.S. jobs data also on tap. At the regional level, the German DAX index dropped 1.69% or 82.64 points to 4,823, while the French CAC-40 index declined 1.32% or 42.57 point to 3,174 and the U.K.’s FTSE 100 index fell 0.85% or 37.09 point to 4,304.

Looking forward, the focus of the day will be on ECB rate decision and US Non-Farm Payroll report today. ECB is widely expected to leave benchmark interest rates unchanged at 1.00% today. From US, markets will expect the release of regular initial jobless claims and factory orders in addition to non-farm payrolls.