Asian markets continue to cheer

Sydney, New Zealand added more than 1% while Shanghai, Sensex ended little lower

Stock markets in Asian region closed higher for third session on Thursday, 16 July 2009, following the strong earnings reports from leading U.S. firms and some fairly encouraging news on the economic front, Investors across region seemed busy in buying activity after renewed optimism about a global economic revival following the U.S. Federal Reserve's announcement that it expects a less severe economic contraction in 2009 and a moderately stronger recovery in 2010. Stocks gained further after gained after official data showed the Chinese economy expanded at a faster-than-expected pace of 7.9% in the second quarter over the year-earlier period

On Wall Street, the major indices surged more than 3% Wednesday as the market welcomed an Intel earnings surprise, a fresh round of economic data and minutes from the latest Federal Open Market Committee meeting. The Dow Jones Industrial Average gained 256.72, or 3.1%, to 8616.21, while the S&P 500 climbed 26.84 points, or 3%, to 932.68. The Nasdaq Composite advanced 63.17 points, or 3.5%, to 1862.90.

Industrials, energy, financial and tech stocks were all swept up in a cross-sector rally after earnings and economic data offered a promising glimpse of the state of the economic recovery. Intel, which surpassed earnings expectations and raised guidance late Tuesday, was one of the greatest gainers on the Dow, rising 7.3%.

The FOMC posted the eagerly awaited minutes for its June 24 meeting Wednesday afternoon. The Fed now expects the economy to shrink by a less severe range of 1% to 1.5% for 2009, against a previously forecast range of 1.3% to 2%. However, it also raised its expectation for joblessness, predicting unemployment could climb to 10.1% after its estimate of 9.6% at the May meeting.

The committee also raised its inflation projection to 1.2% to 1.8% for 2010 to reflect increased energy prices. Board members and FOMC participants expect that the Fed won't have to extend a number of emergency facilities beyond 1 February 2010, if recent improvements in the market continue. However, they're prepared to extend the terms of some or all programs as needed if financial stresses don't moderate.

In the commodity market, crude oil was trading little changed near a one-week high as equities rallied after China’s economy showed signs of rebounding from its weakest growth in almost a decade.

China overtook Japan as the world’s second-largest stock market by value for the first time in 18 months, as government spending and record bank lending boosted share prices. China’s industrial production increased 10.7% in June from a year earlier, the largest gain in nine months excluding seasonal distortions. Retail sales climbed 15%. U.S. crude inventories fell 2.81 million barrels to 344.5 million last weeks, the Energy Department said yesterday.

Crude oil for August delivery was at $61.38 a barrel, down 16 cents, on the New York Mercantile Exchange at 2:58 p.m. in Singapore. Earlier, the contract rose as much as 47 cents, or 0.8%, to $62.01 a barrel. Prices jumped 3.4% yesterday to $61.54, the highest settlement since 7 July 2009.

Brent crude for August settlement was at $62.95 a barrel, down 14 cents, on London’s ICE Futures Europe Exchange at 2:58 p.m. in Singapore. The more-actively traded contract for September, which moves to the front month tomorrow, slipped 14 cents to $63.38.

Gold declined for the first time in six days as the dollar rebounded, reducing the appeal for the precious metal as an alternative investment. Gold for immediate delivery fell 0.3% to $936.55 an ounce at 12:19 p.m. in Singapore after touching $942.21 yesterday, the highest since 1 July 2009. Gold futures for August delivery slipped 0.3% to $936.40 an ounce on the New York Mercantile Exchange’s Comex division. The contract climbed 1.8% yesterday, the biggest one-day gain for the active contract since 20 April 2009.

In the currency market, risk appetite was lifted in early Asian session by strong rally in US stocks as well as strong growth report from China. However, the momentum s cannot sustain towards the end of the session after news that New Zealand's credit rating outlook was downgraded and CIT won't be bailed out. Profit taking is seen on major currencies after yesterday's strong rally against dollar and yen.

The Japanese yen softened against major currencies on Thursday. The Japanese currencies were quoted at 94.23 against the greenback.

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 trade, the Australian dollar struggled to hold on to early gains on Thursday after news that a medium-sized US bank may soon file for bankruptcy slightly dented demand for riskier assets. The dollar slipped back to end local trading at $US0.7966, virtually unchanged from yesterday's close of $US0.7965, and down from a day's high of $US0.8053.

In Wellington trade, the New Zealand dollar was knocked lower by news that credit rating company Fitch has changed the outlook for the country's credit rating to negative from stable. While Fitch is not as powerful as Moody's Investors Service or Standard and Poor's it reminded traders of the country's high debt levels and reliance on borrowing from offshore.

The NZ dollar fell from US 64.63 cents to US 63.90 cents at 5 pm. It was US 64.07 cents at 5pm yesterday and opened this morning at US 65 cents when equity markets around the globe posted gains.

The South Korean won ended at 1,265.7 won against the dollar, up 12.8 won from Wednesday's close, as offshore investors unloaded the greenback.

The Taiwan dollar strengthened against the greenback. The Taiwan dollar gained against the US dollar as it was trading higher at NT$ 32.9590, up by NT$ 0.0140 from Wednesday’s close of NT$32.975.

Coming back in equities, most of the Asian equity markets ended higher, following a strong rally overnight on Wall Street, but robust economic data from China failed to lift shares in Shanghai as investors there locked in some profits.

In Japan, the benchmark indices was lifted by gains amongst the exporters, resources, and financials following a strong rally on Wall Street, rebound in metal and crude oil prices, and softening yen against major currencies. The investors’ sentiments reinforced after better-than-expected results by Goldman Sachs and Intel boosted expectations company earnings will grow. At the closing bell, the Nikkei 225 Stock Average index gained 0.81%, or 74.91 points, to 9,344.16, while the broader Topix index rose 0.7%, 5.88 points, to 872.25.

On the economic front, Japan’s Ministry of Economy, Trade and Industry said today that tertiary industrial activity in Japan fell a seasonally adjusted 0.1% month-on-month in May, after rising 2.2% in the preceding month. Year-on-year, the tertiary industrial activity was down 6.8% in May, on an unadjusted basis, faster than a 6.1% fall in the preceding month. Moreover, the activity index has been declining continuously since August last year.

A report from the International Monetary Fund revealed yesterday that the Japanese economy is expected to contract 6% this year, but expand 1.75% in the next year. Further, the IMF forecasts that inflation in Japan will remain negative until 2011.

The International Monetary Fund has held Japan’s outlook to remain uncertain despite recent tentative signs of stabilization at home and abroad. Staff projects GDP to fall by 6% in 2009, before expanding by 1¾% in 2010. A sustained recovery will likely emerge during the course of 2010 but will hinge critically on improvement in overseas lending conditions and trade. The IMF has projected the country’s inflation to remain negative until 2011. The current account surplus is expected to fall to 1½% of GDP in the short term, well below the levels typical earlier this decade.

The Bank of Japan extended its corporate funding support measures beyond their planned expiry in September, and it kept interest rates on hold at 0.1% amid signs the world’s second-largest economy has ended its slide.

In Mainland China, stock market erased early gains to eventually close lower after swinging between gains and losses snapping two days of winning streak, as investors caution the rally has overvalued the prospect for earnings growth. Materials, Industrials, and energy shares closed below the line amid profit booking. Retailers and healthcares dropped in line with market.

The Shanghai Composite Index, which covers both A shares and B shares on the Shanghai Stock Exchange, dropped 0.15%, or 4.80 points, to 3,183.74, while the Shenzhen Component Index added 0.02%, or 2.63 points, to 13,081.89.

On the economic front, the National Bureau of Statistics said China’s economic growth accelerated in the second quarter amid a stimulus-fueled surge in consumer spending and factory output and investment. China GDP expanded by 7.9% in the quarter ended June 2009 from a year earlier, up from 6.1% growth witnessed in quarter ended March 2009.

The gross domestic product (GDP) grew 7.1% in the first half to 13.99 trillion yuan from the same period a year ago. China’s consumer price index (CPI), a main gauge of inflation, declined 1.7% in June from a year earlier.

The National Bureau of Statistics said China’s retail sales in the first half-year rose 15% to 5.87 trillion Yuan from a year earlier. Retail sales in June 2009 rose by 15% from May 2009. Real (inflation-adjusted) retail sales growth was recorded at 16.6% in the first half year. Urban sales of consumer goods expanded 14.4% to 3.98 trillion Yuan, while sales in rural areas increased 16.4% to 1.89 trillion Yuan.

The bureau also said China’s industrial output expanded 10.7% in June2009 from a year earlier, faster than the 8.9% rate in May2009. The industrial output growth raises to 7% for the first half of year2009. The figure rose to 9.1% in the second quarter from 5.1% in the first quarter.

In Hong Kong, the benchmark index endured gains for third consecutive day, on tracking strong cues from Wall Street overnight and mainland market, on optimism government stimulus policies around the world will revive the global economy. Financials and commerce & industry stocks led the rally after data showing China’s economy grew by a better-than-expected margin in the second quarter. The Hang Seng Index spurted 103.21 points, or 0.57%, to 18,361.87, while the Hang Seng China Enterprise Index surged 41.81 points, or 0.38%, to 10,902.47.

In Australia, the stock market surged, finishing just shy of the 4,000 point mark, endured gains for third day in row on tracking strong cues from the US and other Asian bourses. Gains were broad based with commodity stocks leading the rally on hopes the global economy will soon return to growth. At the closing bell, the benchmark S&P/ASX200 index spurted 71.1 points, or 1.81%, to 3,995.6, meanwhile the broader All Ordinaries surged 70.3 points, or 1.79%, to 3,987.8.

On the economic front, the Australia Bureau of Statistics said in its preliminary analysis that imports totaled A$16.28 billion in June, compared to A$16.29 billion in May.

In New Zealand, equities surged more than 1% for the first time in the month of July. The share market registered the third consecutive session in the positive terrain after a couple of positive economic data fueled slight optimism among investors accompanied by the surge in the US markets overnight. However, alongside came a spark of pessimism as Fitch rating agency revised NZ outlook to negative. The NZX50 advanced 1.35% or 37.43 points to 2801.52. The NZX 15 increased 1.39% or 70.82 points to close at 5171.73.

On the economic front, New Zealand’s inflation rate slows to lowest level in seven quarters. New Zealand’s consumer price index (CPI) increased 1.9 percent from the June 2008 quarter to the June 2009 quarter, which included a rise of 0.6 percent for the June 2009 quarter, Statistics New Zealand said today. This annual increase is the smallest since a 1.8 percent rise recorded in the year to the September 2007 quarter. The food group (up 0.9 percent) made the biggest upward contribution to the quarterly CPI increase of 0.6 percent, driven by higher vegetable prices

New Zealand manufacturing activity improves in June, according to Business NZ. As per the report, New Zealand’s manufacturing activity continued to climb out of the depths of contraction with the highest overall activity level in nine months. The seasonally adjusted PMI was at 46.2 in June, up 3.1 points from May, and 1.2 points higher than June 2008. The seasonally adjusted PMI for June stood at 46.2.

In South Korea, stocks ended up as investors scooped up shipyard, steel and auto shares on upbeat outlooks for their earnings. The benchmark Korea Composite Stock Price Index (KOSPI) rose 11.36 points to 1,432.22, advancing for the third consecutive day.

In Singapore, the stock market surged on tracking strong cues from Wall Street overnight and other Asian bourses, with investors cheered by signs of a turnaround in key economies including upbeat earnings at US companies and strong economic growth in China and an improvement in U.S. manufacturing gauges. The blue chip Straits Times Index added 11.6 points, or 0.49%, to 2,401.02.

In Taiwan, stock market extended its upward run for third session ending the session at the highest level in more than one month, as strong corporate earnings and improving economic data in the United States fuelled technology shares. The main Taiex share index extended gains for third session as the benchmark index added 41.70 points or 0.62%, closing the day at 6780.30, highest closing since 9 June 2009 as signs of global economic recovery boosted investors sentiments.

On the economic front, Hu Sheng-cheng, fellow at the Academia Sinica, Taiwan’s highest academic organization, said that Taiwan’s economic recovery depends on the global climate, as well as reflected by the national savings rate.

Hu was the former chairman of the Cabinet-level Council for Economic Planning and Development (CEPD) and has been closely watching Taiwan’s economic trend, predicting that Taiwan might undergo a second economic recession if its savings rate remains high.

In Philippines, the stock market closed more than 1% higher as market sentiments swung towards optimism followed by a wave of positive news, which boosted investor’s confidence. The investor’s also took cues from the overnight gains on Wall Street. At the concluding bell, the benchmark index PSEi ascended 1.51% or 38.01 points to 2,553.96, while the All shares index rose 1.50% or 24.12 points to 1,627.40.

On the economic front, the World Bank approved over US$320 million in loans to finance development programs and projects in the Philippines in Fiscal Year (FY) 2009, a 31% increase over the previous fiscal year, to help the country weather the effects of the global financial crisis. Fiscal year 2009 was particularly challenging as the Philippines and the rest of the world were hit by shocks coming from the global food crisis and the global financial meltdown. With the new CAS, the Bank is in a better position to help address the country’s development needs as it battles the impact of the evolving global recession.

In India, the key benchmark indices provisionally closed little lower after moving between the positive and negative terrain throughout the day. The BSE 30-share Sensex was down 2.99 points or 0.02% at 14,250.25. The S&P CNX Nifty ended lower at 4,231.40, 2.10 points lower.

On the economic front, India's wholesale price index (WPI) in 12 months to 4 July 2009 fell 1.21% compared to a previous week's decline of 1.55% the government data showed at 12:00 IST today. The government revised upwards the WPI index to 1.56% for week ended 9 May 2009 to 1.56% from earlier 0.61%.

Elsewhere, Malaysia's Kula Lumpur Composite index went up 1.06% or 11.64 points to 1108.88 while stock markets in Indonesia’s Jakarta Composite index ended the day lower at 2177.95.

In other regional market, European shares advanced on Thursday after U.S. banking giant J.P. Morgan put out second-quarter results. The French CAC-40 index rose 1.2% to 3,208.14, the German DAX index climbed 0.9% to 4,970.61 and the U.K. FTSE 100 index rose 0.3% to 4,358.85