Asian Market Update: AUD pummeled again after sharp rise in Australia trade deficit

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Asian Market Update: AUD pummeled again after sharp rise in Australia trade deficit

03.10.2012 08:12 Wednesday
***Economic Data***
- (AU) AUSTRALIA AUG TRADE BALANCE (A$): -2.03B V -685ME (biggest deficit since Mar 2010)
- (CN) CHINA SEPT NON-MANUFACTURING PMI: 53.7 V 56.3 PRIOR (7-month low)
- (AU) AUSTRALIA AUG HIA NEW HOME SALES M/M: -5.3% V -5.6% PRIOR (2nd consecutive decline)
- (AU) AUSTRALIA SEPT AIG PERFORMANCE OF SERVICE INDEX: 41.9 V 42.4 PRIOR (5-month low and 8th month of contraction)

***Markets Snapshot (as of 03:00GMT)***
- Nikkei225 +0.1%
- S&P/ASX +0.2%
- Kospi flat
- Shanghai Composite closed
- Hang Seng +0.6%
- Dec S&P500 -0.2% at 1,438
- Dec gold -0.1% 1,774/oz
- Nov Crude oil -0.3% at $91.62/brl

***Notes/Observations***
- Asian equity markets are trading around unchanged levels as disappointing regional economic data overshadowed final hour bounce on Wall St where investors appear to have squared bearish bets going into tomorrow's ADP jobs report. A sharp rise in Australia's trade deficit shed some light into a surprise rate cut by the RBA during yesterday's session which took many traders by surprise given the neutral tone in RBA's most recent meeting minutes. August trade deficit spiked to its highest level since early 2010, coming in nearly 3 times the amount of analyst consensus. Exports and imports contracted once again - the latter falling 3% in August after falling 2.7% in July. Among some of the other notable trade data components, exports to China fell over 5% to A$5.9B and iron ore exports fell to A$4.9B from the initially reported A$5.1B. Prior trade deficit was also revised wider from -556M to -1.53B AUD. Aussie dollar extended its overnight decline below $1.0220 against the greenback, while EUR/AUD cross rose above A$1.26, a fresh 3-month highs. Overall, AUD/USD is now down over 4 big figures from its peak just 2 weeks ago. Likewise, AUD/JPY is down 3 handles in that span and testing a 3-month trendline support below the psychological ¥80 figure.

- Elsewhere, economic data out of China was similarly sluggish, as services PMI print came in at a 7-month low of 53.7. Shanghai markets remain closed for the remainder of the week, but Hong Kong's Hang Seng returned after break with a modest rally. Asia Development Bank released its semi-annual review of developing Asia, cutting regional GDP target to 6.1% from 6.9% for 2012 and also slashing China by 0.8pts to 7.7%. Malaysia and Philippines were the only regional economies receiving a boost in 2012 GDP target to 4.6% and 5.5% respectively. Overall ADP forecasted ASEAN GDP unchanged at 5.2%, but cuts 2013 target to 5.5% from 5.7% prior.

- In other USD majors, EUR/USD briefly fell below $1.29 as traders continue to scoff at Spain PM Rajoy denying overnight press speculation of an impending bailout request as early as this weekend. In Greece, rising political pressure in opposition to austerity continues to complicate policymakers' attempts to appease the troika inspectors, with Fin Min Stournaras expressing some uncertainty on whether a fiscal package can be finalized before the coming EU summit.

***Fixed Income/Commodities***
- SLV: iShares Silver Trust ETF daily holdings fall to 9,920 tons from 9,939 tons (lowest level since Sept 19th)
- (US) API PETROLEUM INVENTORIES CRUDE: +462K V +1.5ME (3rd consecutive build); GASOLINE: -60K V -500KE; DISTILLATE: -320K V -500KE; UTILIZATION: 88.1% V 86.9% W/W
- (AU) Australia MoF (AOFM) sells A$500M in July 2017 Notes; avg yield: 2.4955%; bid-to-cover: 4.96x

***Speakers/Political/In the Papers***

- (AU) Moody's: Mortgage arrears in Australia improved in July
- (AU) Australia PM Gillard: Reiterates mining investment has yet to peak; sees Australia GDP around 3% in coming year

- (CN) China plans to build more high speed railways - Xinhua press
- (CN) China banks withdraw from World Bank, IMF meetings - Nikkei press

- (ES) Spain PM Rajoy: Govt will not ask for a bailout this weekend - Spain press
- (EU) All 17 euro zone countries may be forced to commit to fiscal reform through binding contract with Brussels as part of a joint euro zone budget - FT citing EU draft
- (GR) Greece Fin Min Stournaras: Uncertain whether or not a deal with Troika can be reached before the EU summit; talks are continuing

***Asia Equities***

- TM: To end domestic manufacture of Corolla models, shifting all production abroad - Nikkei News
- SNE: Plans sale of NYC HQ in efforts to raise cash - tech blogs
- HMC: Reports Sept US vehicle sales +31% y/y to 117.2K units v 114Ke
- TM: Reports Sept US sales +41.5% y/y v 32%e, to 171.9K units v 160Ke
- Nippon Paper 3893.JP: May report H1 op profit around ¥12B v ¥15.5B prior est; Rev seen around ¥510B v ¥530B prior est - Nikkei News

***US Equities***

- XRTX: Reports Q3 $0.37 v $0.49e, R$275.7M v $316Me; -13.8% afterhours

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