UpdateAsian Market

UpdateAsian Market

Nikkei financials lead the slide again; GBP sinks on Lloyds turmoil, seen as the new funding currency; IMF looking to cut gold holdings
Investors in Asia are taking some profits from recent gains in this week's final session, with regional markets trading lower nearly across the board. Coming out of midday break, Nikkei225 is off 1.2% as financials weigh on the index for the second straight day on fresh concerns in consumer financing space. Shanghai Composite and Sydney are down 1% - materials and technology are the worst performing sectors in both markets. Korea's Kospi is the only gainer in Asian bourses, rallying 0.5% on press speculation the government would assist borrowers with poor credit history. Ahead of the Friday session in the US, Dec S&Ps are down marginally at 1,058.
After the Bank of Japan disappointed Nikkei financials by not extending its asset purchase program in the prior session, today's slide was attributed to consumer financing firm Aiful defaulting on its debt obligations, looking to reschedule some of its loan payments with lenders. Sumitomo Trust and Aozora were some of the affected financials disclosing their exposure with ¥90.8B and ¥55.3B respectively. Aiful traded limit down, while Sumitomo and Aozora fell 2% and 4%. Elsewhere, Japan Airlines was speculated to be the target of a joint alliance offer from American Airlines, British Airways, and Qantas.
Incoming finance minister Fujii said Japan's administration is looking to suspend a part of its extra budget as part of its plan to eliminate wasteful spending and possibly cut issuance of new government bonds. The new administration is targeting a saving of several trillion yen but deferring more details until October. In the mean time, local press reported that the new party has 2nd highest approval rating for an incoming administration in history at 75%. Bank of Japan Deputy Gov Yamaguchi spoke again, reiterating slight pick-up in economy and forecasting a more robust recovery in the second half.
Over in China, an official at the Ministry of Commerce said it may look to sell off holdings of US treasuries at spots of strength for the US Dollar. Mainland steelmakers offered a mixed assessment of conditions, with Tangshan Steel noting September output cuts at certain mills and Hebei calling for higher steel prices amid falling supplies. Australian miners traded lower, with commodities sector dragging S&P/ASX to its worst levels late in the day. Treasurer Swan said the administration is targeting a return to surplus by 2015-6 as administration implemented a more responsible fiscal policy.
In currencies, Sterling was heavily sold across the board as concerns over UK financials resurfaced after FT report that Lloyds may have to remain in UK toxic assets insurance plan. Separately, a WSJ feature referred to cable as a new funding currency, citing recent depreciation against the high-yielding commodity FX after monetary authorities left the door open for further interest rate cuts. Bank of England's Miles said UK recession would not end for another 6 to 9 months, and return to normal activity would likely take some time. GBP/USD fell nearly one big figure to 1.6370, just as GBP marked fresh 4-weeks lows against EUR and CHF. In commodity FX, risk aversion sank AUD/USD below 0.87 and NZD/USD below 0.71, while USD/JPY traded higher despite the bearish sentiment on overall greenback strength.
Crude oil prices are declining and have traded near $72/bbl, for most of the session. Oil prices are being weighed down by the declines in the Nikkei 225 equity index and the firmer US dollar. Spot Gold prices are little changed. In terms of news related to the gold market, an earlier released unconfirmed report disclosed that the IMF's executive board may consider the organization's previously announced gold sales plan later today. According to the report, the IMF is planning to sell about 13M ounces of gold, which equals about 12.5% of its total gold holdings. According to estimates from early 2008, the IMF was the world's 3rd largest holder of gold with approximately 103M ounces or 3,200 tons. Today's report related to the IMF follows the announcement in Aug by the various European central banks that starting in late Sept they would sell a maximum of 2,000 tons of gold over the next 5 years. In other metals, Shanghai Copper prices are declining, tracking the early declines in Chinese equities. Later today, the Shanghai Futures Exchange will release its weekly copper inventories data, which will give further direction to copper. During the prior week ended Sept 11, Shanghai Futures Exchange copper stockpiles rose by 12% to more than 97K metric tons