NZD plummets on weak retail sales

Asian Market Update: Markets in holding pattern ahead of FOMC decision; NZD plummets on weak retail sales

Economic Data

- (JP) JAPAN OCT FINAL INDUSTRIAL PRODUCTION M/M: -2.0% V -1.8% PRIOR (largest decline since Feb 2009); Y/Y: 4.3% V 4.5% PRIOR; CAPACITY UTILIZATION M/M: -2.3% V -1.1% PRIOR

- (AU) AUSTRALIA Q3 DWELLING STARTS Q/Q: -13.2% V -5.0%E (largest drop since Q4 in 2000)

- (AU) AUSTRALIA NOV NAB BUSINESS CONDITIONS: 4 V 2 PRIOR; CONFIDENCE: 6 V 8 PRIOR (4-month low)

- (NZ) NEW ZEALAND OCT RETAIL SALES M/M: -2.5% V -0.8%E (first contraction in 3 months and a multi-year low); EX-AUTO M/M: -1.6% V -1.0%E

- (JP) JAPAN NOV TOKYO CONDOMINIUM SALES Y/Y: 0.8% V 9.8% PRIOR

- (NZ) NEW ZEALAND NOV REINZ HOUSING PRICE INDEX M/M:1.9 % V -0.9% PRIOR

- (NZ) NEW ZEALAND NOV NON RESIDENT BOND HOLDINGS: 64.6% V 64.4% PRIOR

- (SL) SRI LANKA LEAVES REPURCHASE RATE AT 7.25%, AS EXPECTED

- (UK) RICS NOV HOUSE PRICE BALANCE: -44% V -50%E (first increase in 6 months)

Markets Snapshot (as of 12:30amET)

- Nikkei225 +0.1%

- S&P/ASX +0.1%

- Kospi +0.4%

- Taiex flat

- Shanghai Composite flat

- Hang Seng +0.1%

- Dec S&P Futures -0.1% at 1,235

- Feb Gold +0.6% $1,401/oz

- Jan Crude oil -0.2% $88.42/brl

- Mar Copper -0.2% at $4.19

Overview/Top Headlines

- Asian equity markets, currency majors, and commodity futures (with exception of gold) are trading in narrow ranges ahead of the FOMC rate decision on Tuesday, as optimism over dodged rate hike from China over the weekend has waned. In turn, a more sobering set of economic data in the Asia region could weigh on the markets going forward - whether it be a severe drop in Japan industrial production revision, a decline in Australia housing starts, or a severe contraction in New Zealand retail sales. The final figure - falling for the first time in 3 months and at fastest pace in years - saw the most pronounced impact on the Kiwi dollar. NZD/USD fell over 50 pips below $0.75 against the greenback, while AUD/NZD spiked sharply above 1.3260 - a 10-yr high. Among European majors, EUR/USD and GBP/USD traded in narrow ranges around 1.3290 and 1.5860, USD/JPY ranged around ¥83.50, and AUD/USD was capped around $0.9960.

- Among notable speakers, Japan PM Kan confirmed earlier press speculation he would order a 5% reduction from the current 40% corporate tax rate at the start of the new fiscal year. In China, State Council researcher Yu forecasted 2010 CPI above the official 3% target and reaching 4% next year. Elsewhere, PBoC offered little evidence it has moved any closer to the dreaded 1-yr lending rate tightening,strengthening its currency reference to a 1-week high and selling 1-yr paper at an unchanged yield of 2.3437%.

Speakers/Geopolitical/In the press

- (JP) Japan PM Kan orders economic ministers to cut corporate tax rate by 5% starting next FY from current 40% level - Nikkei News

- (JP) Japan Fin Min Noda: Needs to find a funding replacement for the 5% cut in corporate tax rate; No decision has been made on capital gains tax

- (CH) China State Council researcher Yu: 2010 CPI likely to slightly above 3% target and rise to around 4% in 2011; 2010 GDP seen around 10.3%

- (CH) China may keep official new yuan loans target at CNY7.5T in 2011; To set M2 money supply target around 16% - Chinese press

- (KS) South Korea Finance Ministry: 2011 GDP seen at 5%; CPI at 3%; In line with previous forecasts

- (NZ) New Zealand Fin Min English: Lowers FY10/11 GDP target to 2.2% from 3.2%

- (HK) Retail sector growth in Hong Kong to slow to 1.3% in 2011 from estimated 5.6% in 2010 - South China Morning Post citing economists

Equities

- HMC: Munjal family to buy out Honda Motors 26% stake in Hero Honda JV for about $1B - Indian press

- Hon Hai Precision Industries: May ship 3M-3.3M notebooks in Q4 2010 and 4M-4.2M notebooks in Q1 2011 - DigiTimes

- Samsung Electronics: Acquired a 41% stake in medical equipment company Medison Co; No terms disclosed - Korean press

FX/Fixed Income/Commodities

- (AU) Australia ABARES: Sees FY10/11 commodity exports +23% y/y to A$211.2B

- (CH) PBoC sells CNY1B in 1-yr bills at 2.3437%, unchanged for 5th consecutive week

- (CH) China to allow onshore yuan option trading in Q1 of 2011 - Shanghai Daily

- (CH) PBoC sets yuan mid point at 6.6531 v 6.6670 prior close (highest Yuan setting since Dec 5th)

- (JP) Japan's MoF sells ¥1.0T 20-yr 2.1% JGBs (1.9% prior); bid-to-cover 3.52x v 2.54x prior

- PKX: Started work to expand stainless steel production capacity in Vietnam amid rising Southeast Asia demand - Korean press

- USD/CNY: China may keep official new yuan loans target at CNY7.5T in 2011; To set M2 money supply target around 16% - Chinese press

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