Asian Market Update

Crude oil surrenders some gains ahead of OPEC, USD rangebound vs majors in thin holiday trading

Equity markets in Asia continued to rally in the final session of the week on bullish momentum set in by extraordinarily large rate cut from China. Earlier this week, PBOC cut by 108 basis point - the largest rate cut in 11 years. The commodity sector was once again on the front line of China's infrastructure build-up commitment, with miners BHP and Rio Tinto helping Australia's ASX index to its largest weekly gain on record since the inception of the index in 1992 as both miners picked up about 8%. Woodside Petroleum - Australia's largest crude producer - also rallied in spite of the overall decline in energy markets. On the session, S&P/ASX was the clear regional outperformer with a 4.3% advance, mainly due Australia's large dependence on materials demand from China. Across the other Asian indices, Nikkei and Kospi gained over 1%, while the Hang Seng rallied by over 2%.

Major European currency pairs oscillated in tight ranges in Asian trading hours with much of the volatility sapped by the US Thanksgiving holiday. EUR/USD traded down as low as 1.2880 before recovering above 1.29 figure, GBP/USD bounced off the intra-day support of 1.5365, while USD/CHF struggled to breach US session high above 1.2030 level. Japanese Yen was driven slightly higher by better than expected jobs data from Japan, however disinflationary pressures coming out of the CPI figures and a much worse than expected household spending in Japan capped initial Yen gains. JPY Session highs against the dollar were just below 95.20, EUR/JPY traded down to 122.70, while GBP/JPY downside was capped at 146.30.

In commodity and emerging currencies, Australian Dollar traded down to US session support at 0.6550 against the greenback but subsequently retraced some of those losses following better than expected Aussie private sector credit growth figures for the month of October. 0.66 still presents a meaningful technical resistance - a peak that has been repeatedly tested with no success for nearly 2 weeks. Likewise, USD/CAD peaked at 1.2370 - a point of downward inflection seen in the US session - before trading down to 1.2330, with additional tests likely on weakness seen in energy markets. In emerging Asian FX, Singapore Dollar resumed its strength, with USD/SGD testing 2-week lows just under 1.5050, while USD/PHP regained its prior session post-GDP surprise strength. USD/KRW was down slighty amid overall EM currency gains, declining down to 1,455. Indian Rupee rallied following better than expected Q3 GDP data from India as that currency continues to retrace its losses below 0.50 level.

In commodities, energy markets are bracing for this weekend's OPEC meeting in Cairo, with much attention paid to rapidly deteriorating demand against greater slack in supply. However, one of the delegates was not optimistic about seeing additional production cuts coming as a result of the meeting, with OPEC instead concentrating on current compliance levels being in line with prior cut. Furthermore, the OPEC member expected no substatial production cut coming from Russia, while similar rhetoric was heard from Nigerian Oil Minister as well. Front-month oil traded down by nearly a full percentage point, briefly testing 53.30 levels, while spot gold spent much of the session oscillating between 812.40 and 814.70 amid general nervousness over developments in Mumbai. Thus far, the positive impact on precious metals from geopolitical turmoil has been minimal.

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