Asian Market Update

Asian equities open mixed following initial US holiday sales results and China's record low PMI data; Markets now await a busy week filled with more expected easing by central banks and US payrolls data

In terms of Asian economic data, both China and HK's PMI indices fell sharply in Nov as the global economic slowdown starts to impact Asian countries. China's official November PMI figures fell to a new record low of 38.8 v a prior reading of 44.6 and overall the index remained below 50 for the second consecutive month. The economic slowdown is also impacting South Korea as the country's Nov preliminary exports fell by a greater than expected 18.3% y/y, which was the largest drop since Dec of 2001. In Australia, the AIG performance of manufacturing index fell to a new record low reading in Nov (Australia AIG Nov Performance of Manufacturing Index: 32.7 v 40.4 prior) and the index contracted for the 6th consecutive month. As markets continue to expect aggressive rate cuts from the RBA, the Nov TD Securities inflation index had its largest m/m decline since at least Dec 2002 (NOV AUSTRALIA TD SECURITIES INFLATION MOM: -0.6% V -0.2% PRIOR; YOY: 3.0% V 3.9% PRIOR). Additionally, Australia's Q3 company operating profits were higher than expected, but lower than the prior reading (AUSTRALIA Q3 COMPANY OPERATING PROFIT QOQ: 5.2% V 3.0%E (15.7% prior).

Ahead of this week's key US employment report and rate decisions by the BoE and ECB, the USD is firmer against the EUR, GBP and the commodities currencies. However, USD/CHF is lower as the Franc is outperforming its European counterparts against the USD and Yen. Also on the crosses the CHF is firmer against the EUR and GBP. The Yen is gaining across the board, tracking the declines on the Nikkei 225. However, CHF/JPY is little changed. The high yielding NZD and AUD are sharply lower against the USD and JPY as markets are pricing in sharp rate cuts by the RBA and RBNZ in their meetings this week. The USD is firmer against most of the Asian currencies, with the exception of the KRW. With respect to the Hong Kong dollar, the HKD's upper limit of 7.7500 was again tested on today's session.

Ahead of the Nikkei open, Japan's NHK reported that the BoJ plans to hold an emergency meeting this week and would announce a plan to provide loans to commercial banks as funding pressures are rising in Japan. Later an unnamed Bank of Japan official noted that the central bank may hold an unscheduled policy meeting soon and added that the BoJ is mulling steps to ease companies' liquidity problems. Back on Oct 14, the BoJ held an unscheduled policy meeting and during this time the central bank left rates unchanged, but agreed to increase the size of its commercial paper repo operations. The BoJ's concerns about the funding prospects of companies comes as the Nikkei reports that one of Japan's largest trading companies, Mitsui & Co, has applied for the Fed's commercial paper program.

Most Asian equities indices have opened the week weaker. The Nikkei 225 is lower by more than 1% on declines in shares of property developers. The Kospi is little changed after declining earlier during the session, as the index has been weighed down by steel makers. The S&P ASX 200 is lower by more than 1%, led by declines in shares of miners and financials. In other trading, Chinese equities and Hong Kong's Hang Seng are both higher on the session.

Crude oil is lower by more than 1.5% and trading above $53.00/bbl after OPEC decided not to make a decision on output until its December meeting. However, the Saudi Oil Minister noted that he is concerned about the buildup in oil stocks. The official added that the fair price for oil is $75/bbl. Spot Gold is lower by more than 0.60% and for the first time in 3 days as the USD is broadly firmer on the session. Tokyo Gold is lower by more than 0.40% and Shanghai Gold is little changed.

In other news, ShopperTrack reported that retail sales on Black Friday rose by 3% and this was much slower than the 8.3% rise seen in 2007. ComScore noted that Black Friday online sales rose by an estimated 1% y/y. Additionally, the National Retail Federation disclosed that Black Friday traffic to stores and websites rose by 17% y/y, while the average amount of money spent by shoppers rose by 7.2% y/y. Following the news, S&P 500 Futures are lower by more than 0.70%.

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