Asian Market Commentary
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Asian Markets Trade Weak

Asian stock markets are trading weak on Monday with investors mostly pressing sales, tracking cues from Wall Street where stocks declined on Friday amid uncertainty about the Federal Reserve's monetary stimulus program.

In the Australian market, energy, financial, consumer staples, industrial, property trusts and healthcare stocks are mostly trading notably lower, while mining and information technology stocks are trading mixed.

The benchmark S&P/ASX 200 index is down 69.4 points or 1.4 percent at 4,733.2, nearly 20 points off the day's low of 4,71.48. The broader All Ordinaries index, which declined to 4,693.7, is currently down 62.8 points or 1.3 percent at 4,712.6.

Key bank stocks ANZ Bank, Commonwealth Bank of Australia, National Australia Bank and Westpac (WBK) are down 2 to 3 percent. Bendigo & Adelaide Bank and Bank of Queensland are trading lower by 1.4 percent and 0.8 percent, respectively.

Among top miners, BHP Billiton (BHP), Rio Tinto (RIO) and Fortescue Metals are down 1 to 1.4 percent, while Newcrest Mining is trading in positive territory, gaining 2.5 percent.

In the energy sector, Woodside Petroleum is down 1.2 percent, Oil Search is trading 1.3 percent down, Origin Energy is down 2 percent, Caltex Australia is down with a loss of 2.6 percent and Santos is trading lower by about 3 percent.

Federation Centres, Spark Infrastructure, Macquarie Group, Ramsay Healthcare, Harvey Norman Holdings, AGL Energy, Monadelphous Group, Investa Office Fund and Treasury Wine Estates are down 3 to 4 percent.

Mirvac Group shares are down by over 3 percent on reports that the company is selling half its stake in the land and development of 200 George St, Sydney, to AMP Capital Wholesale Office Fund.

Mirvac, in a statement on Monday, said total consideration for the 50 percent interest of the completed development would be about A$317 million, based on a capitalisation rate of 6.5 percent and a coupon payment of 6.7 percent, capitalised over the development period.

Primary Healthcare, SP Ausnet, Coca-Cola Amatil, ALS, Orica and Aristocrat Leisure are down 2.8 to 3 percent.

Regis Resources is up nearly 7 percent. Leighton Holdings, Sims Metal Management and Alumina (AWC) are among the other notable gainers.

Shares of packaging company Amcor Ltd. are trading flat. The company has announced that it will acquire Jiangsu Shenda Group's flexible packaging operations for 350 million yuan, or A$62.20 million.

Amcor said it expects that the returns, measured as EBIT to funds employed, will reach more than 20 percent by calendar year 2016 through cost synergies and continued strong growth in the Chinese market.

On the economic front, the TD Securities/Melbourne Institute Monthly Inflation Gauge came in flat in June, following a 0.3 percent increase in May. The rate for the 12 months to June was 2.4 percent, in the middle of the Reserve Bank of Australia's two to three percent target range.

According to the latest monthly survey by the Australian Industry Group, the manufacturing sector saw a fairly good surge in growth in June with the Australian Performance of Manufacturing Index rising to 49.6, up 5.8 points from May.

In the currency market, the Australian dollar opened sharply lower against the U.S. dollar. In early trades, the local unit was quoting at US$0.9115, down 1.6 percent from Friday's close of US$0.9262.

The Japanese stock market opened on a firm note with a stronger dollar and better than expected results of the June tankan quarterly survey of business sentiment triggering some buying in early trades.

However, stocks retreated soon and pushed the key index Nikkei down into negative territory, with investors turning cautious amid renewed concerns about U.S. stimulus tapering and on a weak report on Chinese manufacturing activity.

The benchmark Nikkei 225 index, which spurted to 13,747 at the start, declined to 13,563 subsequently and was down 65.6 points or 0.5 percent at 13,611.7 when the morning session ended.

Japan Steel Works lost about 3.5 percent. Chiba Bank, Fukuoka Financial Group, Marui Group Holdings, Shizuoka Bank, Pioneer Corp. and Sumco Corp. lost 2 to 3 percent.

Bank of Yokohama, Sharp Corp., Tokyo Electron, JGC Corp., JX Holdings, Inpex Corp., Fuji Electric and Tokyo Gas were among the other prominent losers. Among the gainers, Tokyo Dome Corp., Kajima Corp., Furukawa, Mitsui Engineering & Shipbuilding and IHI Corp. moved up 4 to 4.4 percent.

East Japan Railway gained nearly 4 percent. Yaskawa Electric, Mazda Motor, MS&AD Insurance Group, Daikin Industries, Japan Tobacco, Dowa Holdings, Daiwa Securities Group, Credit Saison, Kawasaki Heavy Industries, Nippon Yusen KK, Mitsui OSK Lines, Taiheiyo Cement and Yahoo Japan also rose sharply.

On the economic front, the index measuring business sentiment in Japan surged in the second quarter of 2012, the Bank of Japan revealed on Monday in its quarterly Tankan business survey.

The large manufacturers index came in with a score of 4, beating forecasts for a 3 and up from -8 in the first quarter. The outlook score was 10, also beating expectations for a 7 and up from -1 in the previous three months.

The large non-manufacturers index was at 12, surpassing expectations for 11 and up from 6 in Q1. The outlook score was 12 versus forecasts for 14 and up from 9 in the three months prior.

Large all-industry capex is now seen at 5.5 percent, well above forecasts for 2.9 percent after falling 2.0 percent in the previous quarter.

In the currency market, the U.S. dollar rose to the mid 99 yen level on the strong tankan survey, after trading in the lower 99 yen range earlier in the day. The yen is currently trading at 99.33 to the U.S. dollar.

Among other markets in the Asia-Pacific region, Indonesia, Singapore, South Korea, Taiwan, Malaysia, New Zealand and Shanghai are all trading weak. The Hong Kong market is closed for a holiday.

On Wall Street, stocks closed lower after showing considerable volatility over the course of the session on Friday. The major averages spent much of the day bouncing back and forth across the unchanged line.

The Dow declined 114.9 points or 0.8 percent to 14,909.6 and the S&P 500 slid 6.9 points or 0.4 percent to 1,606.3, while the Nasdaq inched up 1.4 points or less than a tenth of a percent to 3,403.3.

Major European markets ended lower on Friday. While the German DAX index dipped by 0.4 percent, the U.K.'s FTSE 100 index and the French CAC 40 index lost 0.5 percent and 0.6 percent, respectively.

U.S. crude oil snapped a four-day gain to settle lower on Friday, as the dollar continued to strengthen against a basket of major currencies on data that consumer sentiment in the U.S. improved much better than previously estimated in June.

Crude for August delivery dropped $0.49 or 0.5 percent to close at $96.56 a barrel on the New York Mercantile Exchange.

by RTT Staff Writer

For comments and feedback: editorial@rttnews.com

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