Asian markets mostly flat despite negative offshore leads

Asian markets were mostly flat despite very slight negative offshore leads. The MSCI Asia Pacific index gave away early gains while S&P500 index futures were last little changed. Markets in China were the weakest among regional peers, with the Shanghai Composite last down just under 2%. Copper futures were also last pointing to a moderate decline of around 1%. Gold continues to struggle, giving away recent gains, to last settle at around US$1720/oz.

Regional currency news was dominated by a large risk in the Australian dollar against all peers following the Reserve Bank of Australia’s decision to leave rates unchanged. The RBA has the benefit of flexibility in its rate approach, something not many other central banks enjoy – particularly in the US where rates are at record lows and two rounds of money printing have only now started to yield results in economic growth. Australia’s two tier economy might not benefit many individuals but it helps the RBA navigate in the current complex global market environment. That flexibility was today displayed by keeping rates on hold, as we had expected.

The task is now to sit back and evaluate global developments and the impact of two 25 basis point cuts last year. This is very supportive for the A$ against its trading peers. It hit a high of $1.0806 against the US dollar before coming back slightly, last trading at 1.0780. The A$ also hit a record high against the Euro, last trading at 0.8224. Currency news was also dominated by Bank of Japan comments which stressed the dire situation the yen is having on exports. Comments hinting further intervention only slightly elevated the dollar against the yen, last trading at 76.70 which by historical standards is still a very low post-war level.

Regional corporate news was also dominated by Australian banks – both the National Australia Bank (NAB) and Macquarie Group reported numbers below market expectations. Tomorrow will see the world’s largest mining company by revenue – BHP Biliton – report its interim earnings numbers. The stock is the largest constituent on the S&P/ASX200 index which closed 0.5% lower, again failing to exceed the 4300 level. In other corporate news, Asia’s second largest smartphone manufacturer – Taiwan’s HTC Corp – fell by more than 6% after reporting numbers that missed earnings estimates.

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