September 2010

Yen Strengthens amid Silent BoJ, Asian Equities Dip Lower Off of 5-Month Highs

Asia Session Key Developments

• BoJ may take Further Measures to Rein in the Yen, Tokyo Equities still Slip
• Chinese Banking Regulators may Require the Nation’s Biggest Lenders to Boost Capital Adequacy Ratios
• Australian Companies hit by Weak Housing Market in the US

Amid speculation that Japan would take more measures to depreciate the yen, Asian markets suffered when there was no action from Japan on Thursday as the yen appreciated slightly. Prime Minister Naoto Kan stated that the government won’t tolerate rapid movements of the yen and defense against appreciation would trigger at the 82.00 level. In turn, investors in China are sitting on the sidelines a bit longer to see how the situation in Japan play out, driving Hong Kong shares lower. Additionally in China, equities succumbed to profit-taking before the holidays as well as a strengthened Yuan. Shares in Australia fell on banks and material stocks declining as investors reacted to softened commodity prices. Without the usual weakness around this time on Wall Street, investors are looking for a good year end. Thus, as there are some downside risks, people are looking to use any weakness to buy into the market.

Nikkei 225                          9509.50 (-7.06, -0.07%)

The Nikkei 225 posted a slight loss coming down from 5-month highs dropping 7.06 points (0.07%) as the BoJ failed to deliver on speculation that it would further intervene in the currency market. 7 out of 10 components were down with Oil & Gas being the loss leader dropping 1.80% (0% positive) while Industrials led gains rising 0.48% (41%) positive. Liquid Exporters did just fine as the yen has dropped, if temporarily, from record highs against the dollar. Toyota Motor rose 1.7% to Y3,060, Toshiba Corp. added 0.5% to Y408 and Sony Corp. gained 1.7% to Y2,641, supporting the broader market.

Hang Seng                          21691.45 (-34.19, -0.16%)

Shares in Hong Kong dipped lower off a 5-month high dropping 34.19 points (0.16%). 5 out of the 9 components were down on the day with Oil & Gas leading losses dropping 1.04% (0% positive) while Utilities was up 0.53% (75% positive) and Technology up 0.37% (50% positive). Financials, down 0.15% (37% positive), took a hit amid rising concerns about the possibility of an interest rate hike as well as reports that Chinese authorities will raise capital adequacy ratios to as high as 15% for the nation’s biggest lenders. Agriculturual Bank of China shares fell 2.6% to HK$3.79 while Bank of China Ltd. fell 0.25% to HK$4.04. Bucking the broader trend was Cosco Pacific jumping 8.6% to HK$11.60 after Goldman Sachs upgraded the stock to a “buy” grade and added it to its Conviction Buy list – the brokerage expects the company to post a solid set of third quarter results.

S&P/ASX 200 Index           4605.30(-56.20, -1.21%)

Australian shares closed down dropping 56.20 points (1.2%) on profit taking in financials and materials after strong gains on Wednesday drove the market up to a 4-month high. 8 out of the 10 components were down on the day with Financials leading losses dropping 1.68% (7% positive) while Consumer Goods bucked the market trend gaining 0.83% (60% positive). Traders think the Australian market ran out of momentum after rising 8% in 3 weeks. Goldman Sachs recommended to investors to hold off on buying for at least 2 weeks. BHP Billiton fell 1.8% to A$38.75 while rival Rio Tinto fell 2.0% to A$73.79 after resource stocks and commodities lost ground overnight. James Hardie fell 5.9% to A$5.59 and Boral fell 4.7% to A$4.69 after Credit Suisse reported its leading indicator of U.S. housing activity, below consensus estimates, highlighted lower homebuyer traffic and weak homebuyer confidence.

U.S. Equities Mixed, Gold Surges on Speculation of Fed Bond Purchases

U.S. Session Key Developments

•    Analysts at Goldman Sachs, PIMCO Speculate on Fed Quantitative Easing Measures
•    Retail Sales, Business Inventories Beat Expectations
•    Gold Surges to Intraday Record High

U.S. stocks were mixed on the session, while gold futures surged to a intraday record high of $1,276.50 on speculation that the Federal Reserve will announce the purchases of as much as $1 trillion in bonds.  Analysts at Goldman Sachs, PIMCO, and Morgan Stanley have projected that the Federal Reserve will resume quantitative easing through bond purchases this year and some believe that the announcement could come as soon as the FOMC’s meeting next week.  Goldman Sachs economist Jan Hatzius says an announcement in November or December is more likely than at the upcoming meeting, while further bond purchases will likely be done incrementally as opposed to a large “shock and awe” sum.  Regardless, COMEX gold surged 1.80 percent to $1269.50 on the day, while silver added 1.71 percent to $20.495.  Stocks, on the other hand, were mixed as the Dow Jones Industrial Average and S&P 500 closed lower, while the Nasdaq Composite gained for a fifth consecutive day.  Equity bulls were encouraged by a higher-than-expected retail sales reading for August, which showed a 0.4 percent improvement compared to analyst expectations for a 0.3 percent rise.  In addition, business inventories rose 1.0 percent in July, better than the 0.7 percent gain forecast.  Despite today’s generally positive data, bears remained in play as fears of a global economic slowdown continue to plague investor sentiment.

DJIA 30 / 10526.49 / -17.64 / -0.17%
The Dow Jones Industrial Average closed lower for the first time in a week, as a majority of its index stocks closed lower on the day.  Boeing was the biggest laggard, dropping over 2.2 percent on the session, while American Express and Bank of America fell at least 1.9 percent each.  On the positive side, shares of Hewlett Packard gained nearly 2.7 percent after the company said it would buy software maker ArcSight Inc. for $1.5 billion in cash.

Dow Jones Industrial Average

Prepared by James Russell, DailyFX Research

S&P 500 / 1121.10 / -0.80 / -0.07%
The broad-based S&P 500 dipped slightly today as financial shares plunged nearly a full percent.  Leading the sector’s downturn was SLM Corp, which fell nearly 5 percent, while First Horizon National and BB&T dropped over 3 percent each.  As a sector, financials traded lower due to concerns about new Basel III rules, which set new capital requirements for financial firms.

NASDAQ / 2289.77 / +4.06 / +0.18%
The tech-heavy Nasdaq posted the only gain among major U.S. indices, as shares of Applied Materials and Research in Motion gained over 2 percent each.  Also contributing to the technology sector’s gains was Intel, which rallied over 1 percent after revealing its new chips and software applications store.

Written by James Russell, DailyFX Research
Please send any questions or comments to JRussell@fxcm.com

Shares in Asia Mostly Higher on Overnight Gains Abroad and Positive Chinese Data

Asia Session Key Developments

• Prime Minister Naoto Kan Unveils 920 Billion Yen ($11 Billion) Stimulus Plan, Japanese Shares Rise
• Shares in Hong Kong Benefit from U.S. Job Data and Boosted Optimism in Strength of Global Economy
• Australian Shares Retreat Despite Positive Economic Data from Abroad

Asian shores posted gains for the second day in a row following big losses earlier in the week amid better than expected economic data. In Japan, the Prime Minister finally decided to take some action, pledging a 950 billion yen stimulus plan ($11 billion) to boost the economy – relative to the world’s 3^rd largest economy, it’s a small amount but still provided positive sentiment that the government will begin taking more action on economic policy amid slowing growth in the country. Hong Kong benefited from overnight gains on Wall Street as well as positive trade data from China. Shares in Australia closed slightly down on profit taking and low trade volume. Expect Asian shares to trade at low volumes until more data from the West comes out early next week.

Nikkei 225                          9239.17 (+140.78, +1.55%)

Shares in Tokyo jumped 140.78 points (1.55%) after Japan boosted its estimate for seond-quarter economic growth and fewer people applied for jobless benefits in the U.S.. 8 out of the 10 components were up with Consumer Services gaining 3.18% (73% positive) while Technology followed with a 3.07% (85% positive) gain. The positive U.S. job data drove the USDJPY pair higher, helping exporters in Japan. Canon Inc., who gets as much as 80% of its revenue abroad, jumped 5.6% to 3,7500 yen while Toyota, the world’s largest automaker, gained 0.7% to 2,951 yen. Trend Micro continues rising amid speculation the company is going to get acquired by an unnamed IT company – TM rose 2.37% to 2,637 yen.

Hang Seng                          21257.39 (+90.12, +0.43%)

Shares in Hong Kong continue to pare losses from earlier in the week rising 90.12 points (0.43%) on Friday amid reports of a Chinese trade surplus 7 out of 9 components were up on the day with Consumer Goods rising 2.01% (100% positive) while Oil & Gas rose 1.38% (33% positive) but Telecommunications continued declining dropping -1.04% (50% positive). The Hang Seng benefited from China’s trade surplus of slightly over $20 billion, highlighting friction with the U.S. over claims that the yuan is undervalued. Cnooc rose 3.2% to HK$14.14, accounting for 30.61 points of the Hang Seng’s rise, after Citigroup raised its target on the stock to HK$18.50, which is among the highest among analysts’ target prices (previous target was at HK$15.90). Geely rose 5.7% to HK$2.97, outperforming other China auto firms such as Dongfeng, which fell 1% to HK$13.36.

S&P/ASX 200 Index           4560.30 (-21.90, -0.48%)

Australian shares fell 21.90 points (-0.48%) on low volume trading and materials and energy stocks weighed on the market after commodity prices fell. 9 out of the 10 components were down as Utilities was the only to eke out gains rising 0.05% (17% positive) while Technology tumbled 1.72% (0% positive). BHP Billiton fell 0.6% to A$37.96 after copper fell 1.6%, Newcrest fell 2.3% to A$38.84 after gold fell 0.8% and Woodside Petroleum fell 0.9% to A$42.53 after crude oil fell 0.6%. Greenland Minerals and Energy Soared 70% to A$0.62 however, after Greenland’s government partially changed a decades-old ban on uranium mining. In financials, Commonwealth Bank rose 0.3% to A$52.67 while National Australia Bank fell 0.7% to A$24.67.

Written by Alex Rodriguez, DailyFX Research Team
For questions or comments about this article, please e-mail arodriguez@fxcm.com

Asian Shares Rebound after Wednesday’s Losses, Cautious Outlook ahead of Chinese Data

Asia Session Key Developments

• Shares in Japan Benefit from Overnight Gains on Wall Street and Europe
• Hang Seng Index is Up but Limited by Cautious Outlook Ahead of Economic Data yet to be Released
• Positive Domestic Employment Data Helps Lift Australian Shares to a 4-Week High

Asian Shares were mostly up on Thursday after posting big losses the day prior. Shares in Tokyo benefited from a weakened yen as exporters and trading houses supported the market. Shares in Hong Kong increased early on overnight gains abroad but were subdued by disappointing performances in the banking and development sectors, as well as a cautious outlook ahead of China’s August trade numbers due out on Friday. Australia’s unemployment rate fell to lower-than-expected seasonally adjusted 5.1% from 5.3% in July producing more confidence in investors.

Nikkei 225                          9098.39 (+73.79, +0.82%)

Shares in Japan rebounded slightly from a 200 point drop on Wednesday gaining 73.79 points (+0.82%) on Thursday as exporters benefited from eased concerns in Europe and a weakened yen. 8 out of the 10 components were up on the day with Technology leading the way gaining 1.71% (77% positive) while Financials took a slight hit dropping -0.32% (69% positive). Companies with high exposure to the Euro-Area gained with Canon, who gets over 30% of sales in Europe, rose 1.14% to 3,550 yen while Mazda Motor Corp. gained 1.08% to 187 yen. Trend Micro surged 10.27% to 2,576 yen on a report it received a merger proposal from an unnamed major IT company – however, Trend Micro denies this report. Investors in Tokyo are now waiting on action from the Japanese authorities as the yen continues to hover above 15-year highs, and sentiment is that market is fed up with warnings.

Hang Seng                          21167.27 (+78.41, +0.37%)

Hong Kong equities took a hit on Wednesday falling 312.93 points but pared some of those losses gaining 78.41 points (0.37%) on Thursday following gains on Wall Street. 7 out of the 9 components were up with Consumer Goods surging 4.06% (100% positive) while Telecommunications fell -1.32% (50% positive). Housing developers fell amid rising housing prices because of fears that the government will further tighten the market to try and tamp prices. In the long run prices should come down because Beijing has launched an affordable housing project, but investors are worried what actions occur between now and when those homes are ready. Exporter Li & Fung benefited from positive U.S. data rising 5.5% to HK$42.00 while telecom operator China Unicom rose 3.4% to HK$11.48 as the company comes close to releasing the popular iPhone 4.

S&P/ASX 200 Index           4582.20 (+45.00, +0.99%)

Shares in Australia bounced up on positive domestic employment data rising 45 points (+0.99%) also benefiting from gains on Wall Street overnight. 7 out of the 10 components were up on the day with Industrials leading gains rising 1.52% (72% positive), Financials gaining 1.42% (71% positive) while Telecommunications slumped -1.38% (25% positive). National Australia Bank surged 3.7% to A$24.84 on optimism it won’t need to raise capital to finance a takeover of asset manager Axa Asia Pacific Holdings Ltd. which was blocked for the 2^nd time after regulators stated that the lender didn’t go far enough with concessions to gain approval. BHP Billiton Ltd., the world’s biggest mining company, advanced 0.7% to A$38.18, while rival Rio Tinto Group (3^rd largest) gained 0.6% to A$73.90.
Notable Asian Session Event Risk / Economic Releases

Country	GMT	Release / Event	Forecast	Previous
NZ	22:45	NZD Terms of Trade Index (QoQ)		0.9%
JN	23:50	JPY Domestic Corporate Goods Price Index (MoM) (AUG)	2.0%	1.6%
JN	23:50	JPY Domestic Corporate Goods Price Index (YoY) (AUG)	8.1%	-2.2%
JN	23:50	JPY Gross Domestic Product Annualized (2Q F)	¥865.0B	¥769.0B
JN	23:50	JPY Gross Domestic Product Deflator (YoY) (2Q F)	49.9	49.8
JN	23:50	JPY Gross Domestic Product (QoQ) (2QF)	46.4	46.6
JN	23:50	JPY Nominal Gross Domestic Product (QoQ) (2Q F)	1.0%	-3.9%

Written by Alex Rodriguez, DailyFX Research Team

For questions or comments about this article, please e-mail arodriguez@fxcm.com

U.S. Equities Rally Despite Drop in Mortgage Applications Last Week

U.S. Session Key Developments

•    Global Risk Appetite Returns on European Government Debt Sales
•    U.S. Mortgage Applications Decline For First Time in Six Weeks
•    Crude Oil Rallies, Gold Dips Slightly on Reduced “Safe-Haven” Demand

U.S. stocks rallied for a fifth time in the past six days despite the first decline in mortgage applications since July.  The report, from the Mortgage Bankers Association, showed that mortgage applications fell 1.5 percent in the week ended September 3, while refinancing declined by 3.1 percent and applications for purchases rose 6.3 percent.  Despite the bearish news, strength in the European markets helped buoy investor sentiment in the U.S. and push higher.  The Dow Jones Industrial Average rallied 46 points on the day to 10387, while the S&P 500 added 7 points to 1098.  The main cause for optimism out of the euro region was improved demand for government bonds from Portugal and Poland.  Portugal’s sale of bonds due in 2021 attracted bids for 2.6 times the amount offered, much higher than the 1.6 bid/cover ratio of an earlier March sale.  Poland’s sale of five-year debt was also surprisingly successful, as the government’s auction attracted the largest demand since 2008.  The success of the debt auctions calmed investor nerves over fiscal issues in the euro zone and signaled some sense of stability in the markets.  Stock markets in London, Paris, Germany, Spain, and Italy closed higher on the day and helped to push global investor sentiment higher.

On the commodities front, NYMEX crude oil traded 52 cents higher to $74.61 a barrel, the highest closing level since Thursday.  COMEX Gold, on the other hand, fell by $2.30 to $1257.00 on reduced demand for its “safe-haven” qualities.  Today’s return of risk appetite also translated into currency markets, as the U.S. dollar declined against its major cross-currency pairs.  The U.S. Dollar Index fell 0.25 percent to 82.609, its sixth consecutive close below the 83 level.

DJIA 30 / 10387.01 / +46.32 / +0.45%
The Dow Jones Industrial Average rallied for the first time this week as 23 of the 30 index stocks closed higher on the day.  JPMorgan Chase was the index leader, rallying 2.1 percent on the day, while aluminum giant Alcoa and Bank of America rose at least 1.7 percent each.  The biggest laggard among the bluechips was Hewlett Packard, which dipped nearly 2.8 percent after being downgraded by UBS due to “weak PC demand.”

Dow Jones Industrial Average

Prepared by James Russell, DailyFX Research

S&P 500 / 1098.87 / +7.03 / +0.64%
The broad-based S&P 500 gained over 0.6 percent as financials, industrials, and energy shares gained nearly 1 percent each.  Goldman Sachs contributed heavily to the gain in financial shares, as the bank’s stock rose 1.6 percent on news that KKR and Perella Weinberg are interested in the firm’s Principal Strategies team.  Other financial shares posting strong days included Wells Fargo, Morgan Stanley, and Berkshire Hathaway, whose shares gained at least 1 percent each.  Industrials, on the other hand, were led by 1 percent gains in General Electric, Boeing, and Caterpillar.

NASDAQ / 2228.87 / +19.98 / +0.90%
The tech-heavy Nasdaq posted the largest gain among major U.S. indices, as shares of Apple rallied nearly 2 percent on the session.  Apple, the most heavily weighted shares on the Nasdaq, had its share-price and profit estimates increased at UBS due to increasing demand for the company’s products.  The share-price was increased from $340 to $350, while the EPS estimate for 2011 rose from $16.62 to $18.09.

Shares in Asia Mixed on Tuesday on Stronger Yen, Uncertain Global Economy

Asia Session Key Developments

• Japan Exports Hurt by Stronger Yen
• Hong Kong Responds Well to U.S. Stimulus
• Australian Shares Close Flat on Tuesday amid Uncertain Economy

Traders in Japan responded negatively to the Bank of Japan’s lack of action on Tuesday as the Nikkei 225 posted losses for the first time in nearly a week. Subsequently, the yen strengthened against major currencies, renewing fears that it will continue its ascent while also hurting Japan’s exports, the meat of the economy. Shares in Hong Kong were mixed on positive speculation after President Obama announced a new stimulus plan in the U.S. countered by weak performance by financials. Australia shares traded horizontally on a quiet day for trading as the Bank of Australia predictably held the interest rate unchanged while the Labor Party winning office hurt miners amid their campaign for a mining tax. Market conditions remain uncertain – while concerns over a double-dip recession in the U.S. have temporarily subsided, investors remain cautious ahead of economic data due out throughout the week.

Nikkei 225                          9226.00 (-75.32, 0.81%)

Japan equities were down on Tuesday falling 75.32 points (0.81%) after investors pressed sales in early trades after the index advanced for 4 days straight. 9 out of the 10 components were down on the day with Utilities being the sole positive rising 0.10% (20% positive) while Technology and Consumer Goods both falling by more than 1.04%. The BoJ held its policy interest rate unchanged renewing worries about the yen’s strength, and in turn exporters led declines – the yen strengthened against major currencies. Nissan Motor Co., which gets 15% of its sales in Europe, lost 1.8% to 669 yen, Nintendo Co. dropped 1% to 23,390 yen while Honda Motor Co., which gets 84% of its revenue abroad, slipped 1.4% to 2,815 yen after the yen appreciated.

Hang Seng                          21401.79 (+46.02, 0.22%)

Shares in Hong Kong continue their ascent, rising 46.02 points (0.22%) capping off a weeklong of gains, bucking the trend in Asian markets amid positive speculation on the U.S.’s new stimulus plan. 7 out of the 9 components were up with Telecommunications gaining most at 0.69% (50% positive) while Technology fell a bit dropping 0.22% (0% positive). Shares in China were mixed with property shares higher and some mainland Chinese metal-sector names continuing to gain but banks were mostly on the retreat. Cheung Kong Holdings Ltd. gained 1.28% to HK$103.10, Hang Lung Properties Ltd. gained 0.84% to HK$36.00, while HSBC was down 0.06% to HK$79.25. Industrial & Commercial Bank of China was down 0.85% to HK$5.84.

S&P/ASX 200 Index           4573.204 (-2.30, 0.05%)

Australian shares closed flat on Tuesday dropping just 2.30 points (0.05%) on the BoA’s predicted announcement that the interest rate will remain unchanged while the labor party’s Julia Gillard secured a majority to form the next government – providing worries that a prospective mining tax will pass. 6 out of the 10 components were down as Technology gained 0.69% (100% positive) on the day while Basic Materials fell 0.42% (29% positive). Unsurprisingly, the mining sector was hurt by the labor party winning elections, as they’ve been pining for a mining tax throughout their campaign; Rio Tinto Ltd. dropped 0.87% to A$74.35 while BHP Billiton Ltd. dropped 0.29% to A$38.44. Caltex Australia Ltd., the nation’s biggest oil refiner, climbed 2.8% to A$11.71 while Telstra Corp., Australia’s largest telephone company remains committed to investing in China, advancing 1.4% to A$2.86.

Notable Asian Session Event Risk / Economic Releases

Country	GMT	Release / Event	Forecast	Previous
NZ	22:45	NZD Manufacturing Activity (2Q)		0.9%
JN	23:50	JPY Machine Orders (MoM) (JUL)	2.0%	1.6%
JN	23:50	JPY Machine Orders (YoY) (JUL)	8.1%	-2.2%
JN	23:50	JPY Trade Balance – BOP Basis (Yen) (JUL)	¥865.0B	¥769.0B
JN	00:00 (Wed)	JPY Eco Watchers Survey: Current (AUG)	49.9	49.8
JN	00:00 (Wed)	JPY Eco Watchers Survey: Outlook (AUG)	46.4	46.6
AUS	01:30	AUD Home Loans (JUL)	1.0%	-3.9%

Written by Alex Rodriguez, DailyFX Research Team

For questions or comments about this article, please e-mail arodriguez@fxcm.com

Asian Equities Up for Second Day in a Row on Risk Appetite after Strong Economic Data from Australia, China and the U.S.

Asia Session Key Developments

• Yen Trading Below Weekly High, Exporters in Japan Benefiting
• Shares in Hong Kong Advance on Stronger Banking Sector
• Australian Shares Continue Gaining on Momentum from Wednesday’s GDP Reports

Asian shares gained on Thursday amid the recent positive economic data coming out of Australia and China while also being boosted by overnight gains on Wall Street. However, gains were tempered by caution ahead of non-farm payrolls data coming out of the U.S. on Friday; considering that the Dow Jones jumped 2.5% on Thursday, analysts feel Asian markets should have reacted better. The markets are looking for more direction in the short-term, which is why trade volume on Friday may be lower than normal pending the U.S. data to come.

Nikkei 225                          9062.84 (+135.82, 1.52%)

Shares in Japan traded higher on Thursday rising 135.82 points (1.52%) to 9062.84 on better than expected data from the US and a yen remaining below weekly highs. 9 out of the 10 components were up on the day with Industrials leading gains rising 2.09% (87% positive) while Telecommunications was the sole loser falling 0.76% (50% positive). Japan’s exporters were helped by the euro rebounding against the yen as Canon Inc. gained 1.2% to 3,505 yen and Sony Corp. pared losses earlier this week gaining 2.2% to 2,427 yen. Automakers produced mixed results Thursday as there were sharp declines in U.S. auto sales in August, but the data was skewed by the U.S.’s “cash for clunkers” program last year providing a high comparative base. Honda Motor gained 1.9% to 2,859 yen, Nissan Motor added 3% to 664 yen while Toyota Motor Corp. lost 0.3% to 2,850 yen.

Hang Seng                          20868.92 (+245.09, 1.19%)

Equities in Hong Kong rose for the second day in a row gaining 245.09 points (1.19%) on strong financials and higher commodity prices that boosted energy shares. 7 out of the 9 components were up with Basic Materials surging 3.06% (100% positive) while Consumer Services (-1.01%, 67% positive) and Technology (-0.34%, 50% positive) slumped. Hong Kong shares advanced early on overnight gains on Wall Street and crude-oil prices boosting financial and resource-sector stocks. Ping An Insurance Group Co., China’s second largest life insurer, rose 2.72% to HK$66.10 after announcing plans to buy an additional 32% stake and majority control in Shenzhen Development Bank Co. HSBC Holdings PLC rose 1.96% to HK$77.95 while energy producer Cnooc Ltd. rose 0.76% to HK$13.32.

S&P/ASX 200 Index           4532.70 (+37.00, +0.82%)

The Australian market bounced rose for the second day gaining 37.00 points (0.82%) on the back of overnight Wall Street gains as well as riding positive sentiment after yesterday’s GDP numbers beat expectations. 9 out of 10 components were up with Financials gaining most at 1.10% (81% positive) increase while Consumer Goods traded flat losing 0.04% (50% positive). Aussie shares were led by financials and materials, but the share market underperformed versus Wall Street after outperforming on Wednesday because of disappointing domestic trade data. The July trade surplus fell to A$1.89 billion and missed expectations of A$3.1 billion. Major banks gained 1.1%-1.3% and miners rose across the board with BHP Billiton rising 1.1% to A$38.32, Rio Tinto rising 1.2% to A$73.12 and OZ Minerals gained 2.4% to $1.31.

Notable Asian Session Event Risk / Economic Releases

Country	GMT	Release / Event	Forecast		Previous
AUS	23:30	AUD AiG Performance of Service Index (AUG)		46.6

Written by Alex Rodriguez, DailyFX Research Team
For questions or comments about this article, please e-mail arodriguez@fxcm.com

U.S. Equities Surge By Most Since July on Manufacturing Data

U.S. Session Key Developments

•    U.S. Manufacturing Unexpectedly Rises in August For First Time in Four Months
•    Crude Oil Posts Largest One-Day Gain Since August 2
•    Precious Metals Dip Slightly on Reduced “Safe-Haven” Demand

U.S. stocks posted their largest gain in nearly two months following strong economic reports out of China and a better-than-expected ISM manufacturing reading for the month of August.  The Dow Jones Industrial Average rallied 254 points on the day to 10269, while the S&P 500 added 30 points to 1080.  U.S. equities followed global stocks higher after China announced its purchasing managers’ index rose from 51.2 to 51.7, beating economist forecasts.  The news provided a strong boost to risk sentiment, sending stocks and many commodities higher.  Crude oil rallied 2.7 percent, its largest one-day gain since August 2, to $73.91.  Furthering the bulls’ case was the U.S. manufacturing release, which showed the industry unexpectedly expanded in August for the first time in four months, rising from 55.5 to 56.3.  Readings above the 50 level indicate expansion.  The report sent the Dow Jones Industrial Average over 200 points higher on the day, its largest one-day gain since July 7.  As for currencies, the risk trade was clearly present, as the Aussie and Kiwi rallied against the U.S. dollar by 2.3 percent and 1.8 percent respectively.  The Euro also rallied against its American counterpart, gaining 1 percent to close above the $1.28 level for the first time since August 19.

DJIA 30 / 10269.47 / +254.75 / +2.54%
The Dow Jones Industrial Average rallied for a second straight day as all 30 of the blue-chip stocks closed higher on the session.  Bank of America led the financials higher, rallying over 6 percent following an SEC settlement, while Caterpillar shares gained 4.6 percent on the positive manufacturing data.  Other strong performers included JPMorgan Chase, General Electric, and Chevron, which each rose at least 3.5 percent on the day.

S&P 500 / 1080.29 / +30.96 / +2.95%
The broad-based S&P 500 gained nearly 3 percent today as industrials, financials, and commodities shares rallied at least 3.5 percent each.  Exxon Mobil, the largest company in the S&P oil & gas sector by market cap, gained 2.9 percent on higher energy prices and stronger-than-expected manufacturing data, while copper and gold miner Freeport McMoRan rose nearly 6 percent on bullish data from China.  Iron ore supplier Cliffs Natural Resources also contributed to the commodity sector’s gains, rallying 5.6 percent.

NASDAQ / 2176.84 / +62.81 / +2.97%
The tech-heavy Nasdaq posted the largest gain among major U.S. indices, ending a three-day losing skid.  Technology shares were especially strong, led by Chinese search giant Baidu which rallied 4.4 percent.  Adobe, Cognizant, and Oracle also rallied at least 3.4 percent on the day.

Asian Equities Rebound on Strong Economic Data from Australia and China

Asia Session Key Developments

• Japan Recovers on Strong Data from China and Australia, Fears of Strengthened Yen Tempered
• Hong Kong Shares Up as Manufacturing Data from Mainland Shows Growth
• Australia’s GDP Grows at Fastest Rate in 3 Years

Asian equities rose on Wednesday after China’s manufacturing and Australia’s gross domestic product grew faster than economists estimated. Australia’s GDP growth eased fears of a double-dip recession scenario and provided a much needed positive impact in the region. Ichiro Ozawa has announced he is challenging Prime Minister Naoto Kan for the leadership of the ruling Democratic Party of Japan (essentially the Prime Minister seat because the Party controls parliament) – Ozawa has pledged yen intervention in his campaign, providing enough speculation to bring the yen down momentarily. Japanese exporters continue to hurt because of the yen’s current value, especially before midday when the yen was trading near a 15-year high – however, the yen did retreat in the afternoon, easing investor sentiment for now. The Hong Kong market was given a boost by positive Chinese manufacturing data but continues to be weighed down by the uncertain global market. Furthermore, the Chinese banking regulator will “strictly implement” government policies aimed at curbing soaring housing prices, hurting housing and development equities shares.

Nikkei 225                          8927.02 (+102.96, 1.17%)

Japanese equities rebounded from yesterday’s 16-month low, rising 102.96 point (1.17%) on strong reporting from China and Australia as well as eased fears of the yen strengthening. All 10 components were up on the day with Oil & Gas rose most at 2.83% (100% positive) and Telecommunications pared Tuesday’s losses rising 1.27% (75% positive). Canon rose 1.2% to 3,465 yen, Kyocera gained 1.8% to 7,270 yen and Fanuc Ltd. rose 2% to 9,200 yen. Hitachi Ltd. advanced 2.4$ to 348 yen as it plans an IPO of its hard-drive unit by year’s end. Automakers retreated on the day with Mazda Motor Corp. falling 2.1% to 184 yen while Toyota Motor Corp. fell 0.8% to 2,837 yen. While Japan benefited from positive economic reporting from their neighbors, it is important to note that because of such a steep drop on Tuesday there were a lot of bargain hunters in the market – continue to hold a cautious outlook on Japanese equities and keep watch on the yen’s value.

Hang Seng                          20623.83 (+87.34, 0.43%)

Shares in Hong Kong were up 87.34 points (0.43%) on Wednesday after China reported growth in manufacturing signaling that the country’s slowing growth may have stabilized. 6 out of the 9 components were up with Industrials leading gains rising 1.93% (71% positive) while Utilities traded flat and Oil & Gas fell 0.45% (67% positive). Anhui Conch Element Co., China’s biggest cement maker, climbed 4.3% HK$28.85 while Lumena Resources Corp., the sodium-sulfate producer, jumped 6.4% to HK$2.51 after reporting higher profits. China Railway Construction Corp. gained 1.6% to HK$10.08 after reporting contracts worth 39.1 billion yuan for work on a rail line linking the Chinese cities of Changsha and Kunming. Housing and development equities faltered as Hong Kong’s government keeps a close eye on the property market and may introduce further measures to contain prices if they keep rising. Henderson Land Development Co. fell 1.9% to HK$46.70 while China Overseas Land & Investment Ltd., controlled by the nation’s construction ministry, lost 2.4% to HK$16.20.

S&P/ASX 200 Index           4495.70 (+91.50, +2.08%)

The Australian market bounced up rising 91.50 points (2.08%) as the country reported GDP levels increased and beat expectations for the quarter and month to month. All 10 components were up on the day with Basic Materials rising most at 2.56% (92% positive) while Financials also did well rising 2.18% (93% positive). Australia has been weathering the global economic downturn better than most developed countries because of an A$42 billion ($38 billion) stimulus package and China’s insatiable demand for raw materials. Second quarter growth was driven by a 5.6% increase in exports and a 1.6% increase in household expenditures, according to the statistics bureau. Rio Tinto jumped 3.07% to A$72.24 while rival BHP Billiton rose 2.32% to A$37.91. Major banks also performed well on Wednesday as the National Australia Bank rose 2.8% to A$23.85, ANZ added 2.4% to A$23.14, and Commonwealth Bank rose 1.% to A$51.31.

Notable Asian Session Event Risk / Economic Releases

Country	GMT	Release / Event	Forecast	Previous
JPN	23:50	JPY Monetary Base (YoY) (AUG)		6.1%
AUS	01:30(Thur)	AUD Trade Balance (Australian dollar) (JUL)	3100M	3539M

Written by Alex Rodriguez, DailyFX Research Team

For questions or comments about this article, please e-mail arodriguez@fxcm.com