Asian Maket Update: Asian markets pare gains in a similar pattern of late-session profit-taking, EUR/USD at 3-week lows

- December auto sales reports dominated an otherwise uneventful news-wise session. Surprisingly, poor performance of Tokyo's own Big 3 hardly translated on their shares, suggesting the investors have become increasingly forward- looking. Toyota, Honda, and Mazda all traded up just above 1% despite the comparable mid-30% across the board contraction in US sales on a yearly basis. Furthermore, Toyota anticipated an extended suspension of production beyond the slowdown of the holiday season, calling for an 11-day output break designed to help relieve the company of inventory buildup while reducing production by about 200K units. Japan's largest automaker had also declined to forecast 2009 auto demand in the US in light of the uncertainty in economic conditions. Elsewhere, Kawasaki Heavy Industry shares saw double-digit gains on announced increase of carrier and storage capacity for liquefied natural gas, possibly benefiting from the energy friction between Russian and Ukraine, while FDK picked up nearly 20% for second consecutive session after prior announcement of intention to mass- produce a next generation lithium-ion battery. Yet another high flyer on the Nikkei, Nippon Electric Glass was limit up by 16% following its announcement to invest in a new facility for production of TV display units and distribution by Sharp, who had recently anticipated a recovery in demand for its products over the coming year.

- In South Korea, widely traded shares of Hyundai Motor were bid up by 4% in light of a much stronger monthly performance. Although 2008 sales were down 14% overall, December saw a 25% jump over November sales levels, just as automakers worldwide slumped notably. Some of the factors behind the Hyundai gains were profiled in the WSJ feature that focused on the company's new incentive programs, namely offering to cover up to $7,500 in negative equity on the lease or purchase of one of Hyundai's cars or trucks. The company also plans to allow buyers to break contracts and return vehicles in the event of loss of job/income. Elsewhere on the Kospi, shares of Samsung and Hynix were up 4.6% and 2.4% respectively after sharp gains registered for companies' DRAM memory chip products on the Dramexchange.

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- In Australia, divergence between the dollar demand driven gold decline and geopolitically motivated crude rally translated into comparable commodity producers' market response. Oil names Santos and Woodside gained over 3% and 2% respectively while Lihir and Sino Gold were down by 6.5% and nearly 2%. Leighton holdings was also widely traded with heavy tone toward an over 10% session drop. The company anticipated its first half results to see a A$170M sales decline while also guiding operating profits at A$650M v analyst-estimated A$967M result. The writedowns were said to be related to Connect East, RiverCity investments and stakes in Brisconnections, Devine and MacMahon. In Aussie economic data, December AiG Performance of Services Index matched the 2nd lowest figure in months with a 39.3 reading.

- In currencies, the US Dollar continued to generate strong buying interest against the Euro and Swissy, while also getting bid to a smaller extent against the Sterling. EUR/USD traded all the way down to 1.35, and USD/CHF rallied beyond 1.1150 - 3-week highs for both. UK currency traded around 1.46 against the dollar, but was also well off its lows against the Euro and far from danger of reaching parity. Japanese Yen largely maintained a 92.85-93.55 trading range against USD, but rallied against the heavily sold European currencies. EUR/JPY was at a single week low under 126, while GBP/JPY broke below 136. In commodity currencies, Canadian Dollar approached mid-December high just below 1.1820, and AUD/USD found interim resistance around 0.72 handle.

- Spot Gold is lower in Asian trading, as the gains in the USD weigh on the commodity. Additionally, it was reported earlier today that in 2008 gold imports by India, the world's largest buyer of the metal, declined by 47% y/y. Overall gold is lower for 4th consecutive session and the metal has so far this week failed to gain on the back of the conflict between Hamas and Israel. Tokyo Gold is lower on the session, as the yen is firmer against most currencies. In terms of the technical outlook for gold, one dealer noted support in the $835-$840 region and resistance in the $900-$930 area. Crude oil is lower by more than 1% in Asian trading, after gaining by more than 4% in NY trading. During the US session, crude rose on concerns related to the conflict in Gaza and on speculation that OPEC would stick to its recently announced production cuts. Earlier today, Iran's OPEC minister said that the cartel would “seriously” implement its supply cuts from Jan 1st. Additionally, an unconfirmed report disclosed that Iran would cut oil supplies to some of its Asian clients by 14% in Jan. Also, another unconfirmed report noted that Kuwait may cut its crude supplies to at least 2 of its Asian customers by 5% from contracted volumes as of Jan 22. In China, the Shanghai Securities News reported that the country's two largest refiners, PetroChina and Sinopec, have started to lower their prices for gasoline and diesel, after the government disclosed in Nov that the country's fuel prices would be lower after price reforms were implemented. In other metals trading, Shanghai copper and zinc futures rose by their respective daily limits for the 2nd consecutive session, tracking the gains in Chinese equities.

Written By: Trade The News