Asian Market Update

(AU) AUSTRALIA Q4 PRODUCER PRICE INDEX (PPI) Q/Q:
0.3% V 0.4%E (1-year low); Y/Y: 2.9% V 3.0%E

(HU) HUNGARY JAN ECONOMIC SENTIMENT: -26.8 V -24.6 PRIOR; BUSINESS CONFIDENCE: -16.3 V -14.5 PRIOR; CONSUMER CONFIDENCE: -56.6 V -53.3 PRIOR
(JP) JAPAN DEC SUPERMARKET SALES Y/Y: -0.6% V -2.3% PRIOR

Markets Snapshot (as of 05:30GMT)

Nikkei225 +0.1%
S&P/ASX -0.3%
Kospi closed
Taiwan Taiex closed
Singapore Straits Times Index closed
Shanghai Composite closed
Hang Seng closed
S&P Futures -0.3 at 1,307
Feb Gold +0.5% at $1,672/oz
March Crude -0.2% at $98.13

Overview/Top Headlines

With only Australia and Japan open today due to the New Year's celebrations, Asian equity markets were subdued with thin trading. Both the ASX and Nikkei225 ended the session almost unchanged from opening levels. EUR/USD opened gapping down over 50 pips below $1.2880 with no progress in Greece. Dollar appetite returned with heightened uncertainty and limited liquidity in the region. Silver gained over 2% testing $32.50 before retreating. Australia's Q4 producer price index fell to a 1 year low q/q to 0.3% v 0.4%e; y/y also fell short of expectations at 2.9%. Commonwealth Bank of Australia economist noted that the high AUD is pushing down import prices and keeping inflation at bay and reiterated others sentiments that the door is "well open" to RBA rate cut by Q4 PPI data.

Weighing on the markets was the lack of progress between Greece and its private sector bondholders. IIF's Dallara said to have told EU press, "We are at a crossroads... Our offer, delivered to the (Greek) Prime Minister, is the maximum offer consistent with a voluntary PSI (private-sector involvement) deal... I think it's clear we are at the limits of a voluntary deal. I am optimistic... We made a lot of progress in Athens over the last few days." In a separate FT report indicating IIF's position may have included a loss of as much as 65-70% on current bonds' long-term value. Troika officials said to have requested a report on Greece debt sustainability as part of negotiations on bond swap agreement.

In the German press was reported that Italy PM Monti and ECB President Draghi seek to increase ESM capacity from €500B to €1T. Draghi already suggested using leftover funds from EFSF and transferring them to ESM for a total amount of €750B.

Looking ahead to tomorrow, we are expected the Bank of Japan rate decision. Rates are expected to be left unchanged and the BoJ is not expected to announce any new stimulus. However many analyst expect that the BoJ will cut its GDP forecast. Also on tomorrow's session expecting Australia Q4 CPI to gain only slightly from Q3's 0.6%.

Speakers/Geopolitical/In the press

(CN) Moody's: China's moderating non-bank financing growth lowers systemic risk concerns and is a credit positive for domestic banks

(JP) Japan Dep PM Okada: Rules out snap elections before consumption tax hike legislation is enacted - Nikkei News

(CN) China Premier Wen: China to face bigger challenges in the new Lunar year; Reiterates China will seek to "give more importance to people's lifestyles, and let the population share the fruits of the reform." - Chinese press

(CN) China State Administration of Foreign Exchange (SAFE): China banks saw net sales of FX in December for the second consecutive month - China Daily

Equities

TM: Australia President: Confirms press speculation, to lay off 350 employees (approx 7% of workforce in Australia)

HMC: To reduce workforce at domestic motorcycle plant, transferring staff to other parts of Japan - Nikkei News

QAN.AU: Entered into agreement with engineers union; deal to include 3% pay increase annually; Agreement through Dec 2014 - financial press

HIT: May discontinue production of flat-panel TVs in Japan by September due to tighter price competition - Nikkei

SNE: To relocate assembly of lithium ion batteries to Singapore and China by the end of FY13/14 - Nikkei News

US Equities

RIMM: Co-CEOs have resigned; Lazaridis to become vice Chairman, Balsillie to remain a director; Names Thorsten Heins new CEO effective immediately

FX/Fixed Income/Commodities

(IR) UK and French ships join the US in the Strait of Hormuz - UK press
OPEC Sec Gen: $100/brl price of oil is acceptable to consumers and producers; Does not weigh on global economy

(AU) Newcastle Coal Exports +43% v -14% prior in week ended Jan 22nd
(KR) South Korea Agriculture Ministry: Will resumes imports of beef from Canada - Korean press
EUR/CHF: (CH) Switzerland Econ Min: CHF expected to weaken in the medium term - financial press
(RU) Russia vice-min for Energy Ministry: 2011 output of crude oil rose to a record 511M tons, but unlikely to increase in the next 3 years - Russian press