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Thursday, August 04, 2011 10:37 PM

Asia-Pacific Bloodbath Round II; Australia -4%, Hong Kong -4%, Indonesia -5%, Japan -3%, South Korea -3%, Taiwan -4%; Late-Night Global Headlines

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It's another rough night for Asia-Pacific equities as show in the following chart.

click on chart for sharper image

This second Asia-Pacific rout in three days follows a rout of US equities on Thursday.

For details of the US rout, please see In Commodities Bloodbath Gold Holds Up Well; Equities Plunge 4%; Dow Drops 512 Points; Crashes Happen When "Oversold"

Here are some late-night headlines to consider:

RBA Cuts 2011 GDP Growth Target to 2% From 3.5%

RBA Cuts 2011 Growth Outlook, Raises Inflation View in Two-Speed Economy

“Conditions are expected to remain very strong in the mining industry, as well as those parts of the economy benefitting from high rates of resource-sector investment,” the central bank said today in its quarterly monetary policy statement. “In other sectors, the high exchange rate and subdued levels of retail spending mean that the trading environment is likely to remain difficult.”

The RBA forecast growth in 2011 will average 2 percent, down from its May 6 estimate of 3.25 percent, while in 2012, gross domestic product will accelerate 4.5 percent, stronger than the prior estimate for a 4.25 percent expansion.
What the hell is the RBA smoking with this upping of GDP estimate for 2012. Australia housing is crashing, China is slowing and you have to be a dunce to not see it.

11-Month Low for China

China’s Stocks Slump to 11-Month Low as Economic Concerns Spur Global Rout

China’s stocks fell, driving the benchmark index to the lowest level in 11 months, as global equities markets plunged on concern slumping U.S. growth and Europe’s debt crisis will push the world economy into recession.

“China’s already-weak stock market can’t find shelter from the global rout,” said Tu Jun, a strategist at Shanghai Securities Co. “Negative factors like the European debt crisis and U.S. growth concerns have accumulated and kept adding to investors’ pessimism. That has hammered markets worldwide.’”

The Shanghai Composite Index, which tracks the bigger of China’s stock exchanges, tumbled 61 points, or 2.3 percent, to 2,622.98 at 9:39 a.m., the lowest since September 2010. Only three stocks among the 947 in Shanghai Composite advanced. The CSI 300 Index (SHSZ300) declined 2.4 percent to 2,889.64.
Australia Equities Biggest Drop in Three Years

Australian Stocks Set for Biggest Drop in Almost 3 Years Amid Global Rout
Australia’s S&P/ASX 200 Index fell 4.4 percent to 4,088.20 as of 11:20 a.m. in Sydney, set for the biggest drop since Nov. 13, 2008. Energy, material and consumer companies declined the most among the gauge’s 10 industry groups and all but three of the index’s 200 stocks dropped. New Zealand’s NZX 50 Index (NZSE50FG) slid 2.4 percent to 3,297.33 in Wellington, set for the steepest decline since March 3, 2009.

“It’s a panic attack from fear that growth is dropping off a cliff,” said Prasad Patkar, who helps manage the equivalent of $1.7 billion at Sydney-based Platypus Asset Management Ltd.
Is it a fear growth is dropping off a cliff or a simple statement of reality that it is happening as I type?

Japan Warns on Yen

Japan Looks to Warn Investors Away From Yen
Japan escalated its campaign to convince investors that the nation’s post-earthquake challenges mean they shouldn’t pile into the yen as a haven from the turmoil over U.S. and European debt.

On his third day in the job, Takehiko Nakao, vice finance minister for international affairs, oversaw currency sales that sent the yen down the most against the dollar since September; it recouped some of the loss today. With Nakao’s boss Yoshihiko Noda this week referring to mid-1990s style intervention as a useful reference, investors may need to brace for further action, according to Gareth Berry, a strategist at UBS AG in Singapore.
As I have mentioned before, currency intervention is useless.

US, Japan, Australia, Germany Government Bonds Soar

Treasuries Poised for Biggest Weekly Advance Since Fed Rate Cut in 2008
Treasuries headed for their steepest weekly gain since the last time the Federal Reserve cut interest rates in 2008 as stocks tumbled around the world on concern economic growth is slowing.

Bonds surged from Japan to Australia to Germany this week as investors sought the relative safety of government debt. The TED spread, the difference between what lenders and the U.S. government pay to borrow for three months, widened to 26.9 percentage points, the most in a year.

“Hot money is flowing into U.S. Treasuries in a flight to quality,” said Hiromasa Nakamura, a senior investor in Tokyo at Mizuho Asset Management Co., which oversees the equivalent of $37.9 billion and is a unit of Japan’s second-largest bank. “There’s a flight from riskier assets into bonds. All bonds are benefiting.”
No, Not All Bonds have benefited. Italy, Spain, Belgium government bonds were hammered.

Mike "Mish" Shedlock
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