Asian Market Update: Nikkei Recovers Despite Further Earnings Disappointments, While Aussie Equities Shrug Strong Economic Data on BHP H1 Results; USD Under Pressure Ahead of ADP Jobs, Services ISM

- Equities in Tokyo reversed a three-day losing streak on the Nikkei as traders looked for value in the tech sector in spite of more downbeat earnings. The broader index opened up 0.9% and traded just under 3% going into the final hour of the session. Among tech names, media speculated that Canon and Sharp would post respective Q1 and FY losses. Also, Elpida was rumored to seek public funds following approval of funding for non-financials by Japan's cabinet. Fuji Heavy was in line with prior estimates in terms of guidance after missing slightly on the bottom line in the 9-month period. Mitsubishi Motor was the next automaker in line to report ahead of Toyota on February 6th, coming well short across the board over 9 months and also cutting sales estimates by 15% and CAPEX by 30%. Elsewhere, Steel names Nisshin and Sumitomo also released 9-month results, missing on the bottom line but beating estimates in sales.

- In Sydney, BHP results, increasingly vocal political opposition to the stimulus plan by the minority, and more news of share offerings by large companies weighed on bullish market sentiment despite a strong set of economic data. Australia's December retail sales rose by 3.8% in December - the largest margin in over 8 years - prompting Treasurer Swan to reflect on strong figures as a result of the stimulus boost. Additionally, December building permits, albeit still negative, registered the smallest decline in 5 months at -2.9%. Australia's opposition party railed against the additional A$41.5B stimulus plan for being too large however, calling for greater emphasis to be placed on tax cuts. In company-specific developments, Westfied and Lend Lease announced additional share placements, while the halted Qantas was poised to absorb more bad news after S&P said that its A$500M offering would not be sufficient to lift a Negative outlook. BHP's H1 results were also poor, registering a 56% decline in profit despite the 16% increase in sales. S&P/ASX traded to the downside for most of the session, ending the day down 2%.

- Elsewhere across Asia, Korea's Kospi tracked the strength in the Nikkei, spending most of the day in positive territory before finishing the session up 2.3%. Shares of chipmakers led the field of gainers, with Samsung and Hynix trading firmly as memory chip prices rose to their highest level in three months. Korea's automakers have also outperformed, following reports of increased US market share to a record 49.5% in January. Hyundai's 14% gain in US sales, attributed to company's innovative sales strategy allowing jobless drivers to return their vehicles, was particularly notable. In Indonesia, the Central Bank cut interest rates by the expected 50bps to 8.25% hours ahead of the scheduled announcement, with accompanying statement largely upbeat over the "sound" banking system that kept bad loans within "safe limits". Jakarta Composite gains were slightly more muted, with the index ending the session up 0.7%.

- In foreign exchange, major currencies largely consolidated the gains made against the greenback ahead of the significant January ADP jobs and services ISM data in the US. EUR/USD was contained by 1.3060 intra-day resistance, while USD/CHF bottomed out at 1.14 before marginally consolidating that decline. British Pound was also rangebound at 1.4360-1.4440 against the dollar, but did give up some ground against the Euro after a four-year low in UK consumer Confidence. Furthermore, UK 2009 GDP growth was downgraded at NIESR to -2.7% vs its prior estimate of -0.9% - the largest downgrade in about 60 years. New Zealand Dollar also extended its recovery after S&P relaxed some of its recent scrutiny, suggesting that New Zealand had a 2/3 chance of keeping current AA+ foreign rating and no formal review of the rating was underway. NZD/USD traded back above 0.51 after peaking at 0.5150 in US hours. In other commodity FX, AUD/USD retested 0.65 level after rallying three big figures in the past two days, while USD/CAD fell to Feb lows under 1.2280 following confirmation of Canada's budget that would effectively prevent a referendum on Canada's minority government. USD/JPY and GBP/JPY found selling pressure at intraday resistance levels of 89.67 and 129.45, and Eur/JPY hit a fresh 1-week high just above 116.90.

- Crude oil is trading higher in Asian trading, after closing the NY floor session up by 2%. Today's gains in oil prices come as equities in Tokyo are trading sharply higher. Earlier today, API reported that during the prior week US crude, gasoline and distillate inventories were all higher than expected (API PETROLEUM INVENTORIES: CRUDE: +8.1M V +3ME; GASOLINE: +2.15M V +1ME; DISTILLATE: -184K V -1.3ME). Later today the US Dept of Energy will release its weekly inventories report for the prior week. According to one survey, the report is expected to show that crude oil inventories rose by 3M barrels. In other oil related news, Algeria's oil minister noted that he sees a 50% chance of a production cut at OPEC's next meeting in March. Additionally, the United Steelworkers union reached a tentative agreement with the US oil refining industry. The agreement prevents a potential strike, which could have impacted approximately 30,000 workers and about 8.7% of the US' total refining capacity. Spot Gold is gaining in Asia after declining during the prior 2 sessions. The declines in gold prices during the prior two sessions were attributed to profit-taking as gold closed at its highest level since July 28 on Jan 30, which is just below the $930 resistance area. Additionally, during the prior week, speculative net-long positions for gold hit the highest level since Aug.