Asian Market Update: Pres Obama Signs Stimulus and Looks to Take on Housing Slump, while Carmakers ask for More Funds; Toyota Rallies on Expanded Production Targets in May; Gold Bounces Higher as USD Consolidates Gains

- US equities had little left-over Valentine affection for a symbolic "feel-good" White House ceremony that sent the most ambitious stimulus since the 1930's out to brighten the dreary global recession.
Instead, much of the attention was devoted to new pleas for help from the sinking US auto-industry, as "viability" plans instead centered around the need for an expanded industry bailout. Jointly, GM and Chrysler asked for some $14B to remain solvent in the near term while hinting at the possibility of more funding required to stay afloat in years to come. In return, carmakers offered workforce reduction, plant closures, hopes for a recovery in demand, and faith in cooperation with the unions, while warning that the dreaded bankruptcy options would be far more costly and result in greater job loss. Treasury Secretary Geithner and the White House response promised to assess the request, as Congressional leaders reiterated the need for longer term viability in the industry.

- In other after-hours US developments impacting market sentiment, President Obama heeded the assessment expressed by former Fed Chairman Greenspan in a speech this evening that called for stabilizing home prices as prerequisite to economic recovery. According to WSJ, the administration was set to unveil a multi-faceted program on Wednesday helping troubled homeowners lower monthly mortgage payments, allowing borrowers to refinance their loans, and expanding the power of bankruptcy judges to modify "underwater" mortgages. The initiative was set to tap $50B from the bailout fund allocated toward mass foreclosure relief. That report seemed to quell rampant bearish sentiment of Tuesday's trading magnified by auto bailout dilemma, pointing S&P futures to a higher Wednesday open while also boosting regional equity indices in Asia.

- In Tokyo, Nikkei225 traded down 2.2% in the first hour but pared some of the early losses, ticking up to -1% going into the midday break before closing down 1.45%. Among the most notable gainers, Toyota was up over 2% in the final hour of trading after announcing that production volume for the month of May was projected to outpace April by over 30%. Among Nikkei's large losers, Sony was sold down by 3.5% on news that the company has started clearing out its electronics inventory at discount prices. In other Tokyo developments, Japan's January chip equipment orders were reported to decline 80%, while December leading index ticked a touch higher to 80.0 from prior month's 79.8.

- Elsewhere in Asia, Korea's Kospi closely tracked the Nikkei early selloff and late-day comeback, shedding 2.7% at the open to close off session lows down 1.2%. Bank of Korea's Ahn reiterated prior comments rejecting speculation over a "March crisis" while also noting a drop-off in demand for funding Korea's banks. Taiwan's index was one of the few gainers, shrugging recent weakness in chip sector and preliminary Q4 GDP rumors undershooting estimates at -8.36%. Meanwhile, China's FX regulator pledged to keep buying US treasuries on condition they can preserve the value and safety of the investment. China agency further warned against trade protectionism and promised to explore more ways in utilizing its FX reserves to benefit its domestic objectives.

- Australia's ASX also yielded to selling pressure early but failed to stage a comeback comparable to other regional markets until the final moments of the day, trading off by about 2.5% for much of the session before closing down 1.5%. Aussie retail sales in Q4, ticking higher to 0.8% from prior 0.1%, were cheered by RBA Asst Governor Edey, who claimed that Australia can outperform its counterparts based on a more robust financial system and a sound pass-through of central bank rate cuts by the mortgage lenders. In company-specific news, McQuarrie Communications traded down 2% expanded 1H loss and BHP was down 4% on slumping energy and metal prices. Among notable gainers, Fortescue Metals was up 25% after confirming rumors that it hired JP Morgan to advise on "broad range of opportunities" to address interest for large company stake from Anglo American and China Investment Corp. Newcrest Mining rallied 4% on strength in gold, while Woodside Petroleum dodged slumping energy after confirming that it would not look to raise funds with equity offering.

- In currencies, USD largely pared its gains vs the majors after extreme volatility of the prior session. EUR/USD rallied to intra-session resistance of 1.2630, USD/CHF fell over 100 pips from its peak to 1.1650, and GBP/USD repeatedly brushed against session ceiling of 1.43. Commodity majors were also bid slightly higher amid short covering, with AUD/USD rising above 0.64, USD/CAD retesting below 1.26, and NZD/USD trading up to US hours ceiling around 0.5120. Japanese Yen remained weak, rediscovering its inverse correlation with short term equity market trends. USD/JPY was resided above 92.00, EUR/JPY extended gains above 116, and GBP/JPY traded at intraday highs above 132.

- At the time of writing, spot gold is higher, after consolidating for most of the Asian session. During the NY session, gold closed up by more than $25, and the intraday high was $974.20/oz. As physical demand for gold continues to remain strong, the SPDR Gold Trust ETF's holdings of bullion rose to another record of 1,008 tons vs. 985.9 tons on 2/15. Today's gain in gold prices comes as Asian and US equities declined, driven by losses in financial companies. Crude oil prices are lower, tracking the weaker Asian equities, as the trading in the commodity continues to be driven by concerns about demand and a global recession. In terms of comments from OPEC, Algeria's oil minister noted that an output cut is more likely if oil prices fall sharply below $40/bbl, after noting on 2/9 that an oil price of $40 was a “good price for the moment”.. Back on 2/15, an Iranian oil official was also quoted as saying that an OPEC production cut was a strong possibility with oil prices below $40/bbl.