Asian Market Update: Financials Lead Broad-Based Selling in Asia After JP Morgan Dividend Cut; Nikkei Flirts with Multi-Year Lows to Chagrin of MOF; JPY Falls to Multi-Week Lows, EUR Braces for IFO, while Gold Slides Below $990.

- "Live by the sword, die by the sword..." If government sponsored bailout of the financials is the said proverbial weapon, the financial sector is hardly convinced of its effectiveness, leading the broader market to reverse the bullish overnight course. After a temporary bounce in equities on the report of a 40% "semi-nationalization" of Citi in the prior session, hopelessness has once again set in on Wall St., punishing US indices to 11-year lows. Selling carried over into Asia, but with the added bearish premium. First, the presumably "healthier" JP Morgan unexpectedly announced an 87% dividend cut from $0.38 to $0.05 in defense of its balance sheet. Next, rumors surfaced that majority government-owned AIG, in a Detroit-esque fashion, may require additional funding to avoid bankruptcy under an overhaul of the last package. Asian bourses subsequently traded in the red across the board and for the duration of the session. Nikkei225 entered the final hour down 2% after sliding nearly 3% from the get go, briefly trading below the multi-year low close of 7,162. Korea's Kospi retraced its relative regional shine, trading near lows late in day at -3.5%. Meanwhile, S&P/ASX hugged the 3,300 figure for much of the session before paring half of its plunge, ending the day down 0.6%.

- Tracking the US slide, financial names led the selling across the Asia region, as Nikkei-traded Mitsubishi UFJ, Sumitomo Mitsui, and Mizuho fell 4-5%. Nomura was the outstanding loser in the sector, plunging by over 10% after confirming issuance of 375M shares to raise ¥152B in capital.
Likewise, South Korea's banking sector was also heavily hit, as Woori Finance, Shinhan Financial and KB Financial slipped 3-5%. Nikkei and Kospi names also commiserated in the shipping sector on a dip in Baltic Dry Bulk - as Tokyo's Mitsui OSK and Nippon, as well as Kospi's Daewoo Shipbuilding and Hyundai Heavy were bid.

- Elsewhere in Tokyo, markets digested January meeting minutes from the BOJ and Finance Minister Yosano. Central bank members suggested that the impact of the recent rate cut may not yet be felt, also stressing the need to work on reducing longer-term interest rates. BOJ further noted that corporate cash flow is decreasing sharply, financial conditions have become tighter, and falling inflation risks require attention, while still forecasting a late 2009 economic recovery. In turn, Yosano opined that the decline in equity markets is concerning, pledging to monitor shares closely amid consistent selling in the US.

- In notable Sydney names, Woodside Petroleum saw some buying interest on reports of a company gas discovery in the Pluto area. In miners, Rio Tinto briefly extended prior session's sharp weakness before paring much of the losses, and Fortescue metals remained on halt after confirming talks with CIC and Valin for funding. BHP fell over 1%, with selling driven by reports of a fatal rail accident resulting in halted ore transport.

- In currencies, Japanese Yen stamped its decoupling from risk averse flows as USD/JPY rose to multi-week highs above 92, EUR/JPY rallied two big figures from session low of 119.40, and GBP/JPY approached prior day's peak at 139. European currencies reclaimed some ground lost against the greenback in US hours, with EUR/USD rising to 1.2750, USD/CHF peaking above 1.17, and GBP/USD picking up over 120 pips from the low before being repelled by 1.4580 intraday ceiling. IFO data was seen as the key event risk in the Eurozone, with upside risk bolstered by the first in eight months bounce last time and a much better than expected ZEW result last week. Commodity currencies were also firmer against USD, as buyers stepped in below 0.64 in AUD/USD and at 0.5050 in NZD/USD, punishing the dollar by nearly 100 pips.

- Spot Gold has declined for most of the Asian session, after closing the NY session down by more than $7. Today's weakness in gold prices came as shares of Bank of America and Citigroup closed the NY session higher, after falling to multi-year lows during the prior week. Additionally, gold prices have moved lower as the bullion holdings of the SPDR Gold Trust have remained unchanged so far this week after the ETF increased its holdings by more than 4% to record levels during the prior week. Crude oil prices are declining for the 3rd consecutive session and continue to track the declines in equities prices. In terms of oil supplies related news, Petrologistics reported that OPEC-12 Feb production is expected to decline to an average of 27.6M bpd vs. 28.7M in Jan. A separate publication noted that Kuwait's oil output may declined by 100K bpd below its OPEC target in Feb.
Despite the production cuts by OPEC, according to an analyst at commodity fund manager Astmax Ltd OPEC's supply reductions are not leading to higher prices because the global economy has yet to show any signs of recovery.