Asian Market Update: Hang Seng Leads the Rebound on Short-Covering and HSBC Gains, while Nikkei Cannot Sustain Rally; China Inflation, Aussie Jobs Data Remain Grim; KRW Recovers to 10-day Highs, USD Pares Gains

- Merger activity is shifting into high gear on Wall Street, while cautious optimism mixed with support for new administration's policy response from the oracle in Omaha are helping index futures in the US and bourses in Asia reverse some of their recent losses. Front-month S&Ps are rising by just under 1% in late Asian trade, while S&P/ASX, Kospi, and Hang Seng track those gains with 0.6%, 1.1%, and 2.9% respective rallies. Nikkei225 is among the few losing regional bourses unable to sustain repeated attempts to the upside, but trading well off session lows at -0.4%.

- A sharp rebound in HSBC has put the Hang Seng at the forefront of a short-covering rally. Hong Kong press reported that local Securities and Futures Commission had investigated last hour trade activity in the prior session that extended HSBC's Monday loss to 24%, discovering a particularly large block of 4.7M shares sold that was responsible for distorting price action. HSBC bounced sharply at the open to trade over 13% higher despite announcing that it would not halt its rights issue coming on the heels of last week's poor annual results. A 7am GMT press conference was scheduled by HSBC to provide additional details on the offering and potentially on the volatility of the last two sessions.

- China reported notable weakness in February inflation levels, with CPI falling by 1.6% - wider than the estimated 1.0% decline - and PPI coming in line at -4.5%. Troubling downward price pressure prompted China's officials to address deflation concerns by noting that the declines are due to commodity price slide and seasonal factors rather than structurally-oriented trends. Earlier, China's Industry and Information Minister offered a more sobering assessment of conditions, suggesting that a bottom in global economy has yet to arrive. In turn, this would continue impacting China's exports, exacerbate domestic overcapacity, and keep employment situation challenging.

- Comments from Taiwan's memory chief announcing plans to inject as much as NT$30B into a new DRAM company with a large government stake sent chipmakers lower. Taiwan Semi was down over 3%, matched by a loss in Japan's Elpida. In other notable Nikkei names, Takeda Pharmaceuticals continued to trade limit down by 4.2%, extending loss following FDA request for more clinical data on alogliptin late last week. Fuji Heavy was initially 2% down after widening its FY net loss estimate by over 20% and halving guidance for its yearly dividend. Toyota was also weaker on plant shutdown in Venezuela amid contract-related worker strike. Separately, Toyota was also negotiating its wage-related agreement with the workforce in Japan. Consistent performer amid the global downturn - Nikkei's McDonald's Holdings posted yet another increase in the month of February, with SSS coming in at +1.8% and total sales gaining 2.8%.

- Australia saw its own share of poor fundamentals, with NAB Business Confidence posting 14th consecutive negative figure at -22 and ANZ job advertisements coming in at a record decline of -10.4%. The employment data was perceived as particularly damaging ahead of this week's jobs growth and unemployment figures on tap for release at 8:30pmET on Wednesday. Aussie Prime Minister also saw the numbers as disappointing, even as Treasurer Swan offered a more cheery view on strength of domestic consumption. In notable Aussie shares, Rio Tinto was up 1.6% after prior session's reports of Arch Coal interest to purchase the company's Jacobs Ranch unit in Wyoming for $761M, gold producers Newcrest and Lihir declined following a dive in spot gold prices, while Woodside Petroleum rose to two-month highs amid extended front month crude rally.

- In currencies, European and commodity pairs traded firmer against the greenback across the board, benefiting from risk appetite in equities while reclaiming territory lost earlier in the day.
EUR/USD tested 1.27 after initially dipping below 1.26, USD/CHF fell below 1.1550, and GBP/USD was at the upper end of the 1.3750-3850 range. AUD/USD rallied nearly one big figure to 0.64, USD/CAD fell below 1.29 just hours after multi-year highs above 1.3020, and NZD/USD broke out of an intra-day downward channel to 0.4980 after coming within pips of multi-year lows around 0.49.
Japanese Yen remained contained by 99.20 resistance against USD, but was widely weaker in the crosses due to dollar weakness elsewhere. Korean Won was a notable outperformer, with USD/KRW falling to levels not seen since late February amid more vocal commitment by BOK to use as much of its reserves in defending the currency as needed.

- Crude oil prices are currently declining at the time of writing, after gaining by more than 3% during the US session. As OPEC's March 15 meeting approaches, speculation regarding the cartel's next move is driving markets. During yesterday's European session, Libya's oil minister noted that the upcoming OPEC meeting will focus on quota compliance and the cartel may not decide on a supply reduction. Additionally, a Al Hayat report citing sources quoted a Saudi Arabian OPEC official as saying that OPEC should focus on compliance with existing cuts and it saw no need to discuss cuts at the March 15 meeting. However, OPEC's President said that the group could lower production in March if necessary, while Kuwait's oil minister said that he expects prices to rise above $50/bbl in Q3, if OPEC cuts supply by 1M bpd at its upcoming meeting. Furthermore, OPEC's Secretary General said that OPEC may need to cut output by 800K bpd, but cuts will depend on compliance rates. Spot gold prices are declining for the second consecutive session, as shares of US banks such as Citigroup and Bank of America rose during the US trading session. Additionally, some are citing profit taking for today's drop in gold prices.