Asian Market Update: Financials Follow Broad US Gains Across Asia Before Poor China Trade Figures Damper Risk Appetite; AUD Stalls Ahead of 0.65 on Disappointing China Trade, Housing Figures; Gold Rangebound Below $900, Finds Pivotal Technical Support

- The optimism of Citi's Vikram Pandit plus the increasing likelihood that the short-sale uptick rule will be reinstated prompted broad-based gains on Wall Street on Tuesday. The rally carried over to Asia, where regional bourses traded sharply higher across the board: S&P/ASX peaked at 2.5%, Kospi rallied over 3%, and Nikkei225 nearly reached a 5% gain, before giving some of those profits on downbeat China fundamentals. Asia's financials were at the helm of the rally, comparably following the bounce in the US session that saw Citi rise 38% and XLF gain 15%. Tokyo's Mitsubishi UFJ, Mizuho, and Nomura were up 6.4%, 7.8%, and 8.4%. Korea's KB Finance and Woori picked up 5% and 3%, while Aussie Macquarie and Westpac gained 4% and 3% - all outpacing regional index rallies. HSBC opened up over 10% but pared a portion of those gains, trading nearly 7% to the upside later in the day.

- China's official trade figures briefly dampered the session's bullish sentiment after coming well short of estimates for February surplus and exports and also below the leak rumored in the press last week, sending Asian bourses lower from the day's best levels. Estimates called for exports at -1% and surplus at $28.3B, while the press speculation saw exports falling 20% and surplus at $7B. The official data saw a 3-year low surplus at just $4.8B, and exports falling by multi-year record levels of -25.7%. Imports were also below the -22.5% expected at -24.1%, but well above last month's -43.1%. Fittingly, analysts cited by China Business News noted that the equity market bounce may not last, as it has been driven by expanded liquidity rather than improving fundamentals.

- Other notable economic data saw more bad news from Australia, but a slight improvement from Japan. Aussie January Home loans came in below estimates of 4.0% at 3.5%, while investment lending declined 3.8% vs the expected 3.5% increase. The latest round of housing turbulence follows last week's -3.7% drop in building approvals, suggesting that the pass-through of RBA easing argued by the policymakers and administration is somewhat elusive. A silver lining to downbeat housing numbers, Aussie Westpac consumer confidence for March came in at best level in three months, albeit still at contractionary -0.2%. In Japan, January Machine Orders fells by smaller margin than expected, coming in at -3.2% v -4.8% estimate. February Consumer Goods Price Index was also slightly above m/m estimates of -0.6% at -0.4%. In the recent stimulative efforts of the administration, Japanese press reported that the proposed LDP stimulus plan would include as much as ¥1T in tax cuts

- Aside from financial sector gains, the Nikkei cheered the developments in some of Japan's automakers. Mazda traded up over 5% after a media rumor that 2009 production total would only fall some 16% from 2008. Honda Motors was also firmer as WSJ reported on orders for its Insight hybrid model exceeding sales targets 3 times over. In early hints of price-wars in the hybrid sector, the Honda version is said to be priced 10% below the industry-leading Prius. Elsewhere in Tokyo, Toshiba was up by 8% after press rumored the company may post a 2009 op profit of ¥100B v loss ¥275.8Be, even though Toshiba officials denied being the source of the report. In other notable Asian shares, Aussie miners Rio Tinto and BHP were up 3.3% and 5% respectively, while gold producers Newcrest and Lihir fell 1.8% and 7% after a steep decline in spot gold prices. Korea's Hynix underperformed the Kospi after the US District Court confirmed a $397M Rambus patent ruling - decision that Hynix would reportedly appeal.

- In currencies, European and commodity majors sold off sharply after the poor China trade numbers, demonstrating greater reluctance to buy into risk appetite seen in equity markets.
EUR/USD dropped below 1.2640 from session high above 1.2730, USD/CHF rose above 1.1660, and GBP/USD fell to late Jan. lows below 1.3670. AUD/USD touched 0.64 - falling nearly one big figure on poor China trade and domestic housing, USD/CAD bounced above 1.2850, and NZD/USD briefly retested the downside of psychologically pivotal 0.50. Japanese Yen was widely firmer against the greenback, sliding 60 pips to 98.30's, and also trading stronger in the crosses.

- Spot gold moved sharply lower below $900, as re-emerging risk appetite punished the de facto safe haven. Intraday session low was seen around $890, a technically key former resistance for much of January turned support for most of February. Crude prices were suspiciously lower despite the rally in stocks. EIA short-term energy outlook appeared to stall recent bullishness, projecting a 1.4M bpd decline in 2009 and cutting WTI forecast to $42.06 from last month's $43.14. API crude inventory draw was also nearly on par with expectations of -500K at -419K, while gasoline inventory of +1.65M against estimated -1M corroborated the cautious EIA assessment of consumer demand.