Asian Market Update: All US Banking Participants Rumored to Pass Stress Tests, while Asian Bourses Stage Comeback on Japan Stimulus Plans; Berkshire Loses Aaa at Moody's; Aussie Job Slump Raises Unemployment to 5-yr High; Bank of Korea on Hold, Sees Signs of Stability

- After a marginal equity market recovery in the US session following two days of losses, Asian bourses are looking to reverse this week's early malaise on a grander scale. Nikkei225 and Kospi extended their gains on the other side of Tokyo break to +3%, while Australia's S&P/ASX is seen higher by a more modest 0.9%. Front-month S&Ps point to another higher open with a 0.7% gain.
The New York Times reported that all of the 19 US banks subjected to stress tests will pass the review, helping the equity market rebound even as the possibility remains that certain banks may require added government capital and could be forced to sell off more distressed assets. A White House aide did announce earlier in the session that President Obama's economic team - including FDIC's Bair, Treasury's Geithner, and Fed's Bernanke - is targeting an announcement on stress test progress for this coming Friday. In other notable US aftermarket developments impacting Asia Moody's cut IDR credit rating of Berkshire Hathaway by 2 notches to Aa2 from Aaa early in the session citing the impact of a protracted US recession, and Micron confirmed a $450M equity raise through common shares and convertible notes, amounting to about 14% of company's market cap.

- Key economic data once again revolved around Australia where, after yesterday's mixed housing and consumption sectors data, the most recent job market update was decidedly poor. March unemployment rate rose 0.5% to 5 year high of 5.7% above the estimated 5.4%. Aussie officials have been increasingly vocal about the lagging impact of the global slowdown expected to surface in the jobs reports in recent weeks, and after the prior two months of mixed data that sentiment stands substantiated. Aussie economy lost 34.7K jobs (predominantly full-time) - the biggest monthly loss in years - exceeding estimates of 25K job loss. This solidifies the prospects for continued RBA easing as evidenced in post jobs release cash rate futures, as traders priced in a 25bp cut in early with over 80% certainty.

- In Japan, finalized stimulus increase of ¥15T helped the Nikkei bounce, raising overall spending package plan to ¥25T. Japan Cabinet Spokesman Kawamura said the government would issue ¥10T to ¥11T in bonds to pay for the stimulus increase. February Machine orders in Japan were surprisingly stronger, registering the first increase since September at +1.4% v -6.9% expected. The data appeared to provide a boost to related Nikkei sector, with Hitachi Construction rising soundly after the release. Shares of Sharp also joined the Nikkei gainers as markets shrugged the company's guidance cut in the prior session and turned long on its plans to move up the projected start of operations at an LCD plant by 6 months. News on Japan's financials remained bleak however, as local press speculated that Nomura, Daiwa Securities and Nikko Citi may all report FY net losses.
Recall recently, Japanese press rumored that Mitsubishi UFJ, Sumitomo, and Mizuho may also post losses. The retail sector in Japan was also cast with downbeat prospects, with Moody's retaining its negative outlook for the sector amid ongoing concern over depressed consumer appetite. BOJ's Shirakawa addressed Parliament upper house, noting that a cut to zero interest rates was not out of the question, even though he saw the current 0.10% as appropriate for the time being that was "supporting the economy and financial conditions, while still giving incentives for financial market activity".

- Elsewhere, Bank of Korea left rates unchanged at 2.00% as expected, noting evidence of moderation in economic slowdown. Specifically, BOK commented on stabilization in financial markets, constraint in deterioration of consumer goods sales, improved manufacturing, and expanded household and small business lending. Bank of Korea Governor Lee did subsequently leave the door open for additional easing, conceding a likely contraction in South Korea's economy this year.

- In currencies, USD majors saw rather subdued volatility in thinning trading ahead of the Good Friday holiday, maintaining 50pip ranges across the board. EUR/USD remains contained by 1.33, GBP/USD backed away from a retest of intraday high at 1.4750, and USD/CHF found selling interest just above 1.15. AUD/USD was last seen making another foray above 0.71, unable to take out 0.7050 after poor jobs data, while NZD was a clear outperformer, gaining against both USD and the Aussie. Japanese Yen was once again oscillating around 100, however JPY sellers were unable to push EUR rate above 133.00.

- At the time of writing, crude oil prices are higher by more than 1% and trading above $50/bbl. The Asian session gains in oil prices are tracking the rise in equities prices. In terms of fundamental news, yesterday the US Department of Energy disclosed that during the prior week crude and gasoline inventories were higher than expected, while distillate supplies were lower than expected (DOE CRUDE: +1.65M V +1.4ME; GASOLINE: +656K V -1.7ME; DISTILLATE: -3.35M V -500KE). Spot gold is higher by more than 0.20% and gaining despite the advances being seen in equities prices.