Asian Market Update: GM Rumored Closer to Bankruptcy, while Japan Inches Further Toward Deflation; Nikkei Sees Caution as Toyota is Rumored to Post Another Year of Losses; PBOC Adviser Reverses Position to More Bearish on Recovery, Global Demand; AUD Opens at Multi-Month Highs Before Paring Gains; Crude Consolidates on Downbeat IEA

- Asian Equity markets are seeing limited volatility coming out of the extended Easter holiday weekend. In Tokyo, Nikkei225 opened modestly lower, falling by as much as 0.8%, before trading around unchanged levels just below 9,000 for the remainder of the session. Korea's Kospi traded higher by nearly 2%, but also subsequently turned lower to trade well off session's best levels.
S&P/ASX remained closed for Easter Monday, as will equity bourses across Europe. US markets will reopen on Monday however, with S&P futures implying a slightly weaker start with a 0.5% drop.

- New developments for US automakers and financials should reclaim the forefront of market attention ahead of Monday open and going forward. According to NY Times, GM has reportedly been told by US Treasury to prepare for a "surgical" bankruptcy by June 1st in the increasingly likely event of being unable to reach an agreement with its bondholders and union leaders. In turn, a committee representing GM's bondholders has taken a more bellicose stance, preparing legal action against the company's "quick" turnaround bankruptcy plan at the expense of its debt obligations. In financials, this week will see earnings reports from Goldman (Tues), JP Morgan (Thurs), and Citi (Fri), giving investors an insight into whether strong guidance from Wells Fargo is part of a broader trajectory of recovery. Asian hours also saw several merger oriented developments. Express Scripts announced a $4.68B acquisition of WellPoint subsidiaries in a continued trend of healthcare deals. eBay was rumored to buy a 34% stake in its Korean counterpart GMarket for $413M, while Pfizer had reportedly initiated a tender offer for India-traded Pfizer Ltd., bringing its stake to about 75%.

- In economic data, another inflation-oriented figure pinned Japan's economy closer to the brink of deflation. March Corporate Goods Price Index - a "wholesale" measure of the price of goods sold by corporations - saw its deepest contraction on a y/y basis since May of 2002 at -2.2% v the estimated -1.8%, while prior month's figure was revised to -1.6% from -1.1%. Elsewhere in Tokyo, the Nikkei press reported that Toyota may post another FY operating loss in 2009/10 of ¥500B, speculating that yearly sales could decline by 7M units to 6.5M units, and also forecasted a wider loss of ¥3B v loss of ¥2.2Be for retailer Aeon.

- China is heading into a pivotal week - one that will see the release of its Q1 GDP and most recent monthly data on CPI, Retail Sales, and industrial production - on a lower note. Chinese media quoted influential PBOC adviser Fan Gang backtracking from his late March view of the economy reaching bottom, as he now sees 2-3 more years to complete economic adjustment toward bottom amid the early stages of global recession that will dampen consumer demand for China's exports. Moreover, China reciprocated US steel industry anti-dumping lawsuit with accusatory tone of protectionism. Late last week, US industry officials alleged that Chinese steelmakers unfairly dumped specific types of tubular and pipe steel onto the US market in 2008. On a related note in Asia, Korea's steelmaker Posco had reportedly reached preliminary agreement with Rio Tinto, securing a deep iron ore discount.

- Currency markets saw USD gapping higher against European majors and lower against commodity currencies at the weekly open, but subsequently closing those moves on holiday-thinned absence of sufficient volume. EUR/USD fell to prior session low around 1.3125 before reclaiming 1.3170's, GBP/USD traded down to 1.46 before reversing back to prior week's close around 1.4670, and USD/CHF traded range-bound at 1.1540-1.16. AUD/USD was the most notable mover, rising above 0.7275 to its highest level since October 7th, but promptly closed that gap with a retreat to low 0.72 range. NZD/USD rise was contained by 0.5670, while USD/CAD found support at prior session low around 1.2250. Japanese Yen was slightly weaker against USD, but recovered around pivotal 100.50 level.

- In commodities, front-month crude opened down as much as $0.80 on most recent IEA demand downgrade, trading as low as $51.40. On Friday, when commodity markets were closed, IEA cut its estimates for 2009 World Oil Demand estimate by 1M bpd to 83.4M bpd, citing global recession concerns as well as the limited scope for an OPEC cut based on the need of member states to maintain inflow of petrodollars in order to sustain their public spending budgets. Spot gold was slightly higher, rising above $887 from prior session's $881.