Asian Market Update: Australian Equities Recover Following Relative Slump as Miners Rebound; Nikkei Mixed amid Warnings in Financials, Goldman Optimism on Autos; PBOC Adviser Fan Flipflops Back to Upbeat Mode, Sees 7-8% FY GDP; USD/JPY Consolidates Fresh Multiweek Lows, while Crude Drifts After Earlier Gains

- Asian equity markets have predominantly followed Wall St.'s lead from the prior session, opening modestly higher before paring much of those early gains late in the day. Nikkei225 picked up over 0.5% in the first hour before selling down to session's worst -0.9% levels coming out of mid-day break. Likewise, Korea's Kospi initially rallied 1% but sold off to unchanged territory with two hours of trading to go. The notable trend-breaking outperformer was Australia's S&P/ASX, as it built on early buying momentum to trade up 1.7% near its best levels amid profit-taking by shorts. Recall over the past two sessions, Aussie shares had underperformed regional bourses on a relative basis in response to government and monetary officials confirming domestic recession. In US index futures, a strong round of tech earnings that saw Apple and Ebay both blow out estimates afterhours were potentially setting up a stronger Thursday open. Front-month S&Ps pared its early decline, trading up 0.1% above $837.

- Rio Tinto was one of the bigger gainers in Sydney with a 5% rally as speculative report in "The Age" commented on Chairman Jan du Plessis possibly having held a meeting with his BHP counterpart Don Argus, contradicting an earlier statement this week from RIO official. Fosters was also one of the bigger winners, racking up over 6% despite the announced departure of its strategy chief. Energy names Woodside Petroleum and Santos traded higher by 1% and 2.7% respectively on broad rebound in crude during US hours, with the latter also reaffirming its FY09 production and CAPEX guidance. Gold producers were modestly higher as gold prices continued to approach $900.
Newcrest Mining was up 1.4% on precious metal strength as well as forecast of the company increasing production by as much as 40% over the next 5 years. Australian Finance Minister suggested that additional economic stimulus could not be ruled out in light of deteriorating conditions, with a focus resting on the slumping jobs sector. Earlier, Treasurer Swan noted that there was no guarantee of jobless rate not reaching double digits v most recent jobless rate of 5.7% in March.

- In Japan, Goldman Sachs issued a brighter outlook on Honda and Toyota, sending their shares higher by 2-3% with a Buy rating. In Tokyo tech, Canon was up on rumored operating profit of ¥30B v loss ¥12.5Be and Pioneed gained 5% after Honda confirmed it was considering the speculated "several billion yen" investment in the company. Seiko Epson was lower by 3% in midday however on Nikkei press forecast of an 80% drop in y/y FY profit. Japanese Press had also punished the shares of financials Nomura and Mizuho with speculation of respective FY net losses of ¥700B and ¥500B. Elsewhere, one of Japan's largest energy trading firms was down around 5% after cutting its net profit estimate to ¥180B vs its Feb 3rd forecast of ¥310B profit. In macro developments, BOJ's Nishimura noted it was significant for the BOJ not to monetize govt debt, particularly with the administration still being seen as fiscally prudent. However, he also reflected on govt finances being in a dire state, with long-term yields rising mainly as part of an overall global trend of hope for a bottom. Meanwhile, additional speculation over official GDP downgrade for the current fiscal year emerged from unnamed govt source, with the new number falling to -3.3% from prior -2% to -3% range.

- China's PBOC Adviser has reportedly altered his view about the timing and progress of the "bottoming process" in local economy. Recall just over a weekago, Fan Gang reversed his initial view of the economy "touching bottom" in Q1 with a forecast of 2-3 years required to complete economic adjustment. Today, Fan reverted to his view of a bottom in China's economy, but was more opaque on this year's growth target, with a 7-8% projected FY GDP range.

- In Korea, steelmakers traded to the downside as Posco and Hyundai Steel both lost over 1.5% following Goldman Sachs research note cutting its view to "Cautious" from Neutral on the sector and also downgrading Posco to Sell. Kospi shipbuilder names traded higher however on the back of the rumored support from Korea's government setting up a fund to acquire vessels from distressed shippers at market prices. Elsewhere, LG Display was up 2% on Goldman upgrade to Neutral but Hynix shed 3% following earlier company approval of a KRW1.3T creditor injection, with KRW700B made up of diluting rights offering and KRW309M in foreign currency loans. South Korea's Fin Min Yoon suggested the local currency and equities were seeing signs of stability amid ongoing difficult times.

- In currencies, the greenback drifted against the European majors for much of Asian session before being offered more broadly amid strong figures seen in Credit Suisse results. GBP/USD retested 1.45 en route to 1.4550 after post-UK budget losses in prior session, while EUR/USD approached intraday highs above 1.3030. Japanese Yen was initially stronger in Asia, approaching multi-week lows seen in US hours just above 97.50's, before returning risk appetite pushed the Yen lower to 98.00. EUR/JPY and GBP/JPY also bounced higher from initial declines, finding respective bottoms at 126.80 and 141. In commodity FX, AUD and USD pared early session weakness as well, rising toward 0.71 and 0.56 handles in late trading.

- Crude oil prices are lower in Asia, as the US Department of Energy disclosed during the US session that weekly crude inventories were higher than expectations (DOE CRUDE: +3.86M V +2.5ME). Spot Gold prices are higher and are tracking the declines being seen in some of Japan's banks.
Additionally, the IMF's reduction of its 2009 and 2010 global growth forecasts and its comments that the stabilization of the financial system may take longer than expected are seen as supportive factors for gold prices. As concerns about the global banking system remain, spot gold could receive some direction from the release of the results to the US bank stress tests. US officials are expected to on Friday begin briefing banks on the results of the tests and the results are expected to be made public one week later. In terms of physical demand for gold, the Bombay Bullion Association disclosed that India's gold imports may rise by more than 100% in April on a y/y basis, due to lower prices.