Asian Market Update: Poor Results from Japan's Shippers Add to Swine Flu Concerns as Bourses Reverse Early Gains; Japan Confirms Negative GDP Forecast Revision; Weekend ECB Speakers Remain Cautious, while Swiss Officials Look to De-escalate Tax Haven Conflict; USD, JPY Rise on Risk Aversion

- Fear over the spread of Mexican swine flu virus has infected investor sentiment midway through trading in Asia, where the initial catch-up rally on the heels of a strong session in the US on Friday has first fizzled and then turned into a downward slide. In Tokyo, the Nikkei halted its 1.5% advance, turning negative shortly after coming out of midday break and subsequently testing its lowest level in 2 weeks. Korea's Kospi was off by over 1.2% after trading up nearly 1%, and Sydney's S&P/ASX entered final hour down 0.7% after initial 1.8% gain. Selloff is even more severe in denser Asian markets of Hong Kong, Taiwan, and Singapore, - all regions impacted by 2002-03 SARS outbreak - with those bourses declining by over 2.5%. In US, front-month S&Ps shrugged prospects of greater clarity from financials' stress test results and automaker bankruptcy saga, trading lower from the get-go toward a near 2% session decline. Earlier this weekend, GM CEO Henderson announced plans to brief the media on company's revised visibility plan on Monday morning, while UAW had reportedly reached an agreement with Chrysler, Fiat, and US govt on the framework for industry reorganization.

- Across the board, shares of companies related to travel and tourism were hit in Asia while healthcare names were generally firmer - this trend is likely to be replicated across financial markets on Monday. Airlines Qantas, Singapore Air, and Japan Air were sharply lower; in turn, Swiss pharma Roche - the maker of Tamiflu - is expected to open very strong. In other company-specific developments, results from Japan shippers released during Nikkei break appeared to add to bearish sentiment. Mitsui OSK and Nippon Yusen FY08/09 results as well as their next year guidance were unanimously below estimates. Kawasaki Kisen net and operating profits were much lower on a y/y basis, with similarly poor next year prospects. In Sydney, the Australian reported that Telstra could be forced to take significant writedowns and lower its financial targets in the near-term. Spirits maker Lion Nathan was one of the few bright spots in risk aversion sensitive consumer sector, benefiting from Kirin Holdings investment paying near A$12/share for the 54% stake in the company that sent its shares up as much as 40%. In Korea, chipmaker Hynix extended its relative strength to trade up 4% in early session as Goldman Sachs raised Korea's tech sector to

"Attractive" from "Neutral" and Deutshe Bank upped its 2009 GDP forecast for South Korea to -2.9% from -5% prior.

- In macro-oriented news, light economic calendar in the session was balanced by new govt growth forecasts from Japan, central banker sentiment from ECB, and banking developments from Switzerland. Japan's officials confirmed that it cut its 2009/10 growth forecast to -3.3% from outdated flat target, pinning y/y figure estimate for Q1 as low as -14%. Bank of Japan was reportedly even more pessimistic, noting that the economy may contract as much as 4%.
Separately, Japan's government has also pledged to expand its 2009 JGB issuance to ¥134.3T v the initial plan of ¥117.4T. Over the weekend, ECB's Weber suggested there was little chance for Eurozone recovery in the near future with jobs markets only seeing some relief in 2011. ECB Pres.
Trichet reiterated that sentiment, but did suggest that the rate of economic decline was slower. In Switzerland, officials took a step toward removing highly publicized stigma of the country's banking sector as a "tax haven", pledging to pass a new tax accord in exchange for the US dropping its legal actions calling for client info disclosure against the Swiss banks.

- In currencies, US Dollar and Japanese Yen gained broadly against commodity and European majors on a spike in risk aversion largely inspired by the pandemic flu threat. GBP/USD fell to 1.4580's, EUR/USD declined to 1.3150's, and USD/CHF advanced above 1.1440. Commodity FX was also in favor of USD, with USD/CAD rising near one big figure toward 1.2180 and AUD/USD collapsed over 100 pips to 0.71. USD/JPY traded down to April lows around 96.50, while Yen gains were magnified in the crosses with EUR/JPY declining to 127 and GBP/JPY falling to 140.70's.

- Crude oil prices are lower by more than 1% on today's Asia session, tracking the weakness being seen in equities. In terms of OPEC related news, the Saudi oil minister Naimi noted that the oil market is still oversupplied, but that inventories will eventually decline from current levels. Naimi added that it is too early to discuss OPEC's next move. Additionally, Qatar's oil minister Al Attiyah said that the outcome of the next OPEC meeting is hard to predict. With respect to oil demand, the IEA's Chief Tanaka was quoted as saying that the group was unlikely to lower its oil demand forecast again, unless its economic forecast changes. On April 10, the IEA cut its global oil demand forecast by 1M bpd to 83.4M bpd. Spot Gold is higher on the session and tracking the weakness in equities prices. Overall, gold prices are gaining for the 4th consecutive session and trading at their best levels since April 3. In other commodities trading, the swine flu outbreak in Mexico is weighing on some of the agricultural commodities. Specifically, US corn and soy futures are sharply lower on the session on possible concerns that the outbreak could lead to lower demand for feed grains in the hog industry. Additionally, China announced that it would place an import ban on hog and pork products from the US and Mexico due to the outbreak.