Asian Market Update: Asian Bourses Recover Lost Ground on Improving Confidence as Flu Fears Subside; NZD Outperforms Following Second Monthly Trade Surplus; JPY, USD Decline Across the Board

- Asia session equity traders took their cue from US markets, where a 5-month high in consumer confidence and a slowing slide in housing values as measured by Case Shiller overshadowed worries over the spread of swine flu as well as concerns over post-stress test capitalization of the singled out Citi and Bank of America. S&P500 and Dow Jones pared initial losses, closing around unchanged levels. Likewise, after opening to the downside, Sydney's S&P/ASX was in marginal positive territory ahead of close, and Korea's Kospi extended its early rise to trade at session highs, up over 2% on the day. Tokyo markets were closed for trading, but other indices knocked down by the swine bug early in the week such as Hang Seng and Singapore's Straits Times traded in concert with US and the rest of Asia, up about 2% and 1% respectively.

- The absence of more acute symptoms in the Swine Flu outbreak has somewhat marginalized its impact on financial markets, as risk appetite reappeared across asset classes. South Korean press did note that nine more cases may have sprung up, New Zealand confirmed 14 instances, and Canada disclosed 12 confirmed cases. In the US, 11 cases were confirmed in California, but all patients were said to be recovering well. On top of response to treatment in US, there appeared to be some discord among the Mexican officials on the mortality rate. Earlier, Interior Secretary Jose Angel blamed swine flu for as many as 159 deaths, however Mexico's Health Minister remarked that only seven deaths were confirmed to have been directly caused by the virus.

- In Ausralia banking, results from ANZ tracked H1 figures from NAB in the prior session. Although ANZ top and bottom results topped estimates, the 25% drop in y/y profit proved to be too damaging, as ANZ fell 6% while NAB continued to underperform with a 3.6% decline. Both banks have also cut their dividends, with ANZ slashing by nearly 50%, and forecasted additional cash rate cuts by the RBA. In Aussie materials, Fortescue fell 5% after reporting Q1 EBIT at about a third of prior year's level and also cutting its FY09 sales forecast by 15% vs prior guidance. Bluescope Steel was also weak, losing as much as 6% after DB research note suggested the company may offer as much as A$1B in new shares, or 45% of its market cap. Elsewhere in Australia, Woodside Petroleum and BHP were up by about 1%, while goldminer Newcrest was down as much 2.5% on gold selloff in the US before a rebound in both shares and precious metals prices over Asian hours. In other notable Asian shares, Korean Hyundai Steel topped estimates across the board with Net KRW51.5B v KRW14.8Be and Sales KRW1.85T v KRW1.83Te; Hynix was rumored by Maeil Busine to be in talks with a Chinese name regarding a sale of $350M worth of chip packaging and equipment.

- In economic data, South Korea's March Current Account balance nearly doubled prior month's $3.56B surplus with a $6.65B figure, although Bank of Korea officials noted that it was too early to forecast a surplus trend because exports appeared to decline faster than imports in evidence of more structural weakness. In New Zealand, March Trade Balance registered a second consecutive monthly surplus at NZ$324M v prior NZ$487M figure and expected NZ$250M. More notably, both imports and exports came in above estimates at 3.72B v 3.34Be in imports and 4.04B v 3.55Be in exports.
Additionally, New Zealand's Business Confidence for the month of April improved sharply, coming in at -15 V -39.3 prior.

- In currencies, positive economic data as well as reversal from yesterday's overextended losses rewarded Kiwi Dollar across the board. NZD/USD rose about 100pips to 0.5670's, NZD/JPY rallied from 53.70's to 54.90's, and EUR/NZD fell some 300 pips from 2.3550's to 2.3250's. Traders were also bracing for tomorrow's RBNZ decision, paring some of the extreme shorts built in the prior session. Consensus estimates point to a 50bp reduction to 2.50%. In European majors, USD declined across the board, with EUR breaching 1.32 handle and Sterling trading above 1.47. In commodity FX, AUD/USD rose about one big figure to 0.7140, while USD/CAD sold down to 1.2120. Japanese Yen declined across the board, with USD/JPY briefly testing 97.00 and subsequently finding intraday support around 96.75. EUR/JPY and GBP/JPY also bounced sharply after falling to multi-week lows in the prior session.

- Crude oil prices are lower on the session and tracking the earlier declines seen in most US airline shares, as concerns regarding the swine flu linger. Additionally, following the US close, API disclosed that during the prior week, crude inventories were higher than expected (API PETROLEUM INVENTORIES: CRUDE: +4.58M V +2ME). Later on today, the US Department of Energy will release its crude inventories data for last week. According to one survey, inventories are expected to rise by 1.8M barrels. At the time of writing, spot gold is little changed and trading below $900/oz. In terms of Indian gold demand an article in the Economic Times noted that some of India's leading jewelers were reporting a rebound in demand due to the Indian Akshay Tritiya festival. A related article in the Times of India noted that, the festival saw the sale of 55 kilograms of gold v approximately 50 kilograms y/y.