Asian Market Update: Risk Appetite Tracking US Gains for Much of Asian Session, before Chrysler Bankruptcy Report Slows Rally; RBNZ Cuts by 50bps, Signals Low Rates into 2010; BOJ on Hold in Rates and JGB Purchase Levels; Kiwi Plummets After RBNZ while JPY, USD Recover Ground after Chrysler

- Equity markets in Asia are following resurging investor optimism in the US where, despite a deeper than expected Q1 GDP dip, sentiment is building on the side of recovery. Opening a day after bank holiday, Nikkei225 outpaced the gainers in a catch-up rally, entering mid-day break up 4%. In Sydney, S&P/ASX traded over 2% to the upside, while Korea's Kospi advanced over 2.5%. Developments from the US auto-sector did put a damper on the advance with news from both Chrysler and GM. Equity gains were slowed after WSJ reported that discussions to keep Chrysler away from bankruptcy had broken down and a Ch. 11 filing was imminent as early as Thursday. The company and the govt's auto task force had reportedly failed to persuade investors to renegotiate Chrysler's debt obligations, allowing Fiat to start picking through the remnants of the third largest US employer. Earlier, GM bond-holders were said to prepare a rejection of company's debt exchange offer, planning to present an alternative offer on Thursday. In other after-hours news, swine flu pandemic alarm was upgraded by yet another notch to Phase 5 - an official WHO acknowledgement of human transmission in "at least two countries in one region". Ahead of Thursday's open, front-month S&Ps traded 0.5% to the upside but slightly off session highs.

- A pair of Asian central banks announced rate decisions in line with consensus estimates. Reserve Bank of New Zealand cut benchmark rates by 50bps to 2.50 and also signaled it will keep rates at or below current levels until 2010, implying that additional rate cuts could be seen. RBNZ noted that recent developments pointed to lower medium term inflation expectations amid global growth declining at a rate worse than previously anticipated. Regarding quantitative easing, RBNZ's Gov Bollard noted he was not planning its implementation. In other New Zealand data, March building permits m/m came in at -4.6% v 11.7% prior, suggesting persisting softness in the housing sector. In Japan, BOJ left both interest rates and JGB buying unchanged at 0.10% and ¥1.8T. Subsequently, Bank of Japan did cut its FY real GDP estimates to a contraction range of 3.0% to 3.7% from prior 2.0%. Earlier this week, official govt GDP forecast was pinned at -3.3%.
Elsewhere in Japan, Housing starts continued to contract in March at a rate close to that of February, while Construction orders decline picked up speed falling -37.8% v -24.9% prior. On the upside, Japan's Industrial Production beat estimates of 0.8% m/m growth with a 1.6% figure, however Japan's govt subsequently noted that industrial production has not necessarily hit bottom yet.

- Among notable Nikkei names, financials Aozora and Shinsei traded down as much as 4% by midday on rumors of merger plans falling apart. Sumitomo reported FY08/09 Net and Revenue short of estimates, and also forecasted continued deterioration in both for this fiscal year that were also below current consensus levels. In Tokyo Tech, Pioneer fell sharply after announcing 9.8K jobs contraction and a ¥47B related charge, but Fujitsu gained broadly after reported talks of outsourcing chip production discussion with Taiwan Semi. In Australia, Westfield Group was up over 3% on strong Q1 retail sales, while in materials, Alumina was halted after announcing intent to raise A$644M at A$1/share (last: A$1.29). Qantas reported weaker revenue seat factor of 78.3% v 80.3% y/y and traffic falling 2.7% y/y, but rallied along with broader market by over 2%. In Korea, reports of govt assistance for shipbuilders boosted Samsung Heavy and Daewoo Shipbuilding, while SK Telecom traded to the downside despite the Kospi rally after Q1 results, with net profit KRW317B v KRW396Be and Rev KRW2.88T v KRW2.91Te.

- In currencies, the weakness seen in USD and JPY was briefly slowed by the reports of bankruptcy from Chrysler, but since then, European and commodity majors regained their upward momentum. EUR/USD reached 1.3340s, GBP/USD reached 1.4850s, and USD/CHF found support around 1.13. In commodity FX, AUD/USD advanced to 0.7290 with multi-month highs just over 30 pips away and USD/CAD fell below 1.20 for the first time since January 12th. NZD/USD was weaker after the 50point cut from RBNZ and dovish outlook but recovered nicely along with broader market risk appetite.
Japanese Yen was under pressure pre-Chrysler but traded firmer late in the session despite the declines in USD against other majors. Intra-day support turned resistance at 97.40 appeared to contain JPY selloff against the dollar.

- Crude oil prices higher and tracking the gains on the Nikkei. During the US session, the Department of Energy disclosed that last week crude inventories were higher than expected, while gasoline inventories were lower than expected (DOE CRUDE: +4.1M V +2ME; GASOLINE: -4.7M V -100KE). Spot Gold is lower on the session and trading below $900/oz. In terms of demand from India, the World Gold Council noted that the country's gold sales during the Akshaya Tritiya festival totaled 45 tons, which was a decline from last year's 49 tons. Technically, some market players are focusing on the $866 level, which is the 250-day moving average, and $917, which is seen as a resistance level. According to one analyst, if gold break below $866, it could confirm a top for the metal. Additionally, the same analyst noted that if gold rises above $900 and tests $917, it could reverse the risk to the upside.