Asian Market Update: ASEAN Summit Pledges Expansion to Swap Network; Taiwan Extends Gains on Rumored Investment House Upgrade; Australia's Housing Price Contraction Reaches Multi-Year Pace, but AUD Rallies to Multi-month Highs vs USD, JPY

- Despite the upcoming week's uncertainty over US financials' stress-tests, central bank meetings, and another round in a sequence of consistently dreadful monthly jobs reports, investors - increasingly enthused by the first S&P500 close above $875 since January - are bidding up Asian shares, extending strength exhibited for much of last week. Entering the final hour, S&P/ASX traded up 2.4%, Korea's Kospi was up over 1.5%, while Hang Seng and Taiwan led the region with 4% and 6% respective gains. In US equity futures, front-month S&Ps were up 0.3%, shrugging FT and WSJ rumors of Citi and Bank of America requiring as much as $10B in new capital. In Tokyo, the Nikkei225 was closed for bank holiday over the next three sessions. Also helping markets preserve risk appetite is the perception that concerns over the swine flu may have been overextended amid talks from Mexico officials returning the country to normalcy by reopening its schools.

- Over the weekend, finance ministers from ASEAN and 3 other major economies met to discuss a framework of additional measures in the region to address the financial crisis, expanding the pool of liquidity in further attempt to improve the tight credit conditions. China and Japan agreed to contribute as much as $38.4B each and South Korea would add $19.2B into the overall $120B pool of reserves for a regional currency swap framework. Additionally, Japan's Finance Minister Yosano pledged about ¥10T in debt and swaps funding to developing economies.

- In Australia, Q1 House Price Index registered multi-year lows, falling short of expectations of a modest recovery and bolstering the case for RBA to maintain its easing pace when it meets tomorrow. On Q/Q basis, prices declined -2.2% v 0.0%e and -1.2% prior, while on Y/Y, prices fell -6.7% v -3.9%e and -3.9% prior - all multi-year lows since at least 2003. April ANZ job advertisements contracted by -7.5%, slower decline than prior month's 8.5% but still indicative of rapidly deteriorating labor conditions. Meanwhile, Australian budget is encountering broader resistance as legislators clash on prospects of higher taxes, defense spending, and a fiscal deficit.

- Elsewhere in Asia, Taiwan equity index remained at the forefront of the regional rally, picking up 6% for the session once again to register the biggest two-day gain since 1991. Bullishness set in motion by the island opening its shores to investment from China was substantiated by a reported upgrade to "Overweight" for Taiwan equities from one of US investment banks, sending Taiex sharply higher. In China, the Manufacturing PMI from the independent CLSA research corroborated last week's 2nd consecutive monthly expansion with the first above-50 number in nine months. President of Indonesia had also chimed in on upgrading estimates of recovery, calling for 2009 GDP in the country to expand by as much as 4.5% from the prior 3-4% forecast.

- In notable Aussie shares, Rio Tinto shrugged opposition to compromise from Chinalco overseas investment official, whose FT interview suggests that he is not in favor of granting Rio shareholders an opportunity to buy convertible bonds. According to the FT feature, Rio Tinto is exploring ways to revise its convertible bond sale offering for Chinalco to 5% of capital from 8%, with remainder going to current investors. Shares of Rio Tinto traded up over 4.5%. In energy, Woodside Petroleum and Santos were also up around 4% after front-month crude contract hit multi-week highs on reemerging consumer confidence. The global leader in industrial explosives - Orica - was up 13% after pledging continued profit for the current year even as the company missed 1H estimates on the top and bottom line, with Profit at A$220M v A$275Me and Sales at A$3.96B v A$4.21Be. MacQuarie shrugged the 2-3% Aussie banking share gains, falling as much as 10% after reopening in the aftermath of a A$540M equity capital raise.

- In currencies, Australian Dollar rallied to its highest levels against USD and JPY since early October just as the markets braced for tomorrow's RBA decision uncertainty. Consensus estimates continued to point to rates remaining unchanged at 3.00%, however short term yields and implied cash rate probabilities portend a much closer decision. Commodity FX strength was also seen in USD/CAD and NZD/USD, with the former testing 1.18 and the latter rising above 1.5750. In European majors, EUR/USD rallied above 1.3340, but Sterling back away from the psychological 1.50 resistance. Japanese Yen decline hit a ceiling against the greenback, as USD/JPY struggled to take out 99.60.

- Crude oil is lower in Asia, despite the gains being seen in Asian equities. In term of oil supplies, Russia disclosed that its April oil production rose to 9.85M bpd, which was a 1.3% rise on a year over year basis and a 0.5% m/m increase. The increase in monthly production is Russia's second consecutive rise and comes despite pledges my non-OPEC countries to limit their supply levels. Spot Gold is higher on the session as the USD is weaker against the Euro and most of the commodities currencies.