Asian Market Update: Nikkei Back from Break with a Vengeance to Reclaim October Highs; Aussie, Kiwi Jobs Figures Post Shocking Upside Surprise; Commodity FX Screams Higher as Crude Rally Extends to Fresh 4-month High, while European Majors Await ECB, BOE

- Much like in the US session that saw equities finish firmly higher, investors in Asia appear to have thrown caution to the wind on the eve of official unveiling of the US banking stress tests results. Instead, continued evidence of a bottom in the leading PMI indicators worldwide, as well as hints of improvement in the labor market seen first in the US and then in Asia, are spurring the bullish stampede further. Tokyo markets reopening rested from a 3-day break are leading the charge, with the Nikkei rising by over 4% to levels not seen since late October on broad gains in financials and energy names. Korea's Kospi traded up as much as +1.5% but reversed those gains to trade slightly lower late in the day. Joining the profit-taking in the recent Asian outperformers is Taiwan, with Taiex falling by 0.7% after double-digit gains in just under a week.
Australia's S&P/ASX spiked sharply higher on surprising strength in April jobs report to gain over 2%, but has retraced to 1.5% advance going into the final hour of trading. In US, front-month S&P futures are marginally lower by 0.2% after the cash index moved within 10 points of erasing all of its 2009 losses.

- In Tokyo, shares of Mizuho and Sumitomo helped financials lead the broader index rally with 11% gains, as the former was rumored to have received an upgrade from JP Morgan while the latter picked up Citi's Nikko operations earlier.
Shippers Nippon Yusen, Mitsui OSK, and Kawasaki Kisen were up 9%, 8%, and 6% respectively, benefiting from 4th consecutive session of gains in Baltic Dry Bulk Index. In electronics, Panasonic rose on media reports this weekend that the company would increase its plasma panels output capacity at 2 of its plans by 20%. Traders took profit in Nintendo after the company posted FY08/09 earnings of Net ¥279B on Rev of ¥1.84T - both above estimates - but forecasted a 12% decline in Operating Profit for FY09/10. In other Nikkei names, Hitachi pared gains after widening its FY08/09 net loss estimate to ¥788B from loss of ¥700B, while Shiseido slipped 2% of its initial 3.5% advance after missing Net estimate of ¥21.0Be with ¥19.4B result.

- Australia's equities and currency spiked on last month's jobs that saw April unemployment rate fall to 5.4% from 5.7% vs expected increase to 5.9%. Even more notably, full-time employment change led the jobs increase, gaining +49.1K v -38.9K prior as overall the economy created +27.3K new jobs v -25.0K contraction expected. Aussie govt officials did subsequently take some luster out of the jobs surpirse, as both Treasurer Swan and Dep. PM Gillard noted that higher jobless rate is still expected, however today's figure was attributed to clear indication of stimulus feeding into the system.
Earlier, New Zealand Q1 jobless rate had also topped estimated, rising to 5.0% v 5.3% expected relative to the prior quarter's 4.7%. New Zealand Dollar was also stronger on the report, even though this unemployment rate does represent the highest level since Q3 of 2002. Aussie materials and energy sectors led the S&P/ASX gainers with BHP and Rio Tinto up 5% and 3% on strength in metals and Woodside Petroleum rising 4% as crude prices extended US session rally to 4-month highs. Elsewhere in Sydney, BlueScope rallied 13% after confirming raising A$797M from institutional investors, Lion Nathan was halted ahead of expected update of deal negotiated with Kirin Holdings, and OneSteel was a touch higher relative to market after reaffirming FY09 profit forecast but downgraded its expectations for demand recovery.

- Risk appetite was notably more contained in Korea's Kospi, where the Finance Ministry remarked that exports and domestic demand are still weak despite the improving economic numbers seen in recent days. Korean officials did see drastic slowdown stabilizing, but were at a loss to forecast a more sustained economic recovery. Korea's financials were also among the bigger gainers as Woori Finance beat Q1 Net estimates of KRW92.7B with KRW162.3B figure, and South Korea's Press rumored that Korea Development Bank is considering a purchase of the smaller Korea Exchange Bank (KEB).

- In currencies, commodity majors were bid sharply higher, supported by jobs numbers from Australia and New Zealand as well as multi-month rally in crude. AUD rose to early October highs against USD and JPY of 0.7560 and 74.60 respectively.
USD/CAD traded at fresh multi-month lows just above 1.1620, while NZD/USD briefly tested 0.59 level for the first time since mid-April. European majors drifted in narrow ranges ahead of ECB and BOE decisions, although GBP outperformed EUR to trade at best levels since late February. Japanese Yen was slightly weaker across the board, with USD/JPY rising 60 pips to 98.80 and GBP/JPY advancing nearly one big figure to 149.60.

- Spot gold is higher on the session and trading above $910/oz. During the US session gold rose by more than $6.00 as markets continue to focus on the US bank stress test results. Crude oil is gaining in line with the advances being seen in Japanese equities. Additionally, crude prices reacted favorably to Australia's better than expected employment data. In NY trading, crude rose by more than 4% after the US Department of Energy disclosed that during the prior week crude inventories were lower than expected (DOE CRUDE: +605K V +2.5ME).