Asian Market Update: Toyota Slashes Global Output to 7-yr Lows; China April Retail Sales Exceed Estimates, but Industrial Production Disappoints

- As the winding down of the first quarter earnings season removes additional uncertainty from the markets, investors appear to be repositioning into risk seeking positions, boosting equities and commodities at the expense of the dollar and Treasuries in yet another session. After a more cautious start mirroring ambivalence on Wall St., Asian bourses are trading firmly to the upside in latter part of the session despite dubious corporate data from Tokyo and more mixed results from China. Nikkei225 bounced to the upside coming out of midday break for +0.7% session highs, Korea's Kospi pared early weakness to trade up 0.3%, while S&P/ASX trailed regional markets with a 0.5% decline trading off session lows. In US, front-month S&P futures reversed initial weakness to rally 0.4% as 10-yr yield rose back to 3.20% level on broader late-session risk appetite.

- In economic data, China once again headlined an otherwise quite calendar with April retail sales and industrial production figures. On Y/Y basis, sales rose from last month's 14.7% to 14.8%, beating 14.5% estimates, while YTD sales were in line with prior month's 15.0% and above 14.8% forecast. Results appear to be corroborating anecdotal evidence cited in recent FT feature that China's internal demand is actually on the rise just as global export interest may continue to stumble, as evidenced by poor trade figures in the prior session. Industrial production came in at 7.3% - weaker than the expected 8.6% and 8.3% prior - on declining crude steel power output components, but coal output (+7.9%), textiles (+7.8%), and auto production (+17.3%) portended a bottoming economy. Korea's unemployment rate for the month of April remained at 3.7% after 2 consecutive rising months. In Japan, March Current Total Account figures also topped estimate of ¥1.21T at ¥1.49T, as both exports and imports contractions eased from prior month's record declining levels.

- Among speakers, Australia's Treasurer Swan spoke in the wake of released government budget view of 6 consecutive yearly deficits, noting that presented forecasts of declining revenues were conservative even as Australia's mining boom was largely seen as being unwound. Speaking on the results of RBNZ Financial Stability Report, Deputy Governor Spencer expressed disappointment over Kiwi dollar response to the most recent 50bp cut, noting that its gains were unlikely to last.
RBNZ Governor Bollard called for New Zealand banks to increase provisioning in expectation of continued asset impairment. More cautious rhetoric was also seen from Korea, where Finance Minister Yoon expressed the need to maintain fiscal stimulus until evidence of sustainable upward momentum emerges, and state's KDI research agency saw little possibility of export sector recovery in the short term.

- On the corporate front, Toyota shares were down 3% after the company slashed its global output forecast by 28% to 6.68M vehicles - the lowest level in 7 years - while also anticipating sales to fally 18% to 7.34M units. Among other Japan auto names, in the afterhours of the prior session, Mazda and Nissan reported FY08/09 performance with mixed results.
Mazda fell 4% after posting net loss of -¥71.5B v profit of ¥14.0B expected with revenue falling short of ¥2.6Te at ¥2.5T.
Nissan fared much better, rising 9% after posting a narrower net loss than expected at ¥233.0B v loss ¥252.0Be with revenues in line at ¥8.44T. Elsewhere, Hitachi and Elpida were also lower, trading down 4% and 9% at midday break after FY08/09 results. Hitachi posted a net loss of ¥787.3B v loss ¥711.2B expected, while chipmaker Elpida saw FY08/09 Net loss ¥178.9B v loss ¥162.5Be and Rev short of ¥349.0B estimate at ¥331.1B. In notable Aussie shares, Rio Tinto was down nearly 5% after UK Telegraph speculation the company may launch a £5B right issue that would presumably damage the outlook for Chinalco deal approval.

- In currencies, reemerging risk appetite over the Asian hours continued to reward European and commodity majors while predominantly punishing the dollar and, to a lesser extent, the Japanese Yen. EUR/USD rose to its highest level since late March above 1.3720, GBP/USD retested the upside of 1.53, and USD/CHF fell below 1.10 for the first time since early January. In commodity FX, AUD/USD briefly rose above 0.77, while USD/CAD fell below 1.16 toward post Canada trade data lows seen in the US session. Japanese Yen has notably reversed its bullish course, with USD/JPY rising nearly 100 pips from session lows to 96.70, EUR/JPY advancing above 132, and GBP/JPY retesting the upside of 148 handle.

- Crude oil is higher by more than 1.4% and trading above $59.00/bbl. During the NY session oil rose by more than 0.5% and traded as high as $60.08. Crude is benefiting from the bullish API inventories figures, which showed that crude inventories unexpectedly declined during the prior week (API PETROLEUM INVENTORIES: CRUDE: -3.1M V +1.1ME). Later on today, the US Department of Energy will release its inventories data for the prior week. According to one survey, DoE crude inventories are expected to have risen by 1M barrels. Spot Gold is higher by more than 0.10%, after rising by more than $10 during the NY session. Today's gains in gold prices are coming as the USD is weaker against the European and commodities currencies.