Asian Market Update: Asian Equities Renew Retreat as Nikkei Briefly Falls Below 9,000, while India Celebrates Election Results; Japanese Press Speculates Moody's May Revise Nation's Sovereign Credit Rating; Kiwi PPI Falls to Multi-year Lows

- Asian equities moved lower nearly across the board as Friday's rally fizzled, proving to be a session of modest profit-taking within the more prevalent sentiment of reemerging caution. Nikkei225 briefly fell below 9,000 level for the first time since May 1st, trading off session lows going into final hour but still down about 2.5%. In Sydney, S&P/ASX was also off session lows but still down by just over 1%, while Korea's Kospi declined 1.3%. One notable exception bucking the overall bearish regional trend was in India's indices, where this weekend's convincing elections that rewarded the incumbent victor Manmohan Singh and his ruling coalition with near-majority Parliamentary representation boosted invest sentiment.
Bombay's Sensex was up just over 10% and the Nifty Index rallied over 14%, prompting intra-day "limit-up" suspension of trading. Equity index futures in US implied more downside after a modest decline on Friday, with front-month S&P's trading lower by just over 0.5%.

- In Tokyo, Japanese press circulated a rumor that Moody's may announce a revision of its sovereign credit rating for Japan immediately after the close of the Nikkei at 2amET. The move would be seen as extremely surprising considering Moody's Stable outlook for Japan's Aa3 rating, and may be providing additional headwind to the wider relative selloff on the Nikkei. Thus far, the credit rating agency has declined to comment whether it will change its rating or revise its outlook. In 2nd tier economic data from Japan, household consumer confidence rose for fifth consecutive month to 32.4, topping 32.1 estimate and prior month's 28.9 figure. Additionally, the pace of Y/Y decline in Tokyo Condo sales slowed markedly to -8.5% from prior -46.2%.

- In other economic data, New Zealand Producer Price Index registered a fresh multi-year record low since at least 1994, with the Inputs component coming in below estimates of flat at -2.5%. Kiwi Consumer Price Index was released in mid-April in line with estimates of 0.3% rise. Earlier this weekend, the Industrial and Commercial Bank of China commented on the prospects of improving domestic consumption, projecting consumer loans rising by 25% to CNY1T by the end of 2010 amid record levels seen in car sales and strong domestic appliance demand coming from rural areas. Recall the rebates coming as part of the Chinese fiscal stimulus rewarded consumption in these household items.

- Among the more notable regional shares, financials led Japan's equities lower some of the earnings results announced in the sector afterhours on Friday. Aozora Bank fell 5% after posting net loss of ¥242.6B v profit ¥5.9B seen in the prior year, while Sumitomo Mitsui declined 4% after its FY08/09 net loss (loss ¥373.5B v loss ¥360Be) and projected FY09/10 net profit (¥220.0B v ¥254Be) were stated below estimates. In regional tech names, Panasonic was one of the biggest losers, falling 8% after the company reported FY08/09 net loss of ¥378.96B v loss ¥386.6Be and missed the top line estimates at ¥7.77T v ¥7.8Te. In contrast, Korea's Hynix rallied by over 1% after the company was speculated to consider a 10% price increase for its DRAM chips.

- Speaking earlier this weekend, Bank of Japan Deputy Governor Nishimura addressed difficult profit environment for Japanese banks as evidenced by Nikkei financials' earnings posted last week, but also suggested that the global financial crisis is waning and Japan's financial system is stabilizing. BOJ is expected to meet this week, with some analysts speculating on the central bank possibly upgrading its outlook on the economy with Friday's decision. In other speakers, South Korea's President Lee and White House NEC Director Summers issued similar assessments of domestic economic conditions, acknowledging improving indicators as early signs of stability. Comments from ECB's Weber coming on the heels of a horrendous GDP figure from Germany on Friday were progressively less upbeat, suggesting that the recent bounce in equities should not be misconstrued for recovery as unemployment was expected to continue rising until the winter of 2010-11 and GDP likely remaining negative, with only moderate growth coming by mid-2010.

- In currencies, the dollar largely consolidated the post German GDP gains it made against the Euro on Friday, also rising to fresh highs against commodity majors. EUR/USD traded down 1.3420's, USD/CHF advanced to 1.1260's, and GBP/USD fell to 1.5115, while AUD/USD and USD/CAD reached dollar-best levels of 0.7450 and 1.1813 respectively, before the overall retreat in USD rally late in the session. Japanese Yen was also initially stronger before retracing the advance, briefly trading below 94.60 and 127 against USD and EUR.

- Crude oil opened the Asian session higher, but has since pulled back as most Asia-Pacific stock indices are declining.
Additionally, the weakness in oil prices is tracking the firmer US dollar. In terms of oil supplies, an unconfirmed report in the Chinese People's Daily disclosed that Sinopec, Asia's largest refiner, planned to increase its crude oil processing in May to 15.6M tons vs. 15M tons in April and 14.9M tons in March. In other oil related news, BP restarted an ultracracker at its Texas City refinery (US' third largest refinery), after the unit was shut on 5/11 for unplanned repairs. Spot Gold is lower and is tracking the weakness being seen in the EUR against the USD. In terms of the technical outlook for gold, one analyst sees resistance at $935 and $968/oz. The same analyst added that gold prices are currently in a consolidation phase as the metal's current range has been in place for 14 months.