- Earlier today, it was reported that North Korea conducted a nuclear test at one of its underground facilities. According to North Korea, the test was successful and more powerful than its prior test which was conducted in Oct 2006. Press reports have disclosed that today's test, was conducted at the same location as the 2006 test. The reports of the North Korean nuclear test coincided with a report from the USGS noting a 4.7 magnitude earthquake about 370 kilometers northeast of Pyongyang. Following today's developments, both Japan and South Korea announced that they are planning to hold emergency meetings and they plan to respond through the United Nations. Today's North Korea nuclear test followed prior warnings from Pyongyang. In late April, North Korea said that it would conduct more tests of nuclear devices. Also in late Feb, a South Korean press report noted that North Korea was operating a secret underground plant in order to make nuclear bombs from enriched uranium.

- The North Korea report has sent most Asian equities either off of their best levels or into negative territory. The Nikkei 225 is higher by more than 1%, but trading off of its highs. The worst performing sectors in Tokyo include oil /gas companies and utilities and the best performing sectors include telecom, health care and financials. Australia's S&P ASX 200 is lower after opening the session in positive territory. Losses in Australian are being driven by financials, after the government announced that it would lift its ban on the covered short selling of financial shares. Equities in South Korea initially traded lower by more than 5%, directly after the reported North Korean nuclear test. However, the Kospi has since rebounded off of its worst levels as markets try to discern the reasoning behind the North Korea nuclear test. According to some dealers the test is seen as an attempt to gain the attention of the US and not a move to destabilize South Korea's economy. Equities in China and Hong Kong are lower on the session, after the Chinese government announced that it plans to end its ban on IPOs, which has led to supply concerns. In Taiwan, the Taiex is lower by more than 0.10%, as gains were reversed following the North Korean nuclear test. The weakest sectors in Taiwan include healthcare companies and technology firms.

- In foreign exchange, the USD and JPY have been the biggest winners following the news related to North Korea. In terms of the European majors, the Euro, pound and Swiss Franc are all weaker against the greenback and the Yen. EUR/JPY, traded above 133.00 earlier during the session, but has since pulled back. In terms of the commodities currencies, the USD and JPY are also firmer. The AUD/USD had traded above $0.7800, but has since moved below the figure, while USD/CAD has rebounded to above 1.1230, after briefly dipping below 1.1200. The NZD has been the biggest loser on the session with respect to the commodities currencies. NZD is lower by more than 0.30% against both the USD and yen, after the US government decided to give export incentives to its dairy farmers. The move is seen as weighing on the NZ economy as dairy exports make up approximately 7.5% of the country's GDP. Additionally, in the New Zealand Press, a S&P analyst was quoted as saying that New Zealand needs to forecast a budget surplus within 5 years to avoid a credit rating downgrade. S&P added that it believed New Zealand's finance minister English should use the May 28 budget to outline a path to a more stable fiscal position. In Jan, S&P affirmed New Zealand's AA+ rating and revised the outlook to negative from stable. In Asian currencies, the KRW moved lower by more than 1% against both the USD and JPY directly after the North Korea test, but the Korean currency has seen rebounded after S&P said that the development had no implications for South Korea's credit rating. In other forex related news, dealers are focusing on this week's US government bond auctions. Overall, the US government is expected to sell $100B of debt this week. According to some reports, market players will be focusing on how much of the debt will be taken up by the US government as the Fed continues its quantitative easing.

- Crude oil is lower by more than 0.30%. Oil prices are declining despite comments from over the weekend from Libya's Oil Minister Ghanem, in which he noted that there is a 50% chance that OPEC will cut its production quotas at this week's meeting. The remarks out of Libya follow comments on 5/23, from the Saudi Oil Minister Naimi in which he said that he would recommend staying the course during the upcoming OPEC meeting. Spot Gold is lower by more than 0.20% and has failed to benefit from the North Korea nuclear test. In terms of physical demand for gold, the SPDR Gold Trust ETF increased its holdings by 13.1 tons and for the first time since May 13.