Resistance for gold is seen at $961 and $966

- Asian equity markets shrugged the geopolitically-driven caution displayed over the prior session, rising broadly in concert with US indices on perception of a more lasting rebound coming from improving US consumer confidence. Hong Kong's Hang Seng led the regional gainers with a 4.5% rally on the back of the announced plans for new HK$16.8B economic stimulus. Japan's Nikkei traded up as high as +1.7% coming out of midday break on solid trade data, coming within 50 points of multi-month highs just above 9,500. In Sydney, S&P/ASX was led by Materials and Industrials sectors once again, picking up 0.8%, while Korea's Kospi was only marginally stronger as North Korea's saber-rattling grew louder in response to early signs of coalition forming to address its nuclear threat.

- Most recent trade figures for the month of April from Japan support the recent BOJ upgrade of economic outlook, with trade surplus registering a third consecutive monthly surplus after four months of deficits at ¥68.9B and the pace of export and import contraction on Y/Y basis easing notably. On a regional basis, relative softer decline was also seen in exports to Asia and US, as both measures came in above prior months' figures. Bank of Japan's Shirakawa saw the need for central banks to provide sufficient liquidity, but guarded against excessively low interest rates allowing a build-up of imbalances. In Japan's corporate sector, Nippon Steel passed the cost savings from the miners agreed to in prior down the supply chain, cutting its steel prices for Toyota by 10% - the first price cut in 7 years allowing Toyota to save about ¥50B. In turn, the company could use the extra supply and lower cost, announcing it would resume overtime work at some of its domestic plants to increase Prius output in response to greater than expected demand. On a related note, Japanese steelmakers JFE Steel, Sumitomo, and Kobe agreed to same price-cut terms with Rio Tinto as Nippon Steel as announced in prior session.
Elsewhere in Japan, Mitsubishi Heavy and Nikon rallied about 4%, with the former reported to be discussing solar plant developments in Eastern Europe and the latter consolidating operations in a move projected to save up to ¥8.0B in fixed costs.

- North Korea stepped up its bellicose posturing as UN continued to consider an appropriate response. The North test-fired another short-range missile and, most notably, deemed the joining of Proliferation Security Initiative (PSI) by the South as "declaration of war". Furthermore, the North 's KCNA stated it was no longer bound to 1953 armistice and could no longer guarantee the safe passage of international ships, while South Korea's press rumored the North was restarting its production of a plant for manufacture of weapon-grade plutonium. Amplified belligerence is being construed by some that North Korea may not necessarily be looking to lure in additional economic concessions but rather making a statement against the new more adverse South Korea's administration - a considerable change from prior and recently deceased South Korean leader. Separately, South Korea's Q1 household credit registered the lowest growth in 4 years, suggesting tighter consumer credit conditions in the struggling economy.

- In Australia, Finance Minister Tanner suggested that economic outlook is "not rosy" despite the sound overall fundamentals in the economy - possibly in response to perception of the economy recovering ahead of the rest of world on rebounding commodity demand from China. In contrast to sentiment from Vale and Rio Tinto management, BHP CEO Kloppers put that notion to the test, noting that China's commodity demand may be related to buying for inventory buildup stemming from China's stimulus plan rather than the emergence of sustained real demand. In Aussie financials, ANZ was halted before the company confirmed a A$2.5B capital raise amid uncertain economic outlook and persisting challenging conditions. Q1 construction data from Australia also painted a dim picture for the housing sector rebound, registering the lowest level since Q4 of 2000 at -3.7%.

- In other notable speakers, Treasury Secretary Geithner courted continued financing of US govt debt on his trip to China, suggesting the US would give the Chinese a "pass" on Yuan, trade issues while pledging to reduce US fiscal deficits. In an FT interview, former US Treasury Undersecretary John Taylor forecasted federal debt reach 100% of GDP within 5 years that would prompt credit rating agencies to cut the US AAA rating. ECB's Liikanen speculated on 2009 being a difficult year, noting that current interest rates were appropriate at this time but that 1% may not be the lowest level. Additionally, Liikanen suggested the ECB would act to withdraw extra liquidity only when a change in medium-term outlook emerged.

- In currencies, US dollar traded in narrow ranges before rising moderately late in the session following declines seen during the US hours. EUR/USD was unable to maintain 1.40, falling below 1.3940, while USD/CHF rose as high as 1.0880. Sterling outperformed relative to European majors, reaching 6-month highs against USD at 1.5970 and approaching multi-month highs against the Euro below 0.8750. In commodity FX, AUD was range-bound at 0.7840-80, and NZD responded to a mixed set of factor, falling on corporate developments from the daily sector calling for weaker currency before recovering after a record-high NBNZ business sentiment data that helped it maintain above 0.62 handle. Japanese Yen was largely weaker in line with risk appetite seen in global equities, with USD and cross pairs shrugging post-trade surplus data Yen strength.

- Crude oil prices are marginally lower on the session after rising to a 6-month high in NY trading. The NY session gains for oil prices came after US May consumer confidence rose to the highest level since Sept 2008 and had its biggest jump since 2003. In terms of fundamental news, Japan reported that its April crude imports declined by 11.1% y/y, after declining by 18.4% in March. In terms of the outlook for the crude market, the release of the US API weekly inventories data and this week's OPEC meeting will be focal points.

- Spot Gold is lower and trading around $950/oz, after briefly dipping below this level earlier during the session. Today's weakness in gold prices is tracking the gains in the USD. Some of the activity in gold prices is also being attributed to end of the month position adjustments. Additionally, some market players said the improvement in Japan's April exports has weighed on gold prices because the data showed that the global economy may no longer be in free fall. In terms of market commentary, the CEO of Australian gold miner Newcrest noted that he believed the USD weakness is supporting gold prices. Also, the Newcrest executive noted the decline in jewelry demand. With respect to the technical outlook for gold, one analyst said that if gold breaches the $950 level it could lead to long liquidation. The same analyst added that he expects longer-term players would remain long gold, while the metal holds above $934/oz. Resistance for gold is seen at $961 and $966. Looking forward, potential event risks for gold include the ongoing developments at General Motors, US economic data and US bond auctions.