Asian Market Update: Japan Unemployment Grows to Over Five-Year Highs at 5% while Industrial Production Expands at Record Pace; USD Succumbs to Renewed Selloff as Commodities Rebound

- Asian equity bourses are trading firmer going into the final hour of the week's final session, tracking gains in US markets that shrugged mixed housing data and impending GM bankruptcy. S&P/ASX led the gainers with over 1.5% on broad rally in commodity/material names, followed by 0.5% rally in Hong Kong. Nikkei225 once again failed the retest of 9,503 - the highest level since early October - with modest selling sparked by mixed set of economic data for April from Japan. Tokyo index was up just 0.1% going into the final hour. In Korea, geopolitical concerns resurfaced after some reports surfaced about Chinese fishing boats leaving maritime border waters and suspected troop movements in the North, sending the Kospi down by about 0.5%.

- Japanese markets saw a wide range of April economic figures from employment, consumer, and industrial sectors as well as an update on the troublesome inflation front. Jobless rate rose to over 5-yr high 5.0%, in line with estimates, while household spending contracted widely then expected at -1.3% v -0.7% forecast. Japan's industrial sector provided the bright spot on the docket, rising by multi-year record high 5.3% on a monthly basis, prompting the governments to raise its assessment of the sector in the economy. Inflation figures came in weak once again however, maintaining its steady disinflationary spiral despite the "green shoots" in the manufacturing sector. National and core CPI fell 0.1% - slightly better than estimates - while Tokyo core was a tick worse than expected at -0.7%. In Nikkei equity-specific news, Toshiba was up on press speculation of increased output of flash memory products, and Fuji Heavy rose over 3% after the Subaru maker was rumored to enter clean diesel car market by early 2011. In financials, Sumitomo Mitsui traded slightly weaker after Nikkei press speculated the equity raise would be above prior forecast at $9.1B, and industrials sector Hitachi was cut 1 notch to A3 at Moody's.

- Australian markets outperformed on rising metals and crude prices amid renewed dollar weakness seen over the course of US session. BHP was up over 2% while energy names Santos and Woodside Petroleum gained over 1%. Qantas airline was marginally stronger as April load factor increased relative to m/m and y/y level to 80.4%. On regional economic docket, Australia's Private Sector Credit was in line with slight increase of 0.1% m/m, while the volatile New Zealand April Building Permits were stronger by 11.2%, better than 2.2% expected and -4.6% prior. New Zealand prime minister Key reflected on the upward revision in S&P outlook in the prior session, calling on the announced budget to help the economy back on the recovery track.

- In other notable economic data, India's Q1 GDP came in well above estimates of 5.0% at 5.8%, with the prior also being upwardly revised 5.8%. South Korea's industrial production also beat estimates, rising 2.6% on a m/m basis v 2.1% expected. In UK, GfK consumer confidence confirmed earlier rumors of underperformance, falling to -27 vs -25 expected after 3 consecutive monthly improvements.

- In currencies, the greenback extended its losses against the European and commodity majors, while also paring the gains made against the Japanese Yen despite the moderate risk appetite. EUR/USD retested 1.40 and GBP/USD reclaimed 1.60 handles, with an even more technically meaningful breakthrough seen in USD/CHF falling to multi-month lows below 1.08.
Japanese Yen rose to 96.20 against USD but fell sharply against the rising "risk"-related majors, as EUR/JPY rallied above intraday high of 135.30 and GBP/JPY lifted to within pips of 155.

- At the time of writing, crude oil is trading above $65/bbl, after rising by more than 2% during the NY session as OPEC confirmed market expectations and left its output unchanged. In NY trading, bullish US durable goods data and Department of Energy crude inventories figures helped oil rise to its highest settlement since early Nov. In addition to the US durable goods figures, later released production figures from Japan and South Korea added to the signs of stabilization for the global economy. Overall oil prices have risen by more than 26% in May and are on track to have the biggest monthly gain in more than 9 years. Spot Gold is higher and trading above $960/oz, a level which was seen as resistance during yesterday's session. Earlier during the session, gold rose to a 2-month high above $965/oz and prices have been supported by the weaker dollar and higher oil prices. In terms of technicals, one analyst is noting resistance in the area of $966/oz, which corresponds with the March 2009 high.