Asian Market Update: Confirmation of GM Bankruptcy Shrugged Off in Asia as China's PMI Posts Third Consecutive Expansion; Commodities and Related FX Reach Fresh Multi-Month Highs

- Asian equity markets are trading unanimously higher in latter part of the session as investors looked beyond bankruptcy confirmation from the largest of the US Auto names - GM - while focusing on strong economic data from the Far East.
Nikkei225 gained 1.6% going into the final hour of trading as the rally received an extra boost beyond the technical breakout to multi-month high above 9,503 by Japan's Govt spokesman, who saw no reported impact of the GM bankruptcy on domestic auto and auto-parts sectors. In Korea, the Kospi was up over 1%, while S&P/ASX gained 1.7% amid continued commodity gains, as materials and energy sectors were at the forefront of the rally across the Asian markets.

- Eleventh-hour negotiations and union concessions fell short ahead of the June 1st GM deadline, and Chapter 11 bankruptcy filing was confirmed to be imminent, with the official announcement coming at 12:15pmET Monday afternoon.
Under the approved arrangement, bondholders are to receive 10% equity plus 15% in warrants within the debt-for-equity swap deal, with overall entity that is 60% government-owned. Canadian officials and UAW would take the remaining 12% and 17.5%. Also as part of the deal, US government will pour an additional $30B into the company and UAW would forgive $20B owed by GM to the retiree health care. The impact from GM was also notably absent in US markets, as risk appetite remained visibly on display with 0.7% front-month S&P futures and benchmark Treasury yield recovering back above 3.50% after Friday's large decline.

- China's "lasting recovery" story on better than expected PMI gave Shanghai and Hong Kong equities the most robust bounce in the region as Shenzen rose 3.2% and Hang Seng picked up 2.8%. May Manufacturing PMI saw its third consecutive expansion at 53.1 which, despite coming below prior month's 53.5, corroborated durability of the recent upturn. Independent financial institution CLSA echoed the PMI improvement, reporting 51.2 figure along with improvements in New Orders and Output. This May PMI report also sparked accentuated risk-related buying in currencies, proving to be the key event for the session.

- In other notable economic data, Australia posted worse than expected April figures from the housing and retail sales sectors. HIA New Home Sales came in at 0.4%, well below prior month's 4.2% rise, while Retail Sales was short of estimated 0.5% as well prior figure of 2.2% at 0.3%. Australia's Treasurer Swan was not concerned however, citing the data as encouraging while also seeing evidence from the government stimulus spending. The RBA is preparing its cash rate decision for tomorrow's session, with virtually no estimates for a rate cut from the current 3.00% expected. Elsewhere, India's Manufacturing PMI registered its highest reading in 8 months just after posting a better than expected GDP result late last week. In South Korea, trade figures took a step back from the recent recovery efforts with the export component declining sharply by 28.3% relative to last month's -19.6%. Finance Minister Yoon pledged that the export drop would be limited to May, forecasting June decline to be less severe around -20%.

- Korean peninsula continued to headline geopolitically-driven worries as local press reported on North Korea extending its military ambitions to the potential launch of a long-range missile with capability to reach Alaska. According to the report, a train carried the missile from a factory near Pyongyang to Dongchang-ri in the northwestern part of the county of Cheolsan over the weekend, which follows earlier speculation that the North was preparing a test of the modified version of its long-range Taepodong-2.

- In currencies, commodity FX continued to outperform their major European counterparts as both persisted on their dollar assault. AUD and CAD were at multi-month highs against USD, with AUD/USD rising to 0.8060's and USD/CAD falling below 1.0870. European majors saw EUR/USD trade above 1.4160 and USD/CHF below 1.0660, but those gains were cut short after firmer commitment by US Treasury Secretary Geithner to maintaining a strong dollar during his trip to China - a much needed sentiment by the government officials to slow the USD freefall. Japanese Yen also reversed its early-session bounce, returning toward unchanged levels against USD around 95.20 after Geithner comments.

- Crude oil is higher by more than 0.50% and trading above at a 7-month high. Crude is benefiting from the expansionary PMI data from China and the gains in equities. In terms of OPEC commentary, the Kuwaiti Oil Minister said that "there is no way" that OPEC will cut production at the Sept meeting. Also, the Kuwait official said that he does not support oil prices rising to $100bbl, but favors a price range of $70-75/bbl. Spot Gold is higher by more than 0.20% and trading at a 3-month high, tracking the weakness in the dollar against the commodities currencies.