Asian Market Update: RBA Stands Pat at 3.00%, Maintains Downward Bias on Rates but Upgrades View on Conditions; Equities Mixed, Major FX Pairs Rangebound

- Asian equity indices are trading with more cautious tone following broadbased selloff in the prior session after US markets staged a late rally to finish the day to the upside. Nikkei225 clawed its way back toward unchanged levels coming out of midday break, while Korea's Kospi was higher by about 0.4% with about 90 minutes of trading left in the day. S&P/ASX was one of the few losers, falling 0.3% on overall commodity slump seen in the US hours, with basic materials and energy leading decliners in both Sydney and Tokyo. Leading the way in the region, Taiwan's Taiex gained1.2% on further talks of closer investment ties with China reported by local press. Ahead of the US open, front-month S&Ps were around unchanged levels around $895 after early weakness, and benchmark yields were back above 3.52% levels.

- Reserve Bank of Australia decision marked the key economic event in an otherwise quiet session that saw tight ranges across equity and major FX markets. As expected, the RBA stood pat at 3.00%, once again keeping the door open for additional rate cuts if required by worsening situation - sentiment that was also seen in the bank's June decision. However, the RBA also noted that economic conditions in Australia are not as weak as expected, with overall global stability and considerable strength in China also mentioned. On the downside, RBA continued to forecast declining corporate investment and downward wage pressures coming from slowing labor demand.

- In other economic data, Australia's June AiG Performance of Construction Index registered its first decline after 3 months of improvement at 46.2, reflecting the trend of deteriorating local housing sector. However, New Zealand Q2 NZIER Business Survey saw its best level since Q3 of 2008 at -25, and Capacity Utilization component improved to 90.7% v 86.3%. Elsewhere, Philippines June CPI saw its worst Y/Y level in over 20 years, coming in at 1.5% below 1.6% expected. Worse than expected inflation prompted Philippines Central Bank to foreshadow another rate easing at its next meeting, as it noted that price pressures remain tilted to the downside.

- In equity news, Japan's telecom names posted strong subscriber growth numbers in June, helping the sector lead the advancers on the Nikkei. Among the most notable of telecom firms, NTT DoCoMo said it added 112.4K net mobile phone subscribers in June v 61.7K seen in May. Asahi Breweries was also one of the bigger gainers on the session after Japanese press speculated the company may post ¥27B v ¥24.5Be operating profit in 1H. Nikkei's real estate sector was also generally stronger following positive statements from Japan's Housing Finance Agency who said that the country's housing market may be bottoming. In Korea, the tech sector remained in the spotlight after a very strong Q2 guidance helped shares of Samsung to steep gains in the prior session. LG Electronics shares were boosted after the company announced plans to reorganize its manufacturing facilities and up its investment levels in Mexico.

- In currencies, the Aussie was one of the bigger movers following the RBA decision in an otherwise quiet session. Just as in the prior month's decision, AUD/USD initially fell below 0.7950 after the RBA left the door open for more easing, before rising above 0.7990 on sentiment of better than expected conditions in domestic economy. In other commodity FX, NZD/USD ranged between 0.6340-0.6380 and USD/CAD traded about 15 pips on both sides of 1.16 handle. European majors saw comparable ambivalence, consolidating the gains made against the greenback in US hours. EUR/USD was contained by 1.3950-1.40 and GBP/USD found consistent selling interest just below the 1.63 handle. Japanese Yen traded firmer early, tracking initial equity market weakness before falling back to 95.50 intraday high seen in USD/JPY.

- At the time of writing, crude oil prices are higher by more than 0.10% and trading above $64/bbl. During the NY session, oil prices declined by more than 3% on the firmer dollar and mixed trading for US equities. Looking ahead, later today the US weekly API inventories data will be released, which could give further direction to energy markets. Spot Gold is marginally higher, after closing the US session down by more than $6.00/oz on the firmer dollar. In terms of physical demand for gold, the SPDR Gold Trust ETF disclosed that its holdings declined by 0.36 tons as of July 6 to a total of 1,120 tons. On June 30, the ETF noted that its holdings declined by 5.2 tons. In other gold related news, today's New York Times is commenting on how the US recession is leading to reduced consumer demand for jewelry. According to the New York Times, many consumers are trading down for less expensive costume jewelry, instead of fine jewelry. Furthermore, a related article in today's Financial Times noted that part of the recent decline in gold prices has been due to lower demand from the world's largest gold buyer India. According to the Bombay Bullion Association, India's June gold imports were about 8-10 tons vs. 24 tons y/y.