Asian Market Update: Australia Unemployment Rate Below Estimates, but June Job Loss at 3-month High; Bank of Korea on Hold at 2.00%, Dovish on Inflation and Uncertainty of Recovery; Dollar and Yen Consolidate Gains

- Asian equity markets are trading with a somewhat less bearish bias after the meltdown to new multiweek lows in Tokyo and Sydney over the prior session. Nikkei225 opened lower but pared nearly all of its losses going into midday break before a late session slide back down to 9,300. With about 90 minutes of trading, S&P/ASX is down 0.2%, Korea's Kospi is firmer by 0.3%, and Taiwan's Taiex reclaimed its spot at the helm of the gainers with a 1.8% rally. The regional pattern appears to be a repeat of last session, when major Asian bourses were able pare most of their losses going into close, while Nikkei remained under pressure around session lows. Financials are still leading sector decliners across the region even though energy names are not nearly as weak on a relative basis, as crude slump pauses just above $60 to trade slightly higher in Asian hours. Ahead of the US open, S%P's are 0.4% higher and benchmark yields are back above 3.30% after a 0.15% post 10-yr auction collapse in US hours.

- Australia's June employment report was the key economic event on the session, and while the jobless rate was better than 5.9% expected at 5.8%, job loss report and its components overshadowed that upside surprise. Australia's economy lost 21.4K - worse than the expected -20.0K. Moreover, the bulk of the losses were in full-time positions, with June losing -21.9K vs near-flat part-time change. Meanwhile, May numbers were also revised lower from -1.7K jobs lost to -8.5K - also predominantly within the full-time space. The data does reflect the recent comments by Australian officials about the employment sector becoming increasingly more vulnerable. In other Aussie economic figures, July consumer inflation expectations rose for the 3rd consecutive month to its highest level since November, making it more challenging for RBA to respond to the threat of double-dip with another easing.

- In other notable macro developments, Bank of Korea left rates on hold at 2.00% for the 5th consecutive month after last cutting rates by 50bps back in February. BOK governor Lee said Q2 was better than expected, but also remained unconvinced that upward momentum was sustainable, pledging to maintain accommodative policy while also closely monitoring economy and financial markets. With respect to inflation, BOK Governor Lee noted that upside pressure could only rise on energy costs, and that the economy was unlikely to face demand-side or currency-driven risks. Incidentally, South Korea June PPI was down 3.1% from prior month's 1.3% - largest rate of decline in 10 years.

- Among speakers, China's Commerce Minister said he was unsure that Q3 GDP could top 8% and that the global crisis had yet to bottom - echoing the downbeat sentiment seen from NDRC economists about 2 weeks ago. Over in Japan, Govt spokesman Kawamura commented on the sharp gain in the Yen during the US session, pledging to watch market developments closely while also admonishing excessive FX volatility as undesirable for the economy.

- In notable Nikkei gainers, shippers Kawasaki Kisen and Mitsui OSK were up over 2% on sector upgrade from Nikko and Sharp rallied 2% after announcing it would expand its domestic manufacturing capacity. In the auto sector, Japanese press speculated that Mitsubishi would partner with Peugeot to make plug-in hybrids and Fuji Heavy was said to partner with Toyota in a manufacturing venture in China. Outside Japan, Citi forecasted that Hyundai Motor could post a Q2 operating profit of KRW498B v KRW459.8Be, while Australia's Virgin Blu rallied over 5% after announcing a joint venture with Delta Air expanding its service network.

- In currencies, the greenback and Japanese Yen have pared some of their recent broad-based gains, falling modestly against European and commodity majors. EUR/USD rose above 1.39, GBP/USD tested the upside of 1.61, and USD/CHF traded down to low 1.0880's. In commodity FX, AUD rose back above 0.78 but was unable to hold on to those gains late in the session. Loonie firmed toward 1.16 handle against USD and Kiwi rose to 0.6280's. Japanese Yen was generally softer, rising to 93.50's from session's worst levels around 92.50 after stern remarks from govt officials in Tokyo.

- Crude oil prices are higher by more than 0.50% and trading above $60/bbl. Oil prices are gaining for the first time in 7 sessions and tracking the rebound in S&P 500 futures and the commodities currencies. During the US session, oil prices dropped by more than 4% and hit a session low of $60.01/bbl. In terms of oil supplies related news, the US Department of Energy disclosed that weekly crude oil inventories declined more than expected, while gasoline inventories rose more than expected (DOE CRUDE: -2.9M V -2.5ME; GASOLINE: +1.9M V +800KE). In other oil related news, OPEC lowered its 2013 crude demand forecast in its medium term outlook to 87.5M bpd, which is a decline of 5.7M bpd from the prior target. Additionally, OPEC's Secretary General was quoted as saying that the cartel is still concerned about oil demand. Spot Gold is higher by more than 0.10% and is tracking the gains in oil prices. During the US session, gold prices hit a 2-month low of around $905.10/oz. As signs continue to appear that physical demand for gold is waning, the SPDR Gold Trust ETF noted that its holdings declined by 10.4 metric tons to 1,109 tons, which was the largest drop in its holdings since they peaked at 1,134 on June 1. In terms of the technical outlook for gold, an analyst at ScotiaMocatta noted that gold's close below $913/oz was a bearish development. The $913 level corresponded with the 61.8% Fibonacci retracement of the move from $865 to $990. Additionally, Barclays Capital believes that gold could see further near-term weakness and test $894/oz.