Asian Market Update:  Singapore Emerges from Recession with Multi-year High 20% Q/Q GDP Growth; Taiwan Officials Oppose Rumor of Delay in China Partnership; Equities Soar After Strong US Session

- Asian equity markets are tracking the high-flying US indices where the financial sector's biggest skeptic Meredith Whitney tempered her pessimism going into Q2 earnings from Goldman Sachs. With about two hours to go, Financials and Tech led the Nikkei up about 2.3%, while materials names helped S&P/ASX to the helm of the regional gainers with a 2.8% rally.
Elsewhere, Singapore and Taiwan were both up about 1.3% on positive domestic developments, while Korea's Kospi lagged the rest with a softer 0.8% rally. Ahead of the US session, front month S&Ps are a touch firmer just above $897, and benchmark yields are unchanged at 3.35%.

- Singapore Q2 Preliminary GDP saw the island leap out of recession with the biggest Q/q increase on record since at least 2001. Following 4 consecutive quarters of contraction, Q2 GDP rose 20.4% - better than 13.4% expected - and Y/Y topped estimates of -5.4% at -3.7%, with construction output marked the biggest improvement at +18.3% y/y. Singapore officials also raised their FY09 economic growth target to -6% to -4% from -9% to -6% prior, but remained cautious in the overall outlook, noting that economy is likely to remain weak going forward with little evidence of a decisive rebound. Furthermore, Singapore govt said global conditions were still weak, with much of the first half improvement coming from bio-medicals and restocking of electronics products, a bounce that may not be sustainable.

- In other regional economic data, South Korea reported improvement from its recently vulnerable trade sector, where June export price index turned positive to 1.9% v prior -4.5% on a m/m basis. In Australia, June NAB Business Conditions posted a 9-month high of -2 v -14 prior, while forward-looking Confidence turned positive for the first time since December of 2007 at +4 v -2 prior. Outside Asia, UK economic data continued to shine as June BRC Retail SSS rose 1.4% v -0.8% prior. Even more impressive, June RICS house price balance registered its highest level since Sept of 2007 at -18.1% v -40.0% expected at -43.8% prior.

- Over in Taiwan, Premier Liu engaged in some verbal damage control after prior session's 3.5% Taiex drop. Recall in the prior session, Commercial Times cited Taiwan's Minister of Mainland Affairs Council noting that Taiwan and China will not start talks on a cross-strait economic cooperation agreement until next year - a delay from the expected tieup to take place later this year. Liu said there would be no delay in the signing of China economic accord, while Taiwan's Financial Supervisory Commission Chairman Chen said Taiwan and China will definitely sign a memorandum of understanding on the financial sector in 2009.

- A handful of other regional speakers were notably downbeat in their assessment despite today's broad-based rally. In Australia, Treasurer Swan suggested that global recession still had some way to run, and that while exports have been surprisingly resilient, inevitable export price decline would impact national income in 2009 by as much as 3%. Assistant Treasurer Sherry was of similar opinion on export decline expectations, but did acknowledge some positive impact from govt stimulus measures. In Japan, Finance Minister Yosano urged the BOJ to maintain their purchases of commercial paper and corporate bonds so as to keep credit flowing, while also addressing the challenges seen in employment sector. In Malaysia, local press cited Moody's opinion that slowing inflation and weak internal demand should allow Malaysia central bank room to cut interest rates further. Among the more optimistic views, RBNZ's Bollard said the feared impact of swine flu on overall GDP is likely to be smaller than feared, and Philippines Economic Planning Chief saw annual GDP in Q2 improving relative to 0.4% reported in Q1.

- In equity news, Nikkei's Komatsu was up over 3.5% after yesterday's press report the company may post an operating profit of ¥5B v loss ¥10Be and Kyocera rallied after lawsuits with SPH America over mobile phone technology patents were dropped. One of the biggest gainers in Tokyo, NEC electronics rose 10% after Japanese press said the company and Renesas are planning to increase production of microcontrollers driven by demand for electronic appliances. Renesas noted that its microcontroller plant would run at full capacity by Sept from current operating levels of 80-90%. Elpida Memory was also said to benefit from those trends, receiving driver production contracts outsourced by NEC. In materials, Marubeni said aluminum stockpiles at end of June were lowest since July of 2008, and Japan's auto sector confirmed increased activity as both Honda and Nissan were set to raise their production capacity in China according to Nikkei press. Shares of Nissan traded up 6% and Honda was up over 2.5%, while Toyota rallied 3%. After an 8% rally in spirits-maker Kirin over the prior session following rumors of merger talks with Suntory, the company added another 2% after confirmation that the parties were in preliminary talks, even though no merger decision had been made.

- In currencies, European and commodity majors pared theirbroad-based gains vs the greenback, trading sideways in technicallydriven ranges. EUR/USD was unable to build on a test above 1.40,falling back as low as 1.3960, while GBP/USD was contained by 1.63 andUSD/CHF backed away from 1.08 handle. In commodity FX, AUD/USD tradedbetween 0.7810-50, NZD/USD was thin between 0.6320-40, and USD/CADdeclines were restricted by 1.15 - its lowest level in 2 weeks.Japanese Yen remained weak, with USD/JPY rising above 93.20 aftertrading below 91.80 late last week.

- Crude oil is gaining by more than 0.50% and trading around $60/bbl.During the US session, oil prices declined by more than 0.25% andclosed below $60/bbl. With respect to the geopolitical situation inNigeria, yesterday theleader of Nigerian militant Group MEND, HenryOkah, was released by the government after he accepted an amnestyagreement last week.
MEND responded to the development by noting thatthe release of Okah was a move towards peace, as one of the group'sconditions for ending its attacks was the release of Okah. Lookingahead, possible event risks for crude oil include, the API inventoriesdata, US economic data and upcoming US corporate earnings. Spot Gold ismarginally lower at the time of writing after gaining by more than$9.50 during the US session. Gold gained in NY trading as the USDdeclined against the European major and commodities currencies.