Asian Market Update: Equities Bolstered as Intel Soars on Solid Earnings; BOJ Extends Bond/CP Buying Program by 3 Months, Cuts FY09-10 GDP Forecasts

- Asian equity markets are unanimously in the green with the earnings baton passed from the financials' high-flier Goldman to the tech bellwether Intel. Reporting after close, Intel followed Goldman suit with a blowout round of Q2 results (Reports Q2 $0.18 v $0.08e, R $8.0B v $7.28Be) that sparked broad-based buying overseas, helping the tech sector lead the way in Asian bourses. With about 90 minutes to go in the session, Nikkei225 is off session highs but still up 0.3%. Korea's Kospi is the biggest gainer in the region, trading firmer by about 2.5%, while S&P/ASX is just around session highs up 1.5%. Ahead of the US session, front-month S&Ps remained strong from the get-go, following Intel to a 1% gain.

- Bank of Japan concluded its 2-day meeting with another unanimous decision to leave rates unchanged at the minimal 0.1% level. BOJ extended its Y1.8B buying program of corporate bonds and commercial paper to Dec 31 from Sept 30 and also noted it would continue accepting wider corporate debt collateral until March. Bank of Japan also raises its economic assessment for 3rd consecutive month, reiterating that economy has stopped worsening and business sentiment was no longer deteriorating. However it also cut its FY09 GDP forecast to -3.4% from -3.1%, cut FY10 GDP view to 1.0% v 1.2%, and suggested that CPI is expected to continue declining. Recovery in the overall economy is expected to start materializing in 2nd half, but BOJ outlook still involved much uncertainty and was said to depend on the final demand trends.

- In other notable economic data, China reported June Foreign direct investment in June down -17.9% on y/y basis - better than -19.9% expected - but noted that the drop in first half China outbound investment due to lack of big deals. China's June Foreign Reserves also topped estimates at $2.13T, better than $2.02T expected and $1.95T prior. In second tier economic data, Australia May Westpac leading index declined to -0.2% from 0.7% prior, and Singapore May retail sales topped estimates on both Y/Y and M/M levels at -10.3% and 0.8% respectively. South Korea's unemployment rate ticked a decimal point higher to 4.0% from 3.9% - the highest level since April of 2001.

- A broad range of speakers in the region included officials from China, Australia, New Zealand, Korea, as well as Singapore. In China, PBOC economist said China should actually increase its holdings of US Treasuries and not cut its purchases relative to 2008 levels. In S Korea, Finance Minister Yoon spoke ahead of the unemployment data, noting that the jobs market is facing difficulties and additional factory investment by companies was welcome. South Korean financial regulator also had sobering remarks for the economy, warning that additional provisions of up to KRW280B for domestic banks were needed to cover potential defaults after more corporate borrowers failed financial strength stress tests. New Zealand Finance Minister reiterated the official position of discomfort with the high NZD rates, but said no policies to lower NZD would be pursued. Additionally Fin Min English saw the need for continued public support for fiscal constraint despite economic needs in order to prevent deeper challenges stemming from structural deficits. Over in Singapore Deputy PM Teo Chee Hean reflected on strong GDP figures in prior session, stating the economy has in fact improved, but the end of the recession could not yet be assumed.

- Australia's PM Rudd responded to political pressure over administration's lackadaisical response to detained Rio Tinto executives, noting that the case was very complex and would take some time to resolve. Meanwhile, FT speculated that BHP and Rio Tinto have stopped putting spot iron ore shipments up for bid in China. Additionally, Australian Financial Review saw China expanding its inquiry into iron ore trading to involve BHP and Vale, with investigators also looking into confidential files found on Rio Tinto Shanghai office computers.

- In other equity news, Hitachi was up 3% after Nikkei press said it would triple output capacity for phone LCD panels, and Panasonic firmed on reports of mass production for new type of batteries for idle-free car engines. Also on the Nikkei, Asahi Glass rallied after Japanese press said the company operating profit could rise to ¥2B-¥4B from prior estimates of flat levels. Outside Japan, Samsung Electronics was raised to buy from sell by Macquarie and BHP was rumored to shop its Ravensthorpe nickel mine for a A$1B price tag.

- In currencies, USD majors traded in narrow ranges across the board after strong performance by commodity and European pairs in US hours. EUR/USD was contained by 1.40, GBP/USD traded between 1.63-1.6340, and USD/CHF was extremely thin between 1.0870-80. In commodity FX, AUD ranged in 0.7930-50, while loonie consolidated its substantial gains below 1.1350. Japanese Yen was unchanged on mixed BOJ release around 93.50 against the greenback.

- Crude oil prices are higher and trading above $60/bbl after gaining more than 1% during the NY session. Oil prices are tracking the gains in S&P 500 futures, following the better than expected earnings from technology heavyweight Intel.
Crude oil prices have also been supported by the weekly API inventories data, which showed that gasoline stocks unexpectedly declined, while crude inventories declined by a less than expected amount. (API PETROLEUM INVENTORIES: CRUDE: -1.16M V -1.7ME; GASOLINE: -70K V +750KE). In Japan, weekly oil product inventories rose to 12.4M kiloliters from 12M previously and gasoline stockpiles rose by 68,500 kiloliters to 2.3M kiloliters. Looking ahead, the US Department of Energy will release its weekly inventories data later today. In terms of OPEC, the cartel noted in its July report that it expected world oil demand to turn positive in 2010. Also, OPEC said it expected 2009 global oil demand to decline by 1.65M bpd to 83.8M bpd. In Nigeria, the rebel group MEND declared a temporary 60-day cease-fire, following the release of its leader. According to MEND, the cease-fire agreement will facilitate talks with the Nigerian government. Spot Gold is marginally higher at the time of writing. During the US session, gold prices rose by $0.30 on the weaker dollar.