Asian Market Update: Potential CIT rescue stokes risk appetite; multi-year low in Australia PPI shrugged off, AUD hits best levels in July

- Asian equity markets are trading with a positive spin at the start of the new week, shrugging off top-line misses from GE, Citi and Bank of America that helped contain the rally in the US markets on Friday. Instead, buyers appear to have focused on the press speculation over the dodged CIT bankruptcy that until late last week appeared to be all but certain. WSJ and FT have both reported that the company reached a major deal with bondholders PIMCO, Oaktree, Centerbridge and Silver Point over a $3B financing. Further details were expected to come out ahead of the US session on Monday. Nikkei225 was closed for holiday, however with about 2 hrs to go, Korea's Kospi and Hang Seng led the Asian region charge with a near 2.5% gain, while S&P/ASX and Taiwan's Taiex picked up about 1.3% for the session. Ahead of the US open, front-month S&P are up 0.4% at $941 and benchmark Treasury yields are tracking the risk appetite flows above 3.64%.

- Monday's economic calendar for Asia was limited to Aussie Q2 wholesale inflation and Kiwi Services PMI data, as both sets of figures were less than stellar. Australia's Q2 PPI came in at -0.8% Q/Q and 2.1% on Y/Y basis - worst levels in at least a decade for and since Q1 of 2004 respectively. The data sets a poor precedent for the closely monitored by the RBA quarterly CPI that is on tap for release on Tuesday at 9:30pmET. Over in New Zealand, the 2nd tier June Services PMI has also fallen below prior month's levels of 46.2 to 45.0, as employment component dropped from 46.3 to 43.6. Moreover, Shanghair Securities news cited an official with the State Council's research center who projected China's exports falling 12% y/y in 2009, with anticipated rebound in Q3 doing little to stem the overall yearly drop. Outside the Asian region however, UK's Rightmove released more good news for the housing sector, as M/M prices rose 0.6% from -0.4% prior and Y/Y fell -3.1% v -5.5% prior. The Y/Y figure marked a 5th consecutive monthly improvement and highest level since July of 2008.

- In spite of the holiday on the Nikkei, Monday press did see several key reports pertaining to Japanese companies.
Speaking with FT, NEC President Yamaguchi said that while the worst of the downturn for the chip sector was over, a recovery to "normal levels" would come only within 2-3 years because the dip in the industry was so significant. In materials, Nippon Mining was rumored to post a June quarter profit of ¥25B vs loss ¥31.3B prior, and Sumitomo Metal planned a ¥15B investment in another blast furnace at its Wakayama facilities. Over in Australia, miners rallied as basic materials led the S&P/ASX index higher overall. New York Times cited Australia's Foreign Minister who said a rumored downgrade of detainment of company employees by China to a commercial case would spare detainees some of the more serious espionage charges. Elsewhere, according to Australian Financial Review, Harvey Norman was on track for a sharp increase in Q4 sales due to an improvement in consumer confidence.

- Among the notable developments for the Kospi components, Posco was rumored to increase its stainless steel prices by KRW200K/ton or over 7% in order to meet rising spending incurred from raw materials costs. South Korean press also speculated that Samsung Electronics would invest as much as KRW5.4T in eco-friendly technology and low-carbon business lines by 2013, targeting a 50% cut in greenhouse gas emissions from company's production lines. In the Korean auto sector, Kia Motors unions threatened partial strike for the next two days over the ongoing wage negotiations, and Ssangyong Motor was said to face a low chance of survival by the Economy Minister. Daewoo Engineering appeared closer to being removed from the selling block, with local officials commenting on an unnamed US construction firm approaching company's sales advisor regarding a potential bid.

- In currencies, the greenback and the Japanese Yen were sold across the board amid the return of risk appetite across the financial markets. EUR/USD and AUD/USD reached their best levels in July above 1.4180 and 0.8080 respectively. Sterling briefly tested the upside of 1.64 and Swissy fell as low as 1.0720, coming dangerously close to former SNB intervention levels against the greenback. Canadian dollar racked up the biggest relative gains, with USD/CAD falling below 1.11 for the first time since June 12th, and USD/JPY gained about 50 pips to near 2-week high above 94.60.

- Crude oil prices are gaining by more than 0.50% and have traded above $64/bbl. Oil is gaining for the fourth consecutive session and prices are benefiting from the advances in Asian equities and the weaker US dollar. Looking ahead, crude oil may receive some direction from this week's upcoming US corporate earnings, weekly US inventories data and macroeconomic releases. Spot Gold is higher for the second consecutive session and trading above $940/oz. Gold prices are tracking the gains being seen in the European major and commodity currencies against the US dollar. Additionally, the gain in oil prices has been supportive for gold, as it increased the need to hedge future inflation. In other commodities trading, silver prices are higher by more than 0.70%, tracking the gains in gold prices.