Asian Market Update: RBA quarterly report raises GDP forecasts, signals neutral policy stance; Currency markets range ahead of US jobs data as Goldman and DB raise NFP estimates

- Asian equity markets are back on the defensive in the final trading session of the week, tracking late day weakness seen on Wall St. Second consecutive day of losses in front-month copper sparked a selloff in basic materials, as the sector led regional bourses to the downside. Nikkei225, S&P/ASX, and Shanghai were down over 1% while Korea's Kospi traded marginally lower with just about 2 hours to go in Asian trading for the week. Ahead of the US Friday payroll numbers, front-month S&Ps are off 0.2% at $993 and and benchmark yields remain around 3.75%. Earlier today, US economists from Goldman and Deutsche Bank raised their NFP forecasts, calling for -250K and -150K respectively relative to -320K consensus view.

- In the prime economic event of the session, RBA released its quarterly monetary policy report, moving firmly to a neutral stance and shutting the door on additional easing while also raising its near-term GDP and inflation targets. Aussie central bank did note outlook was still uncertain, but cited more balanced risks to the economy, putting 2009 GDP up to 0.5% from -1.0% and 2010 GDP at 2.25% v 2.0% prior. RBA also echoed the recent Gov Stevens comments that unemployment will not rise as far as expected and that outlook for housing has risen, even though consumption was still expected to decline in the second half. Business investment outlook, while still weak, was also seen as being weighed in favor of recovery. In second-tier Aussie economic data, July AiG performance of construction index fell to 39.5 from 42.6 - lowest level in 3 months. In other notable macro-oriented developments, Nikkei press said Japanese government would maintain its economic assessment after several monthly upgrades, and China's NDRC officials narrowed their 2009 GDP estimate to "around 8.3%". Back in May, NDRC's Xu Lin said China should be able to reach its official 8% GDP growth target for 2009.

- In equities, Konica Minolta was limit down 10% after posting worse than expected Q1 result after the prior session.
Pioneer posted a narrower than expected Q1 loss but guided below estimates for the full year. The company was also reportedly considering a ¥40B capital raise, trading lower by about 5%. Reporting during session hours, Japan Airlines saw Q1 Net loss ¥99B v loss ¥3B y/y, Operating loss ¥86.1B v profit ¥4B y/y and Revenue ¥335B v ¥490B y/y. Toray also posted mixed results, with weak Q1 Net loss ¥7.4B v ¥4.4B y/y, Op loss ¥2.4B v ¥13.2B y/y, Rev ¥278.7B v ¥280Be balanced out by FY09/10 guidance of Net loss ¥5B v loss ¥7Be, Op Profit ¥15B v ¥12Be, Rev ¥1.3T v ¥1.3Te. Outside the Nikkei, BHP and Rio Tinto were down about 2% on falling metal prices. In Korea, KT Corp reported Q2 above estimates at Net KRW504B v KRW2287Be, Op Profit KRW483.4B v KRW377Be, Rev KRW4.9T v KRW3.6Te, but shares traded slightly lower before turning unchanged. In other notable regional names, DBS Group out of Singapore posted Q2 Net profit S$552M v S$455Me and Rev S$1.8B v S$1.6Be, but saw its shares fall about 3% late in the day.

- In currencies, European majors traded in narrow ranges ahead of the much awaited US jobs report, while the Aussie dollar was briefly lifted on RBA quarterly comments before a full retreat. EUR/USD traded around 1.4350, GBP/USD was contained below 1.68, and USD/CHF was thin between 1.0635-55. AUD/USD rallied above 0.8420 after RBA report before falling to 0.8370, while NZD/USD bounced around 0.67 for second straight session. Japanese Yen also traded primarily sideways near 95.50 vs USD and 137 vs EUR.

- Crude oil prices are lower in Asia, tracking the weakness being seen in equities and the commodity currencies. Overall, crude oil is on track to gain for the fourth consecutive week. The weekly gain in oil prices has been driven by the decline in the dollar, better than expected manufacturing data and the advance in equities. Spot Gold is declining by more than 0.05% on possible light profit-taking as the metal rose to a 2-month high of $971.68/oz earlier during the week. Like oil prices, gold is nearing its fourth straight weekly gain. Gold prices have risen this week despite signs of lower physical demand, as the largest gold ETF's, SPDR Gold Trust, holdings have held steady all week. Shanghai Copper prices are declining and for the second consecutive session, tracking the declines being seen in Chinese equities. Additionally, fears of future monetary tightening in China have weighed on copper prices, as there are concerns that the Chinese government may seek to tighten credit and slow new investments in projects. Later today, the Shanghai Futures Exchange will release its weekly inventories data. During the prior week, Shanghai Copper inventories rose by 1.8K tons to 51.1K tons. Overall, commodity traders are awaiting the US nonfarm payrolls report, which will be released later today, to further assess the extent to which the US economic has recovered.