Asian Market Update: China's Premier reaffirms growth-oriented policy stance; Japan trade balance at 15-month high on export recovery; Australia downplays recovery

- Asian equity markets are modestly firmer in the wake of a much better than expected employment figures from the US on Friday. Nikkei225, also benefitting from recovery in Japan's trade numbers, is up over 1% on strength in financials and materials sectors. In Sydney, S&P/ASX is up by about 0.5%, weighed down cautious comments from local govt officials, while Korea's Kospi is the overall regional underperformed around unchanged levels. Both Nikkei225 and S&P/ASX also rose to their best levels since October of 2008 earlier in the session before retracing some of those gains. Ahead of the Monday open in US, front-month S&Ps are marginally lower by 0.1% at 1,005.

- Economic calendar saw a mixed set of numbers from Japan and Australia. In Tokyo, trade surplus reached its best levels since March of last year at ¥602B as exports rose 6.3% while imports contracted 2.2%. Japan's machinery orders also justified government and BOJ recent perceptions of improving conditions, rising 9.7% on month/month basis - the first expansion in four months and the highest rate of growth since April of 2008. Australian housing numbers were weaker than expected despite an upbeat column on residential demand from the local press. June home loans grew at the slowest pace since September of 2008 at 1.1% - well below the 1.8% expected and the 2.2% prior levels. China was expected to report July CPI and PPI data but postponed those numbers until tomorrow to be released together with its other monthly metrics.

- Among regional speakers, Chinese Premier Wen refuted recent speculation that PBoC may be considering mopping up some of its liquidity, reiterating that China plans to keep its proactive fiscal and accommodative monetary bias. China's Premier expressed similar views two weeks ago, when he said China would firmly implement expansionary monetary and fiscal policy. Elsewhere, Chinese government researcher Ba Shusong forecasted that Beijing may have to consider an exit plan from its loose monetary stance by Q4, with inflation indicators expected to return to positive territory in months to come. Over in Australia, Treasurer Swan tempered some of the bullish calls on local economy following stronger jobs data seen last week, suggesting that economic recovery levels will be modest and unemployment would likely continue to rise.
On the upside, Swan did note the impact of government stimulus on the retail sector, stating that it supported national GDP levels in the difficult Q2. In Singapore, PM Lee was also cautious on employment, suggesting that further job loss was possible in 2009 despite the 1H strength in economic indicators.

- In equities, Toyo Engineering and Bridgestone were among the strongest Nikkei names after both companies posted their Q1 earnings during Friday afterhours, rising over 5%. In Tokyo healthcare, Daiichi Sankyo said it would delay its offer for India-listed Zenotech and Eisai is reportedly planning to start selling its Zebinix epilepsy drug in Europe. Hong Kong press speculated that Hang Seng listed CNOOC would become the second mainland company after China Mobile to pursue an A-share listing. Over in Australia, Rio Tinto traded down 1% after China escalated its corporate espionage accusations, alleging that the detained company employees engaged in spying for the last 6 years.

- In currencies, USD consolidated its broad-based post-NFP gains, falling slightly against European majors and Japanese Yen, with more pronounced declines against AUD. EUR/USD traded higher by about 40 pips to 1.4220, GBP/USD met resistance at 1.6720, and USD/CHF flat-lined just above 1.08. Japanese Yen firmed up across the board, reaching 97.20 vs USD and 137.80 vs EUR, while AUD rose all the way to 0.84 after trading below 0.8340 early in the session.

- Crude oil prices opened the Asian session lower, but have since rebounded, as the US dollar has eased versus the commodity currencies. Additionally, oil prices are tracking the gains in Japan's Nikkei 225 equity index. On Friday's session crude ended the NY floor session lower despite the better than expected US employment report. According to one market player, although recent data showed improving signs in the US job market, the US unemployment rate of 9.4% is still high and negative for demand trends. In terms of US gasoline demand, the most recent Lundberg survey showed that national regular gasoline prices rose by 6.5% to $2.64/gallon, during the past 2 weeks. In the prior Lundberg survey, prices declined by 2.7%. Spot Gold has moved off of its worst levels and currently little changed. In terms of physical demand for gold, the holdings of the world's largest gold ETF, SPDR Gold Trust, declined by 4 tons to a total of 1,068 tons as of August 7. The gold ETF has not added to its holdings since mid July. In other metals, Shanghai Copper prices are gaining for the first time in 3 sessions, tracking Friday's gains in the LME copper contract.