Asian Market Update: China rate cut foreshadowing weaker data over the weekend? Markets disappointed in Fed's lack of immediate commitment to fresh stimulus

***Economic Data***
- (AU) AUSTRALIA APR TRADE BALANCE (A$): -203M V -900ME (4th consecutive month of deficit, 4-month high)
- (KR) BANK OF KOREA (BOK) LEAVES 7-DAY REPO RATE UNCHANGED AT 3.25%; AS EXPECTED
- (JP) JAPAN Q1 FINAL GDP Q/Q: 1.2% V 1.1%E; NOMINAL GDP Q/Q: 1.2% V 1.1%E; GDP ANNUALIZED: 4.7% V 4.5%E; GDP DEFLATOR Y/Y: -1.3% V -1.2%E
- (AU) AUSTRALIA APR HOME LOANS M/M: 0.2% V 0.0%E (2nd consecutive increase); INVESTMENT LENDING: +1.7% V -1.7% PRIOR; OWNER-OCCUPIED HOME LOAN VALUE: 0.9% V 0.7% PRIOR
- (JP) JAPAN APR CURRENT ACCOUNT TOTAL: ?334B V ?441BE; ADJ CURRENT ACCOUNT: ?289B V ?616BE; CURRENT ACCOUNT BALANCE: -21.2% V 7.5%E; TRADE BALANCE: -?464B V -?451BE
- (PE) PERU CENTRAL BANK LEAVES REFERENCE RATE UNCHANGED AT 4.25%; AS EXPECTED
- (JP) JAPAN MAY BANK LENDING INCLUDING TRUSTS: 0.3% V 0.3% PRIOR; BANK LENDING EX- TRUSTS Y/Y: 0.4% V 0.4%E
- (JP) JAPAN MAY ECO WATCHERS SURVEY CURRENT: 47.2 V 50.9 PRIOR; OUTLOOK: 48.1 V 50.9 PRIOR
- (JP) JAPAN MAY BANKRUPTCIES Y/Y: +5.1% V -6.7% PRIOR

***Markets Snapshot (as of 05:00GMT)***
- Nikkei225 -2.1%
- S&P/ASX -1.1%
- Kospi -0.4%
- Singapore Straits Times Index -0.6%
- Shanghai Composite +0.1%
- Hang Seng -0.4%
- June S&P Futures -0.5% at 1,310
- Aug gold -1.2% $1,569/oz
- July Crude -1.8% at $83.32

***Overview/Top Headlines***
- The Greenback gained against all the majors as well the end emerging Asia currencies with the exception of the yen as risk aversion reigns again. Commodities were all off over 1%. Federal Reserve Chairman Bernanke in his testimony failed to give comfort to the markets saying that the Fed will need to assess conditions before deciding if fresh measures are needed to boost the economy. In short the current environment means the Fed needs to stay on its toes but nothing is so bad that there needs to be immediate action. Bernanke comments overshadowed the surprise lending rate cut in China overnight. Gold saw a sudden drop off mid-session with no apparent reason testing to $1,556. Equities markets were off across the region after two strong days of gains. Shanghai failed to find a direction, three of China's top four banks raised their deposit rates to the maximum allowed limit. Former PBoC Advisor said the rate cut was intended to stabilize economic expectations for China and prevent excessive slowdown. He did not expect the cut to impact the property sector much.

***Reminder China will report May trade balance, CPI, PPI, retail sales and industrial production over the weekend***
- Australia recorded its 4th consecutive trade deficit but it was much smaller than expected at A$203M, exports continued to rise while imports saw a 1% drop. Exports to China picked up after their March slump as did iron ore exports. AUD/USD weakened off its US session highs before testing below $0.9840. ANZ bank announced it would pass on the full 25bp rate cut to its customers, Australia Treasurer Swan encouraged the other major banks to do the same. Reserve Bank of Australia (RBA) Gov Stevens said the most recent rate cut was not intended to pump up speculative demand for assets and that rate cuts have little risk of re-igniting a boom in borrowing and prices. He did warn that unemployment data needs to be watched and that mining investment will reach 9% of GDP by mid-2014.

***Speakers/Geopolitical/In the press***
- Fed board votes 7-0 to approve final 'Basel 2.5' market risk rules for stronger bank capital
- (JP) Opposition Party LDP has agreed to the proposed two-step increase on sales tax - Japan press
- (JP) Japan Fin Min Azumi: Must be cautious about the idea of having the BoJ buy foreign debt
- (US) Fed's Evans (alternate, dove): Fed is prepared to act; Chairman Bernanke has stated that clearly today - CNBC interview

***Equities***
- Mazda Motor, 7261.JP: Reports Jan-May China vehicle sales -16% y/y at 88K units - China Daily
- Shui On Land, 272.HK: Chairman Lo: Not facing a cash crunch; may need to defer plans to spin off premier commercial property unit if market sentiment continues to weaken - SCMP
- Renesas Electronics, 6723.JP: Will not go ahead with plans to ask largest shareholders for a capital injection - Japan media
- FXJ.AU: Un-named larger shareholder has confirmed it would consider breaking up Fairfax - Australian Financial Review
- Gome, 493.HK: Planning to restructure its retail chain in order to increase competitiveness - Chinese press
- VAH.AU: Etihad Airways: No plans to become a majority shareholder in Virgin - Australian Financial Review

***Fixed Income/Commodities/Forex***
- USD/CNY: (CN) Former PBoC Advisor Li: China is not in a hurry to internationalize the yuan, may take 10-20 years; Interest rate liberalization process has been launched
- (AU) Australia MoF sells A$700M in 6-yr bonds, avg yield 2.66%; Bid to cover 4.81x
- SLV: iShares Silver Trust ETF daily holdings fall from 9,699 tons to 9,669 tons
- (JP) China buys Net ?74.8B in Japan long and medium term debt in Apr; buys net ?24.3B in short term debt

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