EUR Falls to Pre-QE Levels, at Multi-week Lows vs USD, GBP; Gold Remains Weak as SPDR Holdings Fall
- Much like in the prior session, when poor GDP data sank robust gains seen in earlier trading hours, Asian bourses have retreated to a far more modest advance in latter part of day. Nikkei225 traded as high as +2.2% above 8,950 before retreating some 100 points to just around 1% session boost. Korea's Kospi and S&P/ASX were also up around 2% at session highs before profit-taking pushed the former to negative territory down by over 1% and the latter to a marginal 0.7% advance. US index futures were also pointing to a weaker open late in Asia, down 0.6% on the S&P at $856.70. As in the prior session that saw Fed's Beige Book spark late-day rally, Thursday developments marked a semblance of the sought-after "bottoming process," with more strong earnings out of financials (JP Morgan), a drop-off in jobless claims to multi-week lows, and sound after-hours results from Google. Interestingly, GOOG failed to rally after hours despite topping the bottom line by 23 cents, as it cited cost-cutting for gains in Q1 and also signaled seasonal weakness in Q2-3 and a "tight pocket" in spending going forward.

- Central bankers across the globe effectively tempered bullishness throughout the session. Earlier, BOJ Governor Shirakawa reiterated that Japan's economy is worsening sharply, corporate sentiment and borrowing remain severe, and CPI is expected to continue contracting. Subsequently, Fed's Yellen and Fisher weighed in with more dovish forecasts. Yellen saw more immediate pain for the economy and uncertainty over the timing of the end of the recession. Fisher - one of Fed's biggest proponents for activism - forecasted unemployment rate reaching 10% and Q1 slowdown to be severe, but did point to Eurozone challenges exceeding those in the US. ECB's Trichet capped off monetary authorities commentary with a more mixed message, noting that current economic conditions do not necessarily reflect the weakness in the Euro, but did call for urgent action to fix the toxic asset problem that would continue to contribute in making 2009 a very "tough year". On the widely debated need for more non-standard policy response at the next ECB meeting, Trichet noted a decision would be announced at the May 7th but would not commit to a bias.

- Economic calendar was lighter in the final session of the week relative to China-events heavy Thursday, but did see some positive developments from New Zealand and Japan. NZ Q1 CPI reversed prior quarter's contraction to -0.5% with an in-line +0.3% print, helping NZD outperform commodity majors AUD and CAD. Japan posted an improvement in March consumer confidence which, despite coming short of expectations, was still seen at best levels since October. 2nd tier inflation data from Australia was poor however as Q1 import price index fell to lowest level since Q4 of 2006 and export price index declined to Q3-2003 lows, suggesting lingering evidence of regional disinflationary trends.

- In notable equities, Tokyo steelmakers were widely higher early in the session after securing a cut in prices of 10%, half of that widely expected. Nikkei's Nippon and Sumitomo traded up 9% and 7% going into the midday break. Nissan was also stronger after Morgan Stanley raised its target price estimates, sending shares up 7%. Among decliners, Nintendo fell over 5% after monthly NPD report showed March Wii sales falling 17%. Toshiba was rumored to have posted a ¥300B net loss early in the day by the Nikkei, but subsequently came out with a wider loss forecast at ¥350B during mid-day Nikkei break, sending its shares lower by 2% once trading resumed.

- In currencies, Japanese Yen and USD once again reaped the benefits of resurfaced risk aversion later in the day, with Euro trading particularly heavily after Fed's Fisher and ECB's Trichet comments. EUR/USD and EUR/GBP reached multi-week lows - the former falling toward pre-Fed QE levels around 1.3070 and latter briefly declining below 0.88. Sterling collapsed over 150 pips below 1.48, and USD/CHF rose above 1.1550. Japanese Yen ranged against the greenback around 99.50 but retested the downside of 130 against EUR.

- Crude oil is lower in Asia and as of the time of writing, prices have remained below $50/bbl throughout the session. Oil prices are tracking the declines in the S&P 500 futures. So far this week oil prices have declined by more than 4%. Crude oil markets continue to be driven by expectations related to supply/demand, the outlook for global growth and the performance of equities. Spot Gold is lower by more than 0.20%, despite the declines being seen in US stock futures. In NY trading, gold closed down by more than $13 and some of the weakness was attributed to upcoming options expirations. During the prior session one trader noted that the lack of recent inflows into the gold market has weighed on prices and just today the SPDR Gold Trust ETF disclosed that its holdings declined by 8.25 tons, which was the first drop since April 3.

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