ECONOMIC DATA

- (KS) South Korea Jan Business Survey Manufacturing: 90 v 85 prior (highest reading since Nov); Non-Manufacturing: 84 v 84 prior

- (JP) Japan Dec Nomura/JMMA Manufacturing PMI: 53.8 v 52.3 prior (first increase in 3 months)

- (CH) China Nov Leading Index: 106.3 v 105.8 prior (multi-year high)

- (NZ) New Zealand Nov Money Supply M3: -2.0 v 0.8% prior (multi-year low)

- (KS) South Korea Nov Industrial Production m/m: 1.4% v 2.2%e; Y/Y: 17.8% v 16.5%e (highest since Feb 2006)

- (KS) South Korea Nov Leading Index: 12.5% v 11.3% prior (multi-year high)

SPEAKERS/PRESS

- Asian equity markets are a near mirror image of the prior session, with yesterday's laggard Kospi turning marginally positive on strong economic data and outperformer S&P/ASX retreating on dollar-strength driven commodity weakness. Elsewhere, Nikkei225 is in the last hour of 2009 down 0.3%, the Taiex is bolstered by tech demand with a 0.7% rally, and the Shanghai Composite is leading the way with a 1.3% gain. Ahead of the Wednesday US session, front-month S&Ps are extending Tuesday retreat with a 3-point slide below 1,120.

- Two credit rating agencies chimed in on the sovereign rating of debt-laden Japan, just as the Yen fell to its lowest level against the greenback in two months. S&P said sovereign rating could be cut if fiscal policy steps do not stabilize and gradually diminish debt levels, while Moody's noted that the sovereign rating hinges on Japan's medium-term fiscal consolidation and deficit reduction plan. Earlier, Japan's Strategy Minister Kan said it was still not the time to consider a consumption tax to boost revenues, and Finance Minister Fujii reiterated that a double-dip recession is not likely as growth returns in 2010. Looking forward to the start of the next decade, Japan's 10-yr growth strategy draft targeted annual GDP of over 2%/yr, reaching ¥650T by 2020 with jobless rate seen in the 3.0-3.9% range.

- Elsewhere in the region, Chinese press cited PBoC Advisor Fan Gang, who noted that an increase in the inflow of "hot money" may lead to "asset bubbles". According to the latest fx reserves figures released by the PBoC, inflows rose by about $37B to $2.8T by the end of Nov, with $16B in excess of the trade surplus and FDI aggregate seen as the "hot money" intended to gain from the rising value of the yuan or property. A separate press report from China Securities Journal saw economists targeting December CPI rising 1.5% y/y, suggesting the return of upward inflationary trend. Over in South Korea, President Lee said domestic economy may grow by over 5% in 2010, but would not seek an exit from fiscal support yet. Note, the GDP forecast is substantially above the 4.5% IMF outlook. South Korea also saw several strong datapoints on the session, with Manuf Business Survey printing a 3-month high and Y/Y Industrial Production rising at the highest rate since Feb 2006.

EQUITIES

- In individual shares, Japan Airlines plummeted with another double-digit loss while also weighing on the Nikkei financials sector. As prospects of bankruptcy loom, creditors as well as cabinet officials continue to oppose the painful restructuring of the company. Also in Tokyo, Hitachi was awarded a ¥1T order for a high-speed train from a client in the UK, and Sony acquired a stake in Sharp LCD panel plant as earlier anticipated. Outside the Nikkei, the Taiwan tech sector was boosted by the Commercial Times report of Taiwan Semi investing NT$41B in December on new equipment amid rising demand. Moreover, International Trade Commission ruled that Tessera patents were not violated by other DRAM firms, strengtening shares of Taiex names like Acer and Nanya Tech.

CURRENCIES/FIXED INCOME/COMMODITIES

- In currencies, USD was broadly stronger across the board, tracking the rally in the US hours following a 3-month high in conference board consumer confidence. USD/JPY moved to fresh 2-month high above 92.20, with the Yen also consolidating its recent weakness against EUR and GBP. In European majors, EUR/USD fell about 50 pips but bounced off the 1.43 handle. GBP/USD traded 20 pips on both sides of 1.59, while USD/CHF backed away from 1.04 handle. Commodity FX was particularly weak, with both AUD and CAD falling against USD and European majors. AUD/USD pared US session gains back down to 0.89, USD/CAD advanced above 1.05 for the first time in a week, while EUR/AUD bounced off 1.60 and GBP/AUD found support at 1.77 for the third time in two months.

- Spot Gold prices are lower for the second consecutive session (today's range as of 00:38 EST: $1,090.93-1,098/oz), after the metal closed yesterday's session below $1,100 for the first time since Dec 23. The strength in the US dollar has continued to weigh on gold prices. Additionally, in NY trading there was chatter that some of the weakness in gold prices may be attributed to option-related flows. According to one trader, gold prices are consolidating into year-end and new buying interest may not be seen until 2010. In terms of physical demand for gold, the SPDR Gold Trust raised its daily holdings by 0.9 metric tons to a total of 1,334 metric tons as of Dec 29.

- Crude oil prices are trading near $79/bbl. Following, yesterday's US equity close, API disclosed that weekly crude inventories unexpectedly rose, while gasoline stockpiles were lower than expectations (API PETROLEUM INVENTORIES: CRUDE: +1.7M V -2ME; GASOLINE: -1.4M V +1ME; DISTILLATE: -3.5M V -2ME; CAPACITY UTILIZATION: 78.2% V 80.2%E). Later today, the US Department of Energy will release its weekly inventories data. In other energy related news, a South Korean press report disclosed that the country's National Pension Service (assets equal to about KRW265T) might invest several trillion won in overseas uranium and oil reserves. In May, the South Korea National Pension Fund said it would reduce its exposure to US bonds and diversify into other assets. With respect to geopolitics, a CNN report disclosed that officials in the US and Yemen are looking at new targets for a potential retaliation strike in Yemen, after prior report said the recent failed terrorism attempt on a Northwest airliner on Christmas day might have been retaliation for US attacks in Yemen. In Iran, the Associated Press disclosed that the country may be nearing an agreement to secretly import more than 1,300 tons of purified uranium ore from Kazakhstan. In other commodities, Shanghai Copper prices are higher on supply concerns in Chile.

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