Asian Market Update: Equities Fail to Hold on to Gains as Commodity Majors, Crude Remain Under Pressure; Bank of Korea Raises GDP Forecast for Current and Next Year - Asian equity markets were unable to sustain early session gains, heading into the final hours of trading for the week on a muted note as investors remained cautious following Alcoa's inability to preserve post-earnings rally in the US hours. Nikkei225 traded up by almost 1% in the first hour but entered midday break in the red as financials sector continued to weigh the most on the overall index. In Sydney, the first bounce in copper prices and subsequent strength in materials helped S&P/ASX trade higher but only marginally, while Korea's Kospi led regional decliners with a 1% drop amid profit-taking in the tech sector going into the weekend. Ahead of the final session of the week in the US, front-month S&Ps are off by 0.3% and benchmark yields are retracing their bounce above 3.40% in the overall resurgence of risk aversion. - Economic data was limited to a single 2-nd tier release from Japan, where June wholesale inflation levels as measured by Corporate Goods Price index saw its biggest Y/Y decline on record at -6.6% v -6.4% expected. Speaking after the release of the data, Economic Minister Hayashi suggested it was still too early to say that Japan's economy was in a state of deflation, but did express concern about the recent price trend data. Additionally, Hayashi noted that the recent rise in the Yen was detrimental to exporters, pledging closer monitoring of the impact of currencies on stocks and the economy. Separately, Finance Minister Yosano declined to comment on currency levels but did voice his disappointment over the recent equity plunge. Outside of Japan, China's June Urban Property prices posted a gain of 0.2% v prior -0.6% - the first increase in 7 months - just as Chinese press suggested it would take steps to help settle some 140 million former farmers turned migrant workers. Over in South Korea, the top financial regulatory agency urged the govt to consider unwinding some of the loosened financial policy measures in sectors that have shown significant improvement. Earlier, Bank of Korea followed prior session's hawkishly upbeat statement with an upward revision to its GDP forecasts, raising 2009 view to -1.6% from -2.4% and 2010 view to 3.6% from 3.5%. - In equity news, India's Infosys reversed some of the mid-session malaise after posting better than expected Q1 earnings while also narrowing its FY10 guidance higher to $1.97-$2.00 v $1.93e (had seen $1.91-$2.00). In other notable gainers, Nikkei's Fast Retailing and Tokyo Electron were up over 3% early after both companies upbeat reports following the end of the prior session. Fast Retailing 9-month net profit and sales topped its y/y levels, and Tokyo Electron saw its Q2 chip gear orders more than double on a sequential basis to ¥48B. In Sydney, Rio Tinto and BHP were up by about 1% after the first rise in copper prices this week, while Amcor confirmed it was in contact with Rio on asset purchases but did leave the possibility of an equity offer on the table. In South Korea, the local press reported that the chairman of Posco - Korea's biggest steelmaker - said the company had no plans to buy Daewoo Engineering but would instead focus on investment and M&A overseas. - In currencies, the dollar firmed up against European and commodity majors once again after losing some ground during the US session. EUR/USD fell back below 1.40 and GBP/USD tested the downside of 1.63. In commodity FX, AUD/USD traded around 0.7830 and USD/CAD ranged narrowly just above 1.16. JPY trading range was also confined to a narrow band, as USD/JPY traded some 20 pips on both sides of 93.00 handle. - At the time of writing, crude oil prices have moved into negative territory as Asian equities have moved off of their best levels. Additionally, the rebound in the dollar has weighed on oil prices. During the US session, oil prices rose by more than 0.20% and closed above $60/bbl, after hitting an intraday low of $59.25. In terms of oil supplies related news, Platts disclosed that in June OPEC's production rose to 28.5M bpd from 28.4M in May. In Nigeria, an unconfirmed report during the US session disclosed that the leader of Nigerian rebel group MEND had accepted a government amnesty offer. MEND has been responsible for various attacks on energy assets belonging to Chevron and Royal Dutch Shell. Looking ahead, the International Energy Agency will disclose its monthly report later today. When the IEA released its May monthly report in early June, it raised its global oil demand forecast for the first time in 10 months. During the US session, the IEA's head Tanaka was quoted as saying that he expected a very strong rebound in oil demand in 2010. Overall, oil prices are down by more than 9% on the week and nearing the largest weekly drop since January. Spot Gold is higher by more than 0.10%, after rising by more than $6 during the NY session on bargain hunting. For the week, gold prices are on track to close down by more than 1.5%.

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