Asian Market Update: JPY firms and JGB yields rally ahead of Japanese GDP data - Ahead of Thursday's GDP data, the JPY is gaining despite January domestic corporate goods prices falling by 0.2% m/m v 0.0% expected. Expectations for a stronger preliminary Q4 GDP number are driving the trading in the yen. In addition, positive developments between Japan and North Korea in 6-party are also seen as positives for the Japanese currency. Following the G-7's failure to single out the JPY, Euro Group President Juncker called the weakness in EUR/JPY a problem for EU exports, which also supported the currency pair. - Chinese January PPI data rose more than expected (CHINA JAN PRODUCER PRICE INDEX: 3.3% V 3.0%E). A leading Chinese think tank said that it expects for Chinese GDP to grow by 10.2% in Q1 and 10.0% in Q2, which compares to a rise of 10.7% in 2007. However, the think tank expects CPI to accelerate in 2007, which could put pressure on the Peoples Bank of China to hike rates again. - Asian Currencies: The NZD is gaining against the USD after the market ignored a decline in Q4 producer prices (Q4 PRODUCER PRICES INPUTS Q/Q: -0.3% V 2.0% PRIOR; OUTPUTS: -0.5% V 0.7% PRIOR) as forex traders are not expecting New Zealand's yield differential to narrow against other countries. The Korean Won is weaker, despite progress in 6-party talks with North Korea, while the Taiwan Dollar is tracking the stronger JPY. The AUD is up 0.2% against the USD after NAB's January business confidence and conditions indices rose. - Equities: The Nikkei 225 is higher by more than 0.35% and finding short term support around the 17540 level. Gains in the Nikkei are being driven by real estate and banking shares as a Bank of Japan rate hike would benefit financials. The KOSPI is little changed as gains in shares of LG Electronics offset losses in shares of KEPCO. The ASX 200 index is higher by 0.15% and near a new all-time high as gains are being driven by shares of Alumina on takeover speculation. The Hang Seng is lower by more than 1.13% as shares of China Mobile fell for the second consecutive session and shares of HSBC fell for the fourth consecutive session. - Bonds: Japanese bond prices are trading near session lows ahead of GDP data and are tracking losses in US Treasuries. Japanese 5yr bond yields hit a one month high at the start of the afternoon session. - Commodities: After declining during the US session following commentary out of Saudi Arabia and forecasts of warmer weather in the U.S. northeast, crude oil is slightly higher in Asian trading, but still below $58. Tokyo Gold rose to the highest point since September of 1985 as the USD/JPY pair is trading near session lows. Shanghai copper is lower, after gaining for the prior two sessions on strong global copper inventories.