Asian Market Update: Japanese trade surplus drops unexpectedly during December, as exports remain firm - Japan's December current account surplus fell unexpectedly (DEC CURRENT ACCOUNT: Â¥1.78T V Â¥2.04TE; ADJUSTED: Â¥1.87T V Â¥2.02TE) and fell by 5.0% y/y. The firmness in exports suggests that the Japanese economy will maintain its strength. Despite the drop in the current account surplus the yen is gained for most of the session as traders are buying yen ahead of upcoming industrial production and GDP data. The market is also awaiting later comments from the Bank of Japan's Governor Fukui at parliament. - China's January CPI rose by a less than expected 2.2% y/y v 2.6%e, as the Peoples Bank of China conveyed that the recent spike in China's CPI was caused by seasonality. The PBoC says that it is keeping a keen eye on CPI, and a think tank is projecting China's economy will grow at a rate of 10.2% for the first quarter of the year vs 2006's whole-year growth rate of 10.7%. - Australia's February Westpac consumer confidence rose by 1.7% v a prior rise of 7.3% adding credence to the RBA's belief that domestic demand has slowed. - Asian Currencies: The Kiwi is gaining across the board after rising above the $0.6900 level against the USD on a rebound in commodities prices. New Zealand's Finance Minister Cullen conveyed that demand in the NZ economy is very strong, despite tightness in monetary policy. The Korean Won is gaining sharply against the USD and JPY as 6 party talks ended with an agreement with N. Korea. The Taiwan Dollar is gaining against the USD on demand for equities and tracking earlier gains in the yen. - Equities: Most Asian equities are in positive territory tracking gains in US equities. Better than 3% gains in shares of Sony are leading the Nikkei 225 index to above the 17,700 level. Following sharp losses during the prior session, the Hang Seng index is rebounding by more than 0.50% as bargain hunters stepped in. The Hang Seng is being driven higher by shares of China Mobile and CNOOC. Shares of HSBC are trading higher for the first time in the last five sessions, despite being cut to sell at Goldman Sachs. The KOSPI is gaining by more than 1% as geopolitical fears with respect to North Korea have waned. Gains on the Kospi are being led by shares of Samsung and Kookmin Bank. The ASX 200 index is gaining and hit a new all-time high as strong earnings and bullish guidance from Leighton and Commonwealth Bank drove gains. Chinese equities are higher by more than 1% after a decline in January CPI lowered fears of an imminent rate hike by the PboC. - Japanese Bonds: Ahead of tomorrow's GDP data, Japanese bond prices continued to trade near 1-month lows as equities gained. Japan bond prices tracked declines in US Treasuries. - Commodites: Crude oil prices are lower on profit taking after rising during the US session. Oil gained after the IEA raised its 2007 forecast for global oil consumption. Tokyo Gold is rising for the second consecutive session and is nearing a 21-yr high. Shanghai Copper rose by its daily limit, tracking sharp gains in the LME contract.