Asian Market Update: Asian markets gain on large China rate cut, another last-hour rally in US stocks

- Asian equities unanimously cheered the 108bp rate cut - the largest in 11 years - from China 's central bank, announced after hours of the prior Asian trading session. Nikkei shares in Tokyo gained over 1.6%, Australia 's S&P/ASX rallied by 1.3%, Hong Kong picked up 3.5%, and Kospi was boosted by 2.5%. Commodity demand expected from infrastructure build-up commitment of China 's stimulus plan and looser borrowing environment rallied materials producers in Japan , helping Mitsubishi and Mitsui shares gain as much as 8%. Both firms derive nearly a half of their profits from commodity products. In turn, metals miner Sumitomo picked up 12% on the session while Inpex, Japan 's largest energy explorer, rallied 10%. Machinery maker Komatsu was also seen benefitting from building demand expectations, gaining 6%. Among the other notables traded in Tokyo, Sharp rallied 5% on news of the company entering a joint solar cell venture with European firms, while Panasonic continued to slide, rallying by 4% after cutting its FY operating profit forecast by over 30%. This is the second consecutive session of Panasonic share declines that follows yesterday's objections by Goldman Sachs over company's Sanyo bid.

- In Australia , commodity producer sector was likewise the leader in S&P/ASX rally. Mining giant BHP shares continued to trade firmly with an over 6% gain after abandoning its bid of Rio Tinto earlier in the week. BHP Chairman Argus was concerned over sustainability of demand from China , calling for as much as a 17% decline in China 's steel output in spite of the stimulus, while CEO Kloppers was more upbeat on company prospects, citing a strong balance sheet and expressing interest in growing dividends. In turn, Rio has reversed its freefall, picking up nearly 1% on broad commodity strength. Elsewhere, Woodside Petroleum was up by just over 6% on sharp gains in oil prices during the US session. Leighton Holdings, Australia 's largest engineering and construction firm, surged 14% after its Abu Dhabi unit reportedly won a A$3.75B contract for construction of a commercial tower/hotel.

- Hong Kong 's Hang Seng index rallied by over 3.5% with yet another energy heavyweight PetroChina leading the charge with a 7% gain. China Mobile shares were the most actively traded on the session in further expectation of government investment into telecom as part of its stimulus plan. Earlier this week, an official at China 's Ministry of Industry and Information Technology said "the time is ripe" for government to issue licenses for 3G mobile phone services. The government was said to be studying its 3G policy and should be making an announcement in days to come.

- S Korea's Kospi traded firmly on surprising news from local banking sector. Bank of Korea renegged on its earlier comments stating that no public injection into banks was necessary by tapping Fed swap line secured earlier this month for $4 billion. Moreover, the government was reported to look to buy a "large amount" of bad loans from banks in a move comparable to US TARP provisions. HOlding companies for top two Korea 's banks responded positively to the news, with KB Financial and Woori Finance gaining 4% and 6% respectively. Elsewhere, Doorsan , Korea 's largest construction equipment maker rallied 11% on greater expectation of demand from China following the surprise rate cut, while Samsung SDI unit - world's third largest maker of rechargeable batteries - was among the index decliners with a 2.3% loss after a 30% share price downgrade by Morgan due to lower consumer demand.

- In currencies, the gains made by the greenback in early US session against the majors were retraced thanks in part to latter session equity gains in the US and index firmness across Asia. EUR/USD traded down to prior session lows just above 1.28 but pulled back above 1.29 level, remaining contained by trendline resistance from 1.3070 peak. Likewise, GBP/USD rebounded off session lows toward a more lasting downtrend from around 1.87, initiated in mid-September. A breach of minor support turned resistance at 1.55 risks additional upside, particularly if the tightly correlated recovery in global equities can continue after US Black Friday and into next week's Jobs reports. Swiss franc continues to attract safe-haven flows on geopolitical turmoil in India , where terrorist activity and hostage standoffs are nowhere near to being contained. CHF outperformed the Euro's rebound vs USD as it punctures 1.20 level against the dollar. Japanese yen lost some ground across the board in late US session but pared those losses in Asian trading hours. USD/JPY, EUR/JPY, and GBP/JPY each sold down about one big figure to 95.00, 122.80, and 146.20 respectively, with comparable pip value being the result of strength in EUR and GBP.

- In commodity and emerging Asian FX, AUD/USD oscillated between 0.6480 and 0.6550, USD/CAD was rangebound between 1.2240 and 1.2340, while NZD/USD sold down following worse than expected November New Zealand business confidence. Korean Won continued its rebound, with USD/KRW selling down to week-long low of 1,460 - a technically meaningful former resistance turned support - before pausing its descent. Nonetheless, a month-long rally from 1,230 to 1,520 within a well-defined technical uptrend has been broken, potentially opening the door to a larger corrective slide. Philippine peso gained sharply after better than expected GDP data from Philippines surprised markets, sparking a 0.40 drop to 48.65.

- Crude oil is lower on profit taking after rising by more than 6.5% during the US session. Interestingly crude gained during the US session despite the more than $9.00 drop in gold prices and the firmer USD. Earlier today, the head of Saudi Arabia 's Aramco noted that the company would not pump oil at full capacity and that present prices are too low to increase investments on production. The official added that the oil markets need stability. Additionally, an unconfirmed report noted that OPEC's governors were leaning towards a production cut in Dec rather than Nov, which is in line with prior market speculation. In terms of oil supplies, the US Dept of Energy reported that the prior week's crude, gasoline and distillates stocks were all higher than expected (DOE CRUDE: +7.3M V +1ME; GASOLINE: +1.8M V +500KE; DISTILLATES: -200K V -500KE). Additionally, the EIA revised its Sept oil demand forecast lower by 5.5% from the initial estimate. Spot Gold is higher by more than 3.5% and positive for the first time in 3 days. Tokyo Gold is higher by more than 0.50%. Gold is gaining despite the declines in oil prices. It is unclear if gold is rallying due to the recent geopolitical concerns in Mumbai, as gold and the Swiss Franc have been seen as safe haven assets in the past. Also, some note that gold is benefiting from speculation of more Federal Reserve rate cuts. In other gold news, a Citigroup strategist is being cited in the UK Telegraph as saying that gold prices may rise to more than $2,000/oz in 2009, due to the liquidity that global central banks are injecting into markets.