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Asian stocks hold on to gains; BoE in pictures | WTAQ News Talk | 97.5 FM · 1360 AM

By Ankur Banerjee

SINGAPORE (Reuters) – Asian shares took a breather on Thursday, hovering near their highest levels in two years, as traders waited for more U.S. policy guidance, while the pound was steady ahead of a Bank of England meeting where rates are expected to remain unchanged to stay.

In addition to the BoE, investors will also be watching for decisions from central banks from Switzerland and Norway on Thursday, which will set the tone for the global interest rate outlook.

MSCI’s broadest index of Asia-Pacific shares outside Japan was little changed at 572.97, just below the two-year high of 573.38 it reached on Wednesday, boosted by technology shares. The index is on track for a 4% increase in June.

Japan’s Nikkei fell 0.63%, while stocks in China were also lower, while the blue chip index fell 0.34%. Hong Kong’s Hang Seng index was 0.14% lower.

China left interest rates unchanged on a monthly basis on Thursday, in line with market expectations, despite recent indications that the economy is still shaky.

The domestic yuan weakened above 7.26 per dollar for the first time since November.

The pound was steady at $1.2717 ahead of the BoE’s policy decision and fell 0.2% in June. (FRX/)

Data on Wednesday showed UK inflation returned to its 2% target in May for the first time in almost three years, but strong underlying price pressures all but rule out a rate cut ahead of next month’s election.

Most economists in a Reuters poll last week thought the central bank would start cutting rates in August, but markets see only a 30% chance of a rate cut in August and think a first step is more likely in September or November.

Markets have priced in a 43 basis point easing in the BoE this year.

On the other hand, the Swiss National Bank is widely expected to cut its key policy rate by 25 basis points for a second meeting in a row. The Norwegian central bank is likely to leave its key policy rate unchanged.

NVIDIA LED RALLY

A surge in technology stocks on Tuesday lifted AI chipmaker Nvidia above Microsoft as the world’s most valuable company, sparking a global rally in tech stocks.

U.S. markets were closed on Wednesday, while tech-heavy Nasdaq futures rose 0.25% in early trading on Thursday.

The frenzy over artificial intelligence has seen tech stocks hit all-time highs all year long, with Nvidia leading the pack along with a select few giants, while US stocks are hitting record highs and also boosting Asian peers.

“Nvidia remains the most important stock in the world,” Chris Weston, head of research at Pepperstone, said in a note.

However, Weston warns that index market breadth has been poor and participation has been disappointing, suggesting the rally is built on shaky foundations.

“The fact remains that the market is now in the middle of the rally in AI-related names and big tech, and given the lack of clear immediate risk, the path of least resistance is to higher stock index levels.”

At the macro level, investors are looking for new clues about when the Federal Reserve might begin its policy easing cycle, after the central bank last week forecast only one rate cut this year and policymakers also turned cautious this week.

The dollar index, which measures the US unit against six rivals, was little changed at 105.23, while the euro was steady at $1.0746.

The Japanese yen languished at 158.05 per dollar as the wide spread in interest rates between Japan and the United States weighed on the currency. The yen has fallen more than 10% against the dollar this year. “I think the best-case scenario is a Fed rate cut in September, which narrows the yield differential between the dollar and the yen,” said Stefan Hofer, chief investment strategist at LGT Bank Asia.

“We believe that the Bank of Japan will gradually tighten monetary policy, but there is demonstrably no room to radically raise interest rates,” Hofer said.

In commodities, oil prices were mixed, with Brent steady at $85.08 per barrel, while US West Texas Intermediate crude was 0.18% lower in June at $81.42 per barrel. (OR)

(Reporting by Ankur Banerjee, additional reporting by Summer Zhen in Hong Kong; Editing by Miral Fahmy)

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