Moving markets today: Asia mixed, takes cue from Wall Street; oil prices rise, China’s trade surpasses forecasts; All eyes on Bank of England policy decision
The S&P 500 narrowly missed its chance to set a new winning streak record, ending slightly lower. In Asia, traders aimed to regain momentum following a lukewarm performance on Wall Street, while Europe saw record highs. Oil prices surged due to declining US crude inventories and speculation about potential Federal Reserve interest rate cuts. Meanwhile, gold prices remained stable as investors awaited US economic data for clues on Fed policy. China’s April exports and imports exceeded expectations, while Japan faced its 24th consecutive month of declining real wages in March. The Bank of Japan took a more aggressive stance in April, advocating for further rate hikes. Thursday’s spotlight is on the Bank of England’s latest policy decision, with some economists predicting imminent interest rate cuts in the coming months. Here are five key takeaways for your day.
China’s exports and imports beat analysts’ April forecasts
China experienced a modest increase in its exports measured in dollar terms in April, as the government focuses on revitalizing the country’s economy through a resurgence in manufacturing. Last month, the value of China’s exports grew by 1.5 per cent compared to the previous year, showing an improvement from March’s 7.5 per cent decline, which was attributed to lower prices affecting Chinese manufacturers.
Analysts had anticipated a slight increase in export value, with predictions of 1.5 per cent and 1.3 per cent, respectively. Additionally, China’s import value surged by 8.4 per cent in April, surpassing analysts’ expectations of a figure just under 5 per cent.
Japan’s real wages decline for 24th consecutive month in March
In March, real wages in Japan dropped by 2.5 per cent compared to the previous year, marking two consecutive years of decline due to rising inflation. Since April 2022, inflation has consistently exceeded the Bank of Japan’s 2 per cent target. Despite the recent rate hike, the cost of living crisis persists, impacting the ruling party’s approval ratings.
On the other hand, during the April policy meeting, Bank of Japan members leaned towards a cautious approach, advocating for gradual interest rate increases to prevent inflation from overshooting targets.
UK property surveyors anticipate surge in house sales later in 2024
British property surveyors anticipate more property sales despite high borrowing costs. The number of homes for sale rose sharply last month, according to the Royal Institution of Chartered Surveyors (RICS), keeping its primary house price balance steady at -5 in April, unchanged from March, Reuters reported.
Mortgage costs edged up as chances of a Bank of England rate cut decreased. Transaction volumes increased, with mortgage approvals up 20 per cent in March, hitting an 18-month high. RICS reported its highest overall sales balance since May 2021, though new buyer inquiries dropped below zero for the first time in four months.
BOE’s monetary policy decisions take center stage
Later today, the Bank of England (BoE) is poised to make a decision on its interest rate policy, amid keen interest in the potential for a rate cut in June, especially after Sweden’s Riksbank recently slashed rates, signalling a divergence from the US Federal Reserve’s approach. BOE’s Dave Ramsden and Swati Dinghra are anticipated to advocate for a 25 basis point cut.
BoE chief economist Huw Pill is scheduled to deliver a speech, adding further intrigue to the proceedings.
There’s a split among gilt-edged market makers (GEMMs), banks with direct access to government bond auctions, regarding the timing of the next BoE rate cut. Out of 15 GEMMs, eight foresee the first cut in June, while seven predict it may happen in August.
Other significant events for the session include the release of weekly US jobless claims figures and the US Treasury’s 30-year debt auction.
Investors will also focus on earnings reports from media giants Warner Bros Discovery and UK-based ITV, alongside UK-based private equity firm 3i Group’s 2024 results unveiling.
Investor attention will shift to the release of US consumer inflation data for April next Wednesday, following a streak of unexpected positive surprises, providing valuable insight into the future direction of the Fed’s policy.
Asia markets mixed following Wall Street’s lead
US stock markets experienced mixed movements, with the Dow Jones Industrial Average rising by 0.44 per cent to 39,056.39, the S&P 500 held steady at 5,187.67, and the Nasdaq Composite slightly declining by 0.18 per cent to 16,302.76. The Russell 2000, which focuses on smaller companies, saw a decrease of 0.5 per cent to 2,055.135.
Among sectors, real estate, materials, and consumer discretionary sectors performed poorly.
Intel’s stock fell by 2.2 per cent after warning of potential sales impacts due to revoked export licenses for China. Tripadvisor experienced its largest single-day drop, tumbling by 28.7 per cent, after announcing it wouldn’t pursue a sale and posting an unexpected loss. Lyft, however, saw gains of 7.1 per cent after projecting strong performance for the current quarter.
Some major stocks like Nvidia, Amazon, and Alphabet saw minor declines ranging from 0.2 per cent to 1.1 per cent alongside a slight rise in the 10-year US Treasury yield.
Treasury yields saw slight increases in a relatively quiet trading session, reflecting a trend of minimal movements amid a lack of significant economic data releases.
Asian markets remained subdued, with speculation about currency intervention in Japan influencing the yen’s stability. Chinese stocks rose by 0.6 per cent, boosting Hong Kong’s Hang Seng index, which gained by 0.7 per cent thanks to technology and property sectors.
In commodities, oil prices and gold saw slight increases, with Brent futures rising by 0.2 per cent to $83.76 a barrel, US crude gaining by 0.3 per cent to $79.24 a barrel, and gold prices increasing by 0.1 per cent to $2,311.23 per ounce.