Moving markets today: Asian stocks pause early gains, gold prices rise to one-week high; China holds rates; Focus turns to BOE policy decision
Asian stocks paused after reaching levels close to their highest in two years, as traders awaited clearer signals on US economic policies. The British pound remained stable ahead of the Bank of England’s expected decision to maintain interest rates unchanged later in the day. Brent crude oil prices held steady amid concerns over tensions in the Middle East and upcoming US inventory data. Gold prices rose to a one-week high on speculation that the Federal Reserve might lower interest rates. Meanwhile, the dollar stayed subdued, awaiting new developments in the market. China opted to keep its benchmark interest rates unchanged, navigating cautiously amid economic challenges. Apart from the Bank of England, investors were closely monitoring announcements from Switzerland and Norway, which would influence global interest rate expectations. The Swiss National Bank was anticipated to reduce its policy rate by another 25 basis points. British stocks closed higher on Wednesday, with futures indicating a positive start for Friday’s trading session. Here are five key takeaways for your day.
BOE to keep rates stable at 16-year peak ahead of UK election
Britain’s central bank is likely to keep interest rates unchanged at 5.25 per cent, maintaining them at their highest level in 16 years. This decision comes despite recent data showing that UK inflation has returned to the targeted 2 per cent mark for the first time in nearly three years. Prime Minister Rishi Sunak, hoping for an economic boost ahead of an upcoming July 4 election, finds little room for rate cuts amidst strong underlying price pressures.
Economists had expected the Bank of England (BoE) to follow the European Central Bank’s lead and cut rates this month. However, it now appears more probable that any potential easing cycle will start in August, according to analysts. Market expectations strongly favour no change in rates at this meeting, with the possibility of rate cuts being priced in for August. Overall, markets are anticipating a total reduction of 43 basis points from the BoE over the course of this year.
China’s c.bank kept benchmark interest rates steady
On Thursday, China kept its benchmark lending rates unchanged, meeting market expectations. The one-year loan prime rate (LPR) stayed at 3.45 per cent, and the five-year LPR remained at 3.95 per cent. The one-year LPR is used for most new and outstanding loans, while the five-year LPR influences mortgage rates.
UK election promises leave $48 billion NHS funding shortfall unaddressed: Health Foundation
A report released on Thursday indicates that neither Britain’s governing Conservatives nor the opposition Labour Party have outlined how they plan to address a £38 billion ($48 billion) funding gap for the NHS in England, Reuters reported.
The Health Foundation think tank estimates that to aid COVID recovery, meet increasing demands, and improve services, healthcare funding needs to grow by 4.5 per cent annually over the next five years. This would require an extra £46 billion by 2029/30.
However, current spending plans would only add £8 billion to the health budget, and neither party has a clear plan to bridge this significant gap.
What’s coming up
The spotlight today is on the Bank of England’s policy decision.
Investors are also keeping an eye on upcoming central bank announcements from Switzerland and Norway on Thursday, which will shape the global interest rate outlook.
The Swiss National Bank is anticipated to lower its key policy rate by 25 basis points for the second consecutive meeting, whereas Norway’s central bank is expected to hold its key interest rate steady.
Asian stocks maintain gains; market eyes BOE
Japan’s Nikkei N225 index fell by 0.63 per cent, and Chinese markets also experienced declines, with the CSI300 blue-chip index down 0.34 per cent. Hong Kong’s Hang Seng index slipped by 0.14 per cent, while the CSI 2000 index, which tracks small-cap Chinese stocks, dropped 1.2 per cent.
The onshore yuan weakened, crossing 7.26 per dollar for the first time since November.
US markets were closed on Wednesday, but Nasdaq futures, which are heavy in tech stocks, saw a 0.43 per cent rise in early trading on Thursday.
In Europe, EURO STOXX 50 futures declined by 0.61 per cent. The FTSE 100 managed a 0.17 per cent gain on Wednesday, and its futures suggested a positive start on Thursday, increasing by 0.11 per cent to 8,212.0 points.
In the commodities sector, oil prices showed mixed results. Brent crude held steady at $85.08 per barrel, while US West Texas Intermediate crude for June edged down 0.18 per cent to $81.42 per barrel. Gold hit a one-week high on speculation of a Federal Reserve rate cut, with spot gold rising 0.3 per cent to $2,333.62 per ounce.