- Nikkei slips, yen hits 7-month low after BOJ meeting
- China expected to cut interest rates after disappointing growth
- US closed for holiday awaiting Powell’s testimony
- BOE will hike rates 25 basis points on Thursday as oil prices plummet
SYDNEY, Jun 19 (Portal) – Asian stocks got off to a cautious start on Monday after their best weekly gain in five months as investors waited for China’s interest rate decision and statements by US Federal Reserve Chair Jerome Powell for clues on the way forward receive.
Both S&P 500 futures and Nasdaq futures were broadly flat after Wall Street’s uptrend met resistance on Friday. Cash US Treasuries were flat due to the June 15 holiday, while futures were broadly flat.
In Asia, Japan’s Nikkei (.N225) slipped 0.4% after hitting a three-decade high on Friday, helped by the Bank of Japan’s (BOJ) maintainance of ultra-loose monetary policy, which pushed the yen down 7-month rate sent low against the US dollar.
MSCI’s broadest index of Asia-Pacific stocks outside of Japan (.MIAPJ0000PUS) fell 0.6% after hitting a four-month high on Friday and was up 3% for the week, its best since January.
China’s blue chips (.CSI300) fell 0.5%, while Hong Kong’s Hang Seng Index (.HSI) fell 0.6%.
In China, hopes for stronger economic stimulus are growing after the cabinet met on Friday to discuss measures to boost economic growth. However, concerns remain as to whether these would be enough to revive a faltering economy.
The People’s Bank of China is widely expected to cut interest rates on medium-term policies on Tuesday, after a similar cut in medium-term policy lending last week.
Morgan Stanley expects a stimulus package soon that will include easing restrictions on property purchases in prime cities, more infrastructure support and targeted consumption subsidies.
“Given that Q2 GDP growth is at 0%, strong sequential growth acceleration is needed for full-year GDP growth to meet the government’s target of ‘around 5%,'” said Robin Xing, chief economist for China.
Several major banks lowered their growth forecasts for China last week following disappointing recent data.
US Secretary of State Antony Blinken will conclude his rare visit to China on Monday. Investors are waiting to see if he will meet Chinese President Xi Jinping, which would likely be taken as a positive sign in otherwise strained relations between the world’s two largest economies.
POWELL enters the stage
After a week in which the stock market cheered the Fed’s decision not to hike rates in June, investors are also awaiting a series of speakers from the Fed this week, with Powell set to testify before Congress on Wednesday and Thursday.
Some officials have already issued hawkish comments, and with the dot chart pointing to two more rate hikes, markets are pricing in a 70% chance the Fed will hike rates by a quarter point in July before leaving them unchanged for the rest of the year . .
“Fed Chair Powell makes testimony in the House and Senate focusing on whether the July FOMC (Federal Open Market Committee) meeting is truly “live” and whether the Fed dot plot of two more rate hikes is coming Real base case is “ambitious” or more, depending on the data, said Ray Attrill, head of FX strategy at National Australia Bank.
The Bank of England also meets on Thursday, where it plans to hike interest rates by a quarter point to a 15-year high of 4.75%. Markets are betting on the UK central bank interest rates rising to nearly 6% this year.
The dollar index was little changed against its majors Monday morning at 102.34 after falling 1.2% the previous week, its sharpest drop in five months.
The yen was weakened by the BOJ’s loose monetary policy, hitting a seven-month low of 141.90 per dollar, while a hawkish stance from the European Central Bank, which hiked interest rates by a quarter point last week, helped keep the euro close to a five-week high of 1.094 $ stayed .
Oil prices fell more than 1% on Monday. US crude futures fell 1.0% to $71.03 a barrel and Brent crude fell 1.3% to $75.63 a barrel.
Gold prices fell 0.1% to $1,955.77 an ounce.
Reporting by Stella Qiu; Edited by Christopher Cushing and Tom Hogue
Our standards: The Trust Principles.