Stocks had a poor night, the Nikkei is down -1.6% as is the Hang Seng and there is a Risk Off atmosphere going into month end. Not even a press release from IMF, which expects China’s economy to grow 5% this year, raising its forecast from 4.6% a few weeks ago, reflecting a strong expectation after China government’s additional support to property sector, could change the sentiment.
Over the course of the week, inflation data has been slowly drip fed to the market culminating in the Tokyo CPI tomorrow, so we are now on 'Central Bank Watch'. The ECB is widely expected to start its easing cycle in June after Philip Lane's comments Monday. The market consensus also strongly favours a BoC rate cut next month, with the notable exception of the RBNZ, most other G10 central banks also hold policy meetings in June. Of these, the BoJ and the RBA as the most hawkish, followed by the Norges Bank and the Fed. Next is the BoE, who may set the groundwork in June for what we expect will be a rate cut in August. Yesterday, Riksbank Governor Thedeen stated that a threshold for a Swedish rate cut was “very high” in June. That said, the Riksbank already delivered a move earlier this month and signalled that two more cuts will follow in H2. The SNB is also due to hold a policy meeting next month and the risk of a rate cut as high. This would be the second in the cycle which would mark the SNB as the most dovish G10 central bank at present. EURGBP touched the yearly lows yesterday - is it final time for GBP to outperformer the noisy neighbour? 0.8500 has proved to be good support.
In the corporate world, BHP Group decided against making a firm offer for Anglo American Plc. and Google committed to making $2 billion in investments in Malaysia. Chinese authorities are poised to impose a record fine on PricewaterhouseCoopers LLP over its auditing work for China Evergrande Group.
As for the data today we have Eurozone economic confidence, unemployment, consumer confidence, Swiss GDP, US initial jobless claims, GDP and Wholesale Inventories, Pending Home Sales and we have speeches from the Fed’s John Williams and Lorie Logan.
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