Asian stocks stabilized on Thursday after strong Chinese trade data added to signs of improving domestic demand in the world’s second-largest economy, while the yen steadied after three days of declines amid Japan’s talk of possible currency interventions. Later in the day, the Bank of England will decide on its interest rate policy, with possibilities of a rate cut in June following the overnight move by the Swedish central bank to cut interest rates, confirming Europe’s divergence from the US Federal Reserve.
Investors will focus on US consumer inflation data for April, scheduled for release next Wednesday, after three consecutive upside surprises to get a better idea of the Federal Reserve’s policy direction. Chinese customs data showed that imports jumped by 8.4% in April compared to the previous year, surpassing expectations of a 4.8% increase, while the increase in exports matched expectations. This helped Chinese stocks to benefit from their previous gains.
Masato Kanda, Chief Currency Officer, said on Thursday that there is no limit to reserves in intervening in the currency, keeping traders on alert, while minutes from the Bank of Japan’s April meeting showed policymakers shifting towards tightening monetary policy by a vast majority, helping the yen to stabilize.
However, real wages in Japan fell by 2.5% in March compared to the previous year, marking declines for two years, providing policymakers with a reason not to raise them forcefully. In the Treasury bond market, yields changed little after rising the previous day, with the possibility of weak movements ahead of the US inflation report next week. The yield on two-year bonds remained at 4.8470%, while the yield on 10-year bonds was at 4.5003%, after rising by 3 basis points overnight.
