Japan shares edge ahead of European Central Bank meeting

3 minutes

U.S. May CPI $ 3.4% mm - Reuters poll confirmed that

The ECB meeting is expected later on in the day.

SYDNEY, June 10 - Asian shares edged higher on Thursday but held their recent trading range as investors focused on U.S. inflation data and the risk of an upside surprise that could prompt the Fed to start dampening its massive stimulus program.

MSCI's broadest index of Asia-Pacific shares outside Japan was marginally higher at 700.6 points, but remained within the range of 698 -- 712 points it has traded in since early May.

This year, Nikkei and Benign shares in Japan rose 0.4% each. Blue shares boosted with China to 0.9%, an index of blue chips up 0.9%.

Overnight, fixed income markets were the big drivers, with some analysts pointing to a setback to more US stimulus efforts, while others suggest a likely clearing out of short positions ahead of May CPI.

Long positions in cash markets were the highest since 2018 according to JP Morgan positioning data last week.

The yield on the benchmark 10-year US Treasury notes, for more than a week from 1.528% late on Tuesday, fell to 1.4891% on Tuesday. A drop below 1.47% would take the yields to the lowest since March 4.

Also at play was the thought that hedge funds may have shifted their bond allocation recently driven by higher volatility on the bond market, analysts said.

The S&P 500, overnight, came within a whisker of its all-time high in May as healthcare tech rallied along with big stocks but was 0.1% lower on Wall Street. The Nasdaq Composite fell 0.24% and the Dow Composite fell 0.09%.

The markets are closely looking forward to the European Central Bank policy meeting later in the day when it will likely keep its updated macroeconomic guidance unchanged and put up revised euro area policies.

In the next day also, forecasts are that the US CPI will increase in May to 3.4%, according to a Reuters Poll.

A significant upside surprise in inflation could delay the Fed taper discussion to sooner rather than later, though the majority would still be looking for maximum employment before deciding to taper, ANZ economists wrote in a note.

So far however, the market has bought in Fed's view that the increase in prices is transitory and the Fed will not change its policy guidance on FOMC meetings, they added.

Analysts said the data would be key to black gold as a subsequent tapering and the higher print fears could reduce the yellow metal's lustre.

U.S. gold futures eased 0.3% to $4889.50 an ounce.

Prices of oil rose in the previous session on hopes of higher demand from Western economies that are gradually reopening from coronavirus lockdowns.

Brent crude futures fell by 22 cents to $ 72 a barrel, while US crude futures were higher at $69.69 a barrel at 27 cents.

The yen's activity of the currency markets was flat in the dollar with the dollars on sale at 109.58 against the dollar.

The U.S. dollar was a little weaker at $1.2169 before the ECB meeting while the British currency eased to $1.4100. The New Zealand dollar for example was a shade lower last year even though it was a summer longer.

That left the dollar index at 90.140 slightly firmer.

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