Forex News

The Hang Seng surged 223.95 points or 1.22% to end at 18,537.81 on Thursday, halting losses from the prior two sessions amid a rally in Chinese stocks following the country’s upbeat trade data and fresh signs of property support. Meanwhile, Hong Kong is turning to Saudi Arabia for new funds to boost its stock market, an initiative after China's regulator said last month it would encourage more firms to hold initial public offerings in the city. A notable drop in US futures capped the rise after Fed Bank of Boston President Susan Collins signaled that interest rates need to stay higher for longer to reduce cost pressures. On company news, Chinese builder Country Garden Hlds. said it could not make an interest payment on two local bonds, the first time that an initial deadline on such developer debt has been missed. All sectors logged strong gains, with advances from some heavyweights, such as Tencent Hlds. (2.1%), Meituan (2.6%), China Resources Beer (4.8%), and Lenovo Group (8.8%).

The CAC 40 fell 0.03% to 8,129 on Thursday, as investors paused following four consecutive sessions of gains while awaiting the Bank of England's policy decision later in the day. The Bank of England is likely to maintain the benchmark rate at 5.25%, holding steady at levels unseen since 2008. Still, investors are seeking greater clarity on the timing of potential interest rate reductions, with expectations currently leaning toward June or, more likely, August. Among individual stocks, Renault shares showed a notable rise of nearly 2% to the index, driven by optimistic forecasts that positive Nissan results will contribute to Renault Group's Q1 2024 net income, estimated at EUR 225 million. Other noteworthy gainers included Thales, Stellantis NV and Buoygues, with increases ranging from 0.9% to 1.4%. Conversely, Hermes led the decliners with a 1% drop in shares, followed by LVMH and Sanofi, which experienced declines of 0.85% and 0.82%, respectively.

The IBEX 35 went down to 11,030 on Thursday, halting three sessions of gains and underperforming its European peers, dragged by falls in its heavyweights. BBVA was the most bearish, plunging by 5.6% after the launch of the hostile bid for Sabadell. The bank chaired by Carlos Torres offered the same terms as the merger project that the Catalan entity rejected a few days ago. However, the positions on the board were taken away and BBVA was conditioned to obtain 50.01% of the share capital of Sabadell. Spain's government reacted negatively to news, voicing its concerns about financial stability and job cuts. Still, the proposal benefited Sabadell shares which rose by 4%. Meanwhile, the index was also pressured by Inditex (-1.6%) and Iberdrola (-0.7%). Simultaneously, Telefonica traded near flat despite recording a 78.9% increase in its first-quarter net profit in 2024 and confirming yearly objectives.

The UK 10-year government bond yield has increased to 4.175% from a four-week low of 4.13% hit earlier in the week, ahead of the Bank of England's policy announcement, where it is anticipated that interest rates will remain steady at 5.25%. However, there are expectations of a downward revision in inflation projections. The possibility of an interest rate cut in June is being considered, with markets currently placing a 50-50 probability on such a move and have already factored in a cut for August. Traders are looking ahead to two quarter-point reductions by the year-end, a more aggressive stance compared to the expected actions of the US Federal Reserve.

Top commodity losers are Corn (-3%) and Cotton (-1.51%). Gains are led by Cheese (1.18%), Rapeseed (1.11%) and Wheat (1.08%).

Today's Metals commodities market is characterized by modest daily movements, with Silver standing out as the frontrunner with a 0.98% increase.

Top commodity gainers are Crude Oil WTI (0.69%), Heating Oil (0.60%) and Brent Crude Oil (0.60%).

The British pound dropped below $1.25 on Thursday ahead of the Bank of England's interest rate decision. Analysts predict the central bank will keep borrowing costs stable but may hint at future rate cuts. Currently, there is a 50-50 chance of a rate cut in June and it's already priced in for August. Recent data showed Britain's economy remains stable, while wage growth is slowing and inflation is nearing the 2% target. Traders anticipate two quarter-point cuts by year-end, exceeding expected cuts by the US Federal Reserve.

The FTSE 100 was little changed on Thursday, as investors turned cautious ahead of the Bank of England's interest rate decision later in the day. It is expected that the bank will keep the key bank rate at 5.25% but there is growing speculation surrounding potential interest rate cuts, with June or August being the most probable timing. In corporate news, IMI Plc saw a rise of over 1% after affirming its full-year guidance, while BAE Systems reported progress towards higher earnings and anticipated "further positive momentum." However, 3i Group experienced a decline of over 3% following the release of their full-year results.

European stocks were lower on Thursday, with both the STOXX 50 and the STOXX 600 losing about 0.3% and 0.1% respectively, pausing after four consecutive sessions of gains which sent the latter to fresh record levels. Traders continue to assess prospects for lower interest rates, while awaiting the Bank of England's monetary policy decision later in the morning. Meanwhile, shares of Telefonica were slightly lower (-0.5%) even though the company's profit meet forecasts. Meanwhile, BBVA sank almost 6% after the lender made an €11.5 billion hostile takeover for the Spanish Banco de Sabadell, after Sabadell’s board rejected an unsolicited all-share merger offer earlier this week.

European natural gas futures dropped to €30.5/MWh, continuing its downward trend for the third consecutive session due to easing concerns over supply shortages, unseasonably warm weather conditions, and higher storage levels. The threat to supply has lessened with hopes of a ceasefire in the Middle East and storage facilities across Europe are currently operating at 62.8% capacity, alleviating worries. Even with reduced Norwegian pipeline deliveries for maintenance in May, from 350 to 290-295 mcm/day, immediate concerns are not a major issue. Moreover, the resumption of gas flows from Freeport LNG's Texas facility is expected to boost US LNG exports to Europe. Meanwhile, low wind power generation in north-west Europe and Britain is driving up gas demand this week.

Retail trade in the Czech Republic rose 6.1% year-on-year in March 2024, up from an upwardly revised 2.5% gain the previous month and market forecasts of 2.7% rise. It was the the fourth consecutive month of rising retail activity and the sharpest growth in the sequence, as sales increased at a faster pace for food products (4% vs 2% in February). Moreover, sales grew more for non-food products (7.7% vs 3.6%), particularly in cosmetic & toilet articles in specialized stores (27.4% vs 14.4%), clothing, footwear & leather goods in specialized store (5.2% vs -0.4%), and other goods in specialized stores (6.4% vs 3.3%). On a seasonally adjusted monthly basis, retail trade rose 1.3% in March, rebounding from a downwardly revised 0.3% fall in the previous month.

In China, the Shangai Composite Index rose 26 points or 0.83 percent on Thursday. Leading the gains are Avic Aviation Engine (4.62%), Sany Heavy Industry (4.56%) and Aluminum Corporation of China (3.67%). Top losers were Yonghui Superstore (-2.67%), Agricultural Bank of China (-1.58%) and Sdic Power (-1.40%).

The Bank of England is likely to maintain the key bank rate at 5.25% during its May 2024 meeting, staying at levels not seen since 2008. However, investors are anticipating more clarity on when interest rates might be lowered, with expectations currently favoring either June or, more likely, August. The focus will be on the closely monitored vote tally, currently seen at 8-1, and the release of new economic projections, with the central bank set to upgrade its growth projections. In March, UK inflation dropped to 3.2%, significantly lower than the 10.1% recorded in March 2023, though it exceeded the central bank's projections. Yet, Governor Bailey recently said he sees strong evidence that inflation is coming down as a result of tighter financial conditions.

Industrial production in Saudi Arabia dropped 8.7% year-on-year in March 2024, slipping further from a downwardly revised 6.6% fall in the previous month. It marked the 11th consecutive period of declining industrial activity, weighed by a continued decline in mining & quarrying (-12.2% vs -10.1% in February), with the country reducing its oil production to 8.9 million barrels per day in March. At the same time, growth sharply slowed for manufacturing (0.6% vs 3.2%), primarily due to lower outputs for furniture, chemicals & chemical products, and food products. Also, production moderated for electricity, gas, steam & air conditioning supply (7.4% vs 7.5%), and water supply, sewerage, waste management & remediation activities (5.5% vs 8.5%). On a monthly basis, industrial activity fell 0.2%.

Malaysian palm oil futures traded below MYR 3,870 per tonne, falling for the second straight session amid weakness in rival edible oils and growing caution ahead of April's palm oil data in the following days. Reuters has estimated that Malaysia's shipments of palm oil products during the month were down 7.79% from the prior month to 1.22 million tons. Limiting the decline were trade figures from key buyer China that showed exports and imports grew more than expected in April. Meantime, crude oil prices rose further due to a decrease in US crude stockpiles. Turning to top importer India, palm oil purchases surged 41% last month to their highest figure in three months as price moderation encouraged refiners to increase their buying. Meanwhile, Malaysia reportedly plans to launch "the orangutan diplomacy" in its relations with palm oil-importing countries, offering the animals as trading gifts to ease concerns over the environmental effects of growing the commodity.

The Nikkei 225 Index fell 0.34% to close at 38,074 while the broader Topix Index gained 0.26% to 2,713 in mixed trade on Thursday, as summary of the Bank of Japan's April policy meeting flagged upside risks to inflation and discussed scenarios that would warrant further interest rate hikes. Key factors it is monitoring for further policy adjustments include positive corporate behavior through this summer and an improving trend in consumption. Investors also assessed data showing Japanese wage growth slowed in March, challenging the BOJ’s forecast of a “virtuous cycle” of increasing wages and prices. Notable gains were seen from index heavyweights such as Mitsubishi UFJ (2.1%), Nintendo (3.5%) and Daikin Industries (2.5%). Meanwhile, auto giants Toyota Motor and Mitsubishi Motor dropped 1.4% and 4.9%, respectively, after forecasting lower earnings for the current fiscal year.

The annual urban inflation rate in Egypt slowed to 32.5% in April 2024 from 33.3% in the previous month, remaining significantly above the upper limit of the central bank’s range of 5-9%. Still, it was the lowest reading since January, mainly influenced by a slowdown in prices for food (40.5% vs 45% in March), furnishings, household equipment & routine maintenance of the house (31.1% 31.3%), recreation & culture (44.5% vs 44.8%), and restaurants & hotels (38.6% vs 39.7%). Meanwhile, costs increased at a faster pace for alcoholic beverages & tobacco (95.6% vs 93.4%), clothing & footwear (25.7% vs 20.5%), housing utilities (10.2% vs 9.7%), and transport (23.6% vs 16.2%). On a monthly basis, consumer prices rose 1.1% in April, edging higher from a 1% increase in the prior month.

Lithuania's consumer prices edged higher by 0.1% year-on-year in April 2024, after stabilizing in the previous month. Prices increased for alcoholic beverages & tobacco (5.6% vs 5.3% in March) and miscellaneous goods & services (5.4% vs 3%). Still, the inflation remained relatively low, as costs continued to decrease for housing & utilities (-14.5% vs -15.2%), food & non-alcoholic beverages (-2.1% vs -1.8%), and clothing and footwear (-0.4% vs -0.2%). Moreover, prices slowed for health (8.7% vs 9.6%), transport (3.1% vs 3.7%), communication (2.1% vs 2.5%), recreation & culture (1.3% vs 1.7%), and restaurants & hotels (9.3% vs 10%). On a monthly basis, consumer prices advanced 0.1% in April, rebounding from a 0.2% fall in the prior month.

European equity markets were set for a muted open on Thursday as investors braced for the Bank of England’s latest interest rate decision, with traders looking for dovish signals from policymakers as UK inflation slows. Markets will also assess a fresh batch of corporate earnings reports including those from EDP, Enel, Ferrovial, Pirelli, Telefonica and Salvatore Ferragamo. Euro Stoxx 50 futures were flat in premarket trade.