A look at the day ahead in European and global markets from Gregor Stuart Hunter:
It’s make-or-break time for Britain’s finance minister Rachel Reeves as she unveils later today a budget expected to contain tens of billions of pounds of new tax increases.
Sterling is up 0.2% at $1.3193 in Asian trading, rising for a fifth consecutive day ahead of her speech, due to begin at 1230 GMT.
In Japan, the yen rallied 0.2% against the U.S. dollar as sources told Reuters that the Bank of Japan is preparing markets for a possible interest rate hike as soon as next month, shifting the central bank onto a hawkish footing after a meeting last week between new Prime Minister Sanae Takaichi and BOJ Governor Kazuo Ueda.
Takaichi’s high approval ratings are prompting Japanese opposition parties to ramp up preparations for snap elections, the Yomiuri newspaper reported on Wednesday.
The kiwi dollar surged 1.2% after the Reserve Bank of New Zealand cut interest rates 25 basis points to 2.25%, but removed its dovish guidance, signalling an end to the central bank’s easing cycle. And the Australian dollar jumped 0.5% after a hotter-than-expected inflation report reinforced bets that the Reserve Bank of Australia is also done with rate cuts for now.
Oil markets have been choppy, after Ukrainian President Volodymyr Zelenskiy signalled he was ready to advance a U.S.-backed peace plan, paving the way for a relaxation of sanctions on Russian energy and additional supplies, sending oil prices tumbling to a five-week low on Tuesday.
But Brent crude futures rebounded 0.4% to $62.72 after U.S. President Donald Trump backed away from a Thursday deadline for Ukraine to agree. Trump also shrugged off a Bloomberg News report that U.S. negotiator Steve Witkoff coached the Russians on how to approach him on the topic.
None of that confusion and volatility troubled equity markets, which enjoyed a broad rebound following cues from Wall Street after the S&P 500 rose for a third consecutive day.
On Wednesday, MSCI’s broadest gauge of shares outside of Japan jumped 1% as traders firmed up expectations the Federal Reserve will cut interest rates next month, while the Nikkei 225 surged 2% on optimism about corporate earnings.
But Hong Kong and China lagged gains, with the Hang Seng Index up 0.5% after earnings from AI front-runner Alibaba that beat estimates, but still left shares down 1.1% as the e-commerce company underwhelmed investors with its Q4 guidance and said it would decrease spending on its instant commerce business – prompting a 6% gain for rival Meituan.
Key developments that could influence markets on Wednesday:
UK: Autumn budget
Debt auctions:
Germany: 10-year government debt
(Reporting by Gregor Stuart Hunter; Editing by Muralikumar Anantharaman)
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