Risk aversion came back overnight with DJIA dropping -217.23 pts, or -1.21% to close at 17711.12, revising this week's gain. S&P 500 also dropped -19.93 pts or -0.96% to close at 2064.46. Asian markets follow and are trading broadly lower. At the time of writing, Nikkei is down -100.93 pts or -0.61%, Hong Kong HSI down -130 pts, or -0.6%. China SSE (LON:SSE) is suffering more and is trading down -1.2%. WTI crude oil surged yesterday as US inventories dropped more than expected but is still held inside recent range. Gold was is also still stuck in consolidation. In the currency markets, the development is relatively mixed. Yen trades higher as the pressure from intervention talk fades. Dollar is under some pressure against European majors and Canadian dollar. But Aussie is dragged down by weakness in equities and China. Sterling is stuck in range as markets awaits BoE Super Thursday.
In Japan, BoJ governor Haruhiko Kuroda said that the central bank can still ease monetary policy "substantially" if necessary. And, "quantitative easing, qualitative easing, negative interest rates" are the three dimensions where BoJ can act. Nonetheless, he said the Japan is "absolutely on the right track" to achieve the 2% inflation target even though "we have only gone halfway". Also, he reiterated the need to "wait a few months to see the effects" of the extra stimulus in the real economy. Meanwhile, "the situation financial markets has not yet stabilized" and yen could have appreciated more if there wasn't additional stimulus announced back in January.
In Eurozone, Bundesbank president Jens Weidmann said that the ultra loose monetary policy of negative rates and asset purchase is "justified for now". But, "we must not over-extend the period of ultra-loose monetary policy, because various risks and side effects are part and parcel of the current policy stance." And, he warned that "the longer a central bank pursues an ultra loose monetary policy... the greater the risk that a slight tightening of policy, or even expectations of a slight tightening of policy, will send market interest rates sharply higher."
BoE will be the main focus today with rate decision, minutes and quarterly inflation report scheduled. There is no chance of a change in policies before the EU referendum in June. BoE would keep bank rate at 0.50% and asset purchase target at GBP 375b. The main focus will be on adjustment to inflation and growth projections. There are speculations of downward revision on both front, which could give Sterling some selling pressure.
On the data front, New Zealand business manufacturing index rose to 56.5 in April. Australia consumer inflation expectations rose 3.2% in May. Japan current account surplus widened to JPY 1.89T in March. UK RICS house price balance rose to 41 in April. Eurozone will release industrial production today. US will release import price index, jobless claims. Canada will release new housing price index.