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Japan raises rates

The Bank of Japan (BoJ) raised interest rates to their highest level since the mid-1990s on Tuesday, lifting the yen and bond yields while Japan’s equity market also edged higher after the widely expected move. Asian stocks traded mixed as investors also assessed the Reserve Bank of Australia’s decision to keep rates unchanged and another weak batch of Chinese data showing retail sales fell in May. US stocks had rallied strongly on Monday after a framework agreement between the US and Iran pushed oil prices lower and eased inflation concerns ahead of the Federal Reserve’s policy decision on Wednesday. Gold was somewhat higher, trading around USD 4320 on Tuesday, as the US dollar strengthened slightly.

  • Data
  • Autore Shane Strowmatt, Senior Investment Writer
  • Tempo di lettura 5 minuto

Tokyo
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The BoJ lifted its policy rate to 1% on Tuesday, from 0.75% after its December increase, taking borrowing costs to a level last seen in 1995. The decision passed by a 7-1 vote, with board member Toichiro Asada favouring no change, as policymakers resumed the normalisation process that began in 2024. The move comes as a soft Japanese yen and higher energy costs threaten to feed through to consumers, even though government support kept core inflation at 1.4% in April, below the 2% target; producer prices increased 6.3% in May, the fastest pace in more than three years. The Nikkei 225 gained 0.5% after the announcement, while the yen edged up above 160 against the US dollar and the 10-year Japanese government bond yield rose to slightly above 2.6%.

Asian shares mixed

Asian equities traded unevenly on Tuesday amid central bank decisions. Australia’s S&P/ASX 200 was essentially flat after the Reserve Bank of Australia (RBA) kept its cash rate unchanged at 4.35% on Tuesday, having already increased it by a cumulative 75 basis points since February. Australia's central bank said economic activity was slowing under tighter financial conditions, but warned that inflation remained too high and that further rate increases were still possible if needed. Meanwhile, Korea’s Kospi jumped 2%, supported by gains in chipmakers Samsung and SK Hynix. India's Nifty 50 was 0.4% higher. Chinese shares were little changed following a slur of macroeconomic data releases, while Hong Kong’s Hang Seng Index was trading 1.3% lower.

China retail sales fall in May

China’s retail sales fell 0.6% year-on-year in May, after rising 5.1% in April, according to data released on Tuesday, marking the first decline since December 2022 and underscoring weak consumer demand. Urban fixed-asset investment contracted 4.1% in the January-to-May period, worsening from a 1.6% drop in the first four months, while industrial output rose 4.5% in May, up from 4.1% in April. Property weakness remained a major drag, with real-estate investment down 16.2% in the first five months, and manufacturing investment also slipped into contraction. The figures add to signs of a two-speed recovery, with industry and exports holding up better than consumption even after authorities expanded trade-in subsidies and other measures aimed at boosting domestic demand.

US stocks rally on Iran deal

Stocks on Wall Street rose sharply on Monday after a framework agreement between the US and Iran lifted risk appetite and pushed oil prices lower, easing inflation concerns ahead of the Federal Reserve’s policy decision on Wednesday. The Dow Jones Industrial Average climbed 0.9% to a record 51,671.03 points, while the S&P 500 gained 1.7% to 7554.29 points and the Nasdaq 100 jumped 3.1% to 30,543.92 points. Energy shares followed oil prices lower, with Brent crude oil trading below USD 83 per barrel and West Texas Intermediate (WTI) below USD 81 by Tuesday morning.

Swiss producer prices decline

Switzerland’s producer and import price index fell 0.4% in May from April, when it was unchanged, the Federal Statistical Office said on Monday. The index was down 1.8% from May last year, mainly because pharmaceutical products, petroleum and natural gas, and electricity became cheaper. Domestic producer prices were pulled lower by pharmaceuticals and electricity for large consumers, while import prices declined on cheaper energy products, pharmaceutical preparations and some chemicals. Most European stock indices closed higher on Monday, with the Euro Stoxx 50 rising 0.8%, while the Swiss Market Index lagged with a 0.1% gain.

Corporate and economic calendar

Corporate news in focus: There is no major corporate news scheduled today.

Economic data in focus: Italian Consumer Price Index (10:00), German ZEW Indicator of Economic Sentiment (11:00), US building permits (14:30).

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Editor: Alessandro Fezzi
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