Nikkei 225 hits 1990 high as Japanese stocks surge

PBoC cuts rates, Oil futures decline, and investors await US inflation data

By Ahmed Azzam | @3zzamous | 13 June 2023

  • Nikkei 225 at 1990 high; Japanese stocks surge.

  • People's Bank of China cuts rates to boost recovery.

  • WTI crude futures decline on recession fears, weak Chinese demand.

  • UK unemployment drops unexpectedly; earnings surpass expectations.

  • Investors await US inflation data for potential declines.

Nikkei 225 hits highest level since 1990 as Japanese stocks continue to rally

The Nikkei 225 Index surged 0.9% on Tuesday, surpassing the 32,700 mark and reaching its highest level since 1990. The broader Topix Index also experienced gains, rising 0.6% to 2,250 for the third consecutive session. Investors remain optimistic about the Japanese market, buoyed by positive economic indicators and a recovery in various sectors.

China's Central Bank cuts Reverse Repurchase Rate in a surprise move

The People's Bank of China (PBoC) made an unexpected decision on June 13th, 2023, to reduce the 7-day reverse repurchase rate by 10 basis points to 1.9%. This rate cut is the first since August 2022 and signifies policymakers' efforts to bolster the country's economy. Notably, the adjustment of the short-term rate precedes the rate on one-year policy loans, known as the medium-term lending facility, which will be announced later this week. This departure from the norm indicates the PBoC's commitment to implementing effective counter-cyclical measures and supporting the real economy amid a slower recovery in demand compared to supply.

WTI Crude Futures decline, weighed down by concerns over US recession

On Tuesday, WTI crude futures remained below $68 per barrel, following a sharp drop of over 4% in the previous session. Multiple factors contributed to this decline, including concerns about a potential recession in the United States, weakening demand from China, and increasing oil supply from Russia. Despite Saudi Arabia's plans to further reduce output, softer-than-expected economic data in both the US and China intensified apprehensions regarding oil demand, as these countries are the world's two largest consumers.

UK unemployment rate defies expectations, boosting Pound

Contrary to forecasts predicting an increase to 4%, the UK unemployment rate unexpectedly dropped to 3.8% in the three months leading up to April. Furthermore, weekly earnings exceeded predictions, leading to a surge in the pound. This strong economic data reinforces the positive sentiment surrounding the UK economy and provides investors with increased confidence in its stability and growth potential. However, further economic indicators, such as the ZEW expectations survey for June in Germany, are yet to be released and will shed light on the current situation and future prospects in the Eurozone's largest economy.

Investors await US inflation figures, anticipating potential decline

Investors are closely monitoring the upcoming US inflation numbers. On a yearly basis, the Consumer Price Index (CPI) could potentially decline to 4.1% from its previous level of 4.9%. Similarly, the core CPI, which excludes volatile food and energy prices, is expected to decrease to 5.3% from 5.5%.