SINGAPORE (Reuters) – Asian stocks took a breather on Thursday, hovering near their highest in two years as traders waited for more US policy clues, while sterling was steady before a Bank of England meeting where rates are expected to remain unchanged.
Apart from the BoE, investors will also watch for central bank decisions from Switzerland and Norway on Thursday to set the tone for a global rates outlook.
MSCI's broadest index of Asia-Pacific shares outside Japan was little changed at 572.42, just below the two-year high of 573.38 it touched on Wednesday boosted by tech stocks. The index is on course for a 4% rise in June.
European stock markets were due for a higher open, with Eurostoxx 50 futures and FTSE futures 0.2% higher ahead of the slew of central bank decisions.
The pound was steady at $1.27125 in cautious trading but is down 0.2% in June.
Data on Wednesday showed British inflation returned to its 2% target for the first time in nearly three years in May, but strong underlying price pressures all but rule out an interest rate cut ahead of election next month.
Most economists in a Reuters poll last week thought the central bank would start to cut rates in August, but markets see only a 30% chance of an August rate cut and think a first move is more likely in September or November.
Markets have priced in 43 basis points of easing from BoE this year.
The Swiss National Bank on the other hand is widely expected to cut its key policy rate by 25 basis points for a second straight meeting. Norway's central bank is likely to keep its key policy interest rate unchanged.
In Asia, Japan's Nikkei was 0.10% higher, while stocks in China and Hong Kong fell, weighed down by lacklustre property shares, as Beijing left its key benchmark lending rates unchanged despite recent data showing the economy remains wobbly.
The onshore yuan weakened past 7.26 per dollar for the first time since November.
The dollar index, which measures the US unit against six rivals, was little changed at 105.27, while the euro was steady at $1.0746.
A surge in tech stocks on Tuesday lifted AI chipmaker Nvidia above Microsoft as the world's most valuable company, leading to a global rally in tech shares.
US markets were closed on Wednesday, with tech heavy Nasdaq futures up 0.5% on Thursday.
The frenzy over artificial intelligence has resulted in technology stocks roaring through the year, with Nvidia leading the pack along with select few behemoths as US stocks clock record highs and also boost Asian counterparts.
"Nvidia remains the most important stock in the world," Chris Weston, head of research at Pepperstone, said in a note.
Weston though cautioned that index market breadth has been poor, with participation underwhelming, suggesting the rally has been built on a shaky foundation.
"The fact remains the market is now all in on the rally in AI-related names and big tech and given the lack of clear immediate risk the path of least resistance is for higher equity index levels."
On a macro level, investors are looking for fresh cues as to when the Federal Reserve would start its policy easing cycle after the central bank last week projected just one rate cut in the year and policymakers this week have also been cautious.
The Japanese yen languished at 158.17 per dollar as the wide difference in the interest rates between Japan and the United States weigh on the currency. The yen is down over 10% against the dollar this year.
"I think the best-case scenario is September Fed interest rate cut that narrows the yield differential between dollar and yen", according to Stefan Hofer, chief investment strategist, LGT Bank Asia.
In commodities, oil prices were mixed, with Brent steady at $85.12 per barrel, while US West Texas Intermediate crude for June was 0.23% lower at $81.38 per barrel.