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Pound falls, FTSE hits record high as BoE edges towards
cut
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Yen backslides again prompting intervention talk
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Chinese stocks outperform after export data and property
moves
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Graphic: World FX rates http://tmsnrt.rs/2egbfVh
By Marc Jones
LONDON, May 9 (Reuters) - World stocks took a breather
on Thursday after a strong few weeks, while the pound lost
ground as the Bank of England edged towards rate cuts and a
swooning Japanese yen prompted more intervention talk in Tokyo.
The pan-European STOXX 600 was consolidating two
straight record highs, although London's FTSE set a new one
after the BoE and Spain was lively too as bank BBVA's 12
billion euro ($12.87 billion) courtship of rival Sabadell
suddenly turned hostile.
The region's bond and FX markets had spent the morning
taking it easy, but the day's big event - the Bank of England's
decision to leave UK rates at the 5.25% level they have been
since August - sparked them into life, as two of the bank's nine
rate setters - one more than in April - voted for a cut.
It also sent a message that bets on the first cut being in
August might be too conservative as it lowered its inflation
forecasts for two and three years' time to 1.9% and 1.6% - below
its 2% target - from its February projections of 2.3% and 1.9%.
"That's encouraging," Governor of the bank Andrew Bailey
told a press conference.
Sterling fell to $1.245 from $1.2486 just before
the BoE's decision and was last down 0.25%. Against the euro,
the pound traded at 86.14 pence, compared to 85.96 earlier
British government bond yields, which are a proxy of
borrowing costs, fell too. The interest-rate sensitive two-year
gilt yield was last down 2.2 basis points at 4.29%
having been at almost 4.33% earlier.
HSBC Asset Management strategist Hussain Mehdi said the BoE
had now set the stage for a summer rate cut. "The question is,
do they go as soon as next month in line with a likely ECB move,
or wait until August," he said.
"Either way, European rate cuts are coming and we think they
are likely to be delivered ahead of the Fed which remains
hamstrung by stickier inflation."
Wall Street stock futures were pointing to a fractionally
lower start for U.S. markets after The Dow Jones Industrial
Average had stretched its winning streak to a sixth
session and closed above 39,000 points on Wednesday.
Focus was set to be on jobless claims data and tech stocks
again after chip blueprint designer Arm Holding's tepid
full-year revenue forecast had its shares pointing almost 9%
lower.
BULLS IN THE CHINA SHOP
Overnight in Asia, Chinese trade data and some property
market developments had helped Chinese stocks continue their
recent outperformance. MSCI's dollar-denominated China index has
jumped more than 13% over the last two months.
Customs figures showed that China's imports jumped 8.4% in
April from a year earlier, beating expectations for a rise of
4.8%, while exports returned to growth, meeting forecasts, in a
boost to economic growth.
That helped Chinese shares build on earlier gains, with
blue-chip stocks ending up almost 1% and Hong Kong's
Hang Seng index increasing 1.2%. News that China's
eastern metropolis Hangzhou will lift all home purchase
restrictions in the ailing property sector, a key pillar of
domestic demand, also boosted sentiment.
Property shares surged 2.5% as a result.
"For imports, strength was heavily concentrated in a few
categories. The main theme in our view is the goal to compete in
the AI race," said Lynn Song, chief economist, Greater China, at
ING, adding that imports of data-processing equipment and
integrated circuits have been strong.
"Considering import demand could remain resilient but
exports face a higher level of risk in coming months, we expect
a smaller contribution from trade to (economic) growth starting
in the second quarter."
In other markets, Japan's Nikkei reversed earlier
gains to finish down 0.3%. Australia's resources-heavy share
market lost 1.1% while South Korea also
retreated 1.2%.
Nasdaq and S&P 500 stock futures were both
down around 0.2% ahead of their restarts. Uber ( UBER ) was also
looking like a drag after a surprise quarterly loss and downbeat
forecast has sent its shares down 5.7%.