Asian equity markets traded soft following on from the flat performance on US Equities where most major indices consolidated after recently hitting fresh record highs and lacking solid fundamental drivers. The Nikkei 225 briefly gave back its early gains as the index succumbed to the Yen strength, although there was also plenty of focus on Toshiba shares which were so far untraded with a glut of buy orders after reports of a USD 20bln buyout proposal from CVC Capital. Shanghai Composite and Hang Seng were subdued after continued PBoC liquidity inaction and with the former suffering from holiday blues on return from the extended weekend as it gets its first opportunity to digest the recent stories of the PBoC telling banks to reduce lending.
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On Wednesday, the US trading session was quiet in terms of incremental news flow, which lent to choppy price action most of the day. A set of FOMC minutes for March failed to add any hurdles, with the Fed policymakers reiterating it would take some time for it to make substantial progress towards its goals, and asset purchases would continue at the current pace until those goals had been realised. Market participants now shift their attention to Powell’s remarks today, where he is due to speak on an IMF panel, while others suggested that given Powell has stuck to the script. The focus will be pivoting towards next week’s inflation data and the start of bank earnings. Some desks suspect earnings will take a hit. Traders and investors will be looking at how banks’ balance sheets fare from all of the expected mortgage deferments, businesses requesting extended credit lines, and higher loan loss reserves.
