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Flash: Nikkei stabilises follow post Bernanke rout - OCBC Bank

FXstreet.com (Barcelona) - OCBC Bank Treasury analysts note that the post-Bernanke market rout saw the Nikkei stabilizing (+0.89%) on Friday after a sharp 7.3% sell-off late Thursday, with the 10-year JGB bond yield testing the key 1% handle (for the first time since Apr 2012) before retreating to the current 0.83%.

They see that triggers appeared to be a combination of speculation of FOMC’s exit strategy and doubts over Abenomics. Further they see that BOJ governor Kuroda opined that there are “no signs at this point of excessively bullish expectations in asset markets or in the activities of financial institutions” following the 1-day Nikkei slump and cited an April BOJ report that suggested that rates could rise by 1-3% points amid an improving economy as lending margin and rising stocks could offset some of the negative effects. They write, “He also said Japan is expected to return to a moderate recovery around mid-year, underpinned by domestic demand and an improving global economy.” Additionally they note China’s president Xi signaled that policymakers will not sacrifice the environment to ensure short-term growth, and this could weigh on short-term risk sentiment as well. They finish by writing, “Key focus this week will be on BOT meeting on 29 May (market looking for a 25bps rate cut to 2.5% after a disappointing Q1 growth), and BOC (likely no change at 1%) on 29 May.”

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