Australia’s economy is slowing down. The BoC meeting is in the spotlight today

Weakness in energy stocks weighed on the overall market on Tuesday after WTI crude fell more than 1% to a 3-month low on concerns that OPEC+’s plan to bring oil production back to the market sooner than expected will lead to a glut in global oil supplies.

Friday will see the release of the monthly US payrolls report for May, looking for signs of labor market strength that could decide when the Fed can start cutting interest rates. The consensus is that non-farm payrolls for May will increase by 190,000, and the unemployment rate will remain unchanged at 3.9%.

The Bank of Canada (BOC) will hold a monetary policy meeting today. In April, the Bank of Canada kept its key rate at 5% as expected and refrained from hinting at the start of rate cuts due to rising inflation risks. However, the latest GDP report showed that the Canadian economy has not recovered as much from the soft period last year as previously thought and may convince the central bank to start lowering borrowing costs. Thus, the Bank of Canada could deliver a surprise 0.25% rate cut.

Germany’s unemployment rate change for May rose by 25,000, the largest increase in 7 months, and showed a weaker labor market than expected at 7,000. Swaps discount the odds of a 25 bps ECB rate cut at Thursday’s ECB meeting to 99%. If the ECB cuts rates by 25 bps on Thursday, markets expect a 0% chance of another rate cut at the next meeting on July 18 and a 62% chance of a 25 bps rate cut at the September 12 meeting.

Asian markets traded flat yesterday. Japan’s Nikkei 225 (JP225) was down 0.22%, China’s FTSE China A50 (CHA50) was up 0.60%, Hong Kong’s Hang Seng (HK50) added 0.22% and Australia’s ASX 200 (AU200) was negative 0.31%. Hong Kong (HK50) stocks were up 0.4% in early trading on Wednesday, rising for a third session amid growing hopes of fresh supportive measures from China as the country’s regulator unveils capital market policy measures at a high-level forum in Shanghai on Saturday. Investors also welcomed private survey data that showed activity in the mainland’s service sector rose by the most in 10 months in May, rising for the 17th month and matching official data.

In Japan, real wages fell for the 25th consecutive month in April, with domestic inflation continuing to outpace wage growth. It also became known that the Bank of Japan is likely to discuss reducing bond purchases at its meeting next week. These are positive factors for the Japanese yen.

In the first quarter, the Australian economy grew by 0.1%, slowing down from the growth of 0.3% in the previous quarter and failing to meet market forecasts of 0.2%. Investors breathed a sigh of relief as the economy avoided an outright recession. Nevertheless, markets see little chance of the Reserve Bank of Australia (RBA) easing policy this year, with the probability of that happening in December at 44%.