LONDON - World stocks were taking a well-earned breather on Thursday after a strong few weeks and ahead of a Bank of England rate decision, while Japanese authorities ratcheted up intervention talk again as the yen continued to backslide

After two straight record closing highs, the pan-European STOXX 600 fluttered 0.1 percent lower although there was action in Spain where bank Sabadell's 12 billion euro ($12.87 billion) courtship by rival BBVA suddenly turned hostile.

The region's bond and FX markets meanwhile were happy to take it easy ahead of the day's big event - the Bank of England's 1100 GMT interest rate decision, where it is widely expected to leave UK rates at 5.25 percent, where they’ve been since August.

With new forecasts coming out too and a post-meeting press conference there will be plenty to chew over.

PIMCO economist Peder Beck-Friis said BoE chief Andrew Bailey was unlikely to give a clear signal on exactly when the bank's first cut since 2020 might come, but focus will be on what guidance he does give and if more than one rate setter votes for a cut this time around.

"We know from history that policy meetings may create some volatility," Beck-Friis said.

"What is also interesting is that we have come from a few years where monetary policy has been very correlated globally... but as the pandemic shocks fade I think it is natural that we see some divergence," he added, pointing to how Sweden and Switzerland had already cut rates whereas the United States might need to wait longer.

Overnight, Japan's Nikkei reversed earlier gains to be off 0.2 percent. Australia's resources-heavy share market lost 1.1 percent while South Korea also retreated 1 percent.

Nasdaq and S&P 500 stock futures, eased 0.2 percent, dragged lower by Uber, which fell 5.7 percent overnight as the ride-sharing company issued a downbeat forecast after a surprise quarterly loss.

Backsliding yen

The Japanese yen dribbled down to 155.85 per dollar in a fourth day of falls. It rose more than 3 percent last week with market participants pointing to likely intervention by Japanese authorities twice to stem its fast decline.

Japan's top currency diplomat Masato Kanda had said overnight there was no limit for reserves in currency intervention, keeping traders on edge, while minutes from the Bank of Japan's April meeting also showed policymakers had turned overwhelmingly hawkish.

New data however showed that Japan's real wages fell 2.5 percent in March from a year earlier, marking the second year of decline, an argument for policymakers to not hike aggressively.

Analysts at Brown Brothers Harriman said that the dollar-yen rate was now "extremely overvalued" but that it was also "justified" due to the two countries' real long-term interest rate differentials.

"We estimate long-term fundamental equilibrium for USD/JPY at 95.00, implying a 62 percent overvaluation relative to the current spot rate," BBH's Elias Haddad said.

In the Treasuries market, yields were little changed after edging up the day before, with movement likely to be muted ahead of the US inflation report next week. Two-year yields held at 4.8511 percent, while the 10-year yield was at 4.5062 percent, having risen 3 basis points overnight to 4.4920 percent.

Among the main commodities, oil prices nudged higher having bounced off two-month lows the previous session. Brent futures rose 0.4 percent to $83.91 a barrel, while US crude gained 0.5 percent to $79.40 a barrel.

Gold prices were 0.3 percent higher at $2,316.23 per ounce.