LONDON, May 2 (Reuters) - World markets showed relief on Thursday after the Federal Reserve shot down talk of more interest rate hikes, while the yen backpeddled after another suspected bout of FX intervention and Apple earnings were looming large for Wall Street.
Europe saw a sluggish morning as much of the region returned from a day off, but after a choppy few weeks for equity markets most dealers were just happy the Fed meeting the previous day hadn't set off any major fireworks.
The U.S. central bank's rate setters unanimously decided to leave rates in the 5.25% to 5.5% range they have been in since July, but it was the post-meeting press conference that proved most interesting.
While Fed chair Jerome Powell indicated that stubbornly high inflation would see a long-expected U.S. rate cut pushed back, he refused to entertain talk that rates might actually need to go up again.
He also said the Fed would scale back the pace of quantitative tightening or 'QT' of its balance sheet starting on June 1, allowing only $25 billion in Treasury bonds to run off each month versus the current $60 billion.
Morgan Stanley FX strategist James Lord said Powell had trod an appropriately fine line, not sounding complacent on inflation, but equally not panicking about the possible need to hike rates again.
"He did enough to provide a soothing balm over markets for the time being," Lord said. "But whether that's enough to be sustainable, will depend on how the data evolves."
The spotlight was still on the Japanese yen too and its precarious level in the currency markets. /FRX
Shortly after Powell had finished telling reporters the Fed may have to leave rates elevated, the Japanese currency surged against the dollar in its second suspected intervention-fuelled leap of the week.
It traded as strong as 153 to the dollar before sliding back to around 156 in Asia and then moved to around 155.5 in Europe.
Kyle Rodda, senior financial market analyst at Capital.com in Melbourne, said it had been another "sneak attack" by Japan's authorities "looking to punish speculators and send a warning about shorting the yen".
The main dollar index (.DXY), opens new tab, which measures the U.S. currency against the yen, euro, sterling and three other major peers, was flat in early U.S. trading, following a 0.6% retreat on Wednesday from near six-month highs.
European dealers had nudged the euro up as much as 0.1% to $1.0727 despite data showing a deepening downturn in euro zone manufacturing activity.
There was some brighter news in the German data and from Paris where the OECD upgraded its global growth forecast to 3.1% for this year and 3.2% next year, although that was largely thanks to stronger-looking U.S. and Chinese economies rather than Europe or Japan.
APPLE EYED
Wall Street's S&P 500 futures were up 0.7%, pointing to it recouping the ground it lost late on Wednesday.
Most of the focus there will be on Apple's (AAPL.O), opens new tab results after the close, with analysts bracing for a big drop in sales and waiting to hear how the company plans to embed AI into its iPhones.
Long considered a must-own stock on Wall Street, Apple shares have underperformed other Big Tech companies in recent months, falling more than 10% this year as fears mount about its slow roll-out of artificial intelligence services and as a resurgent Huawei [RIC:RIC:HWT.UL] takes market share in China.
Analysts on average see iPhone sales, which account for about half of Apple's revenue, falling 10.4% in the first three months of 2024, according to LSEG. That drop would be the steepest in more than three years.
Online fitness firm Peloton (PTON.O), opens new tab looked to have had a spoke jammed in its virtual exercise bike wheel too. It announced its CEO was stepping down and it was slashing 15% of its staff.
Oil was licking its wounds after a heavy fall triggered by a surprise jump in U.S. stockpiles. Brent crude futures were up roughly 80 cents a barrel to $84.18 in Europe, after touching a seven-week low of $83.29. U.S. crude was at $79.52 a barrel
The Fed's signals were still being digested by bond markets, which were also starting to refocus on key U.S. non-farm payrolls data on Friday.
Ten-year Treasury yields rose 2.3 basis points (bps) to 4.611% in Tokyo and Europe, having fallen 9.3 bps in New York on Thursday. Two-year yields , which fell more than 10 bps in New York overnight, rose 1 bp to 4.9497%.
After pricing in as many as six rate cuts for 2024 earlier this year, markets now price only one, in December.
Outside of oil, trade in other commodities was subdued by holidays in China, where markets are closed for the rest of the week. Gold rose overnight and was last holding at $2,314.44.
A washout in rate-sensitive crypto markets had sent bitcoin below $58,000 on Wednesday as the view took root among some investors ahead of the Fed post-meeting statement that the U.S. central bank may not cut rates at all this year. It eased to allow the e-cash posterchild to claw back to $58,285 on Thursday.
Standard Chartered analyst Geoff Kendrick said Wednesday had been "the worst ever day" for the new flock of bitcoin ETFs.
All nine new ETFs plus Grayscale had seen outflows, he said, which was the first time that has happened. There was also the first daily outflow from Blackrock's ETF at $37 million, while the combined total outflow on the day was $564 million.
Reporting by Marc Jones; Editing by Susan Fenton
