World markets have showed relief after the US Federal Reserve shot down talk of more interest rate hikes, while the yen back-pedalled after another suspected bout of intervention and Apple earnings loomed large for Wall Street.
Europe had a sluggish morning on Thursday 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 had not set off any major fireworks.
The US central bank’s rate setters unanimously decided to leave rates in the 5.25 per cent to 5.5 per cent range they have been in since July, but it was the post-meeting news conference that proved most interesting.
While Fed chair Jerome Powell indicated that stubbornly high inflation would see a long-expected US 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 of its balance sheet starting on June 1, allowing only $US25 billion in Treasury bonds to run off each month versus the current $US60 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.
The spotlight was still on the Japanese yen, too, and its precarious level in the currency markets.
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 about 156 in Asia and then moved to about 155.5 in Europe.
The main dollar index, which measures the US currency against the yen, euro, sterling and three other major peers, was flat in early US trading, following a 0.6 per cent retreat on Wednesday from near six-month highs.
European dealers had nudged the euro up as much as 0.1 per cent to $US1.0727 despite data showing a deepening downturn in euro zone manufacturing activity.
Wall Street’s S&P 500 futures were up 0.7 per cent, pointing to it recouping the ground it lost late on Wednesday.
Most of the focus there will be on Apple’s 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.
Apple shares have underperformed other Big Tech companies in recent months, falling more than 10 per cent in 2024.
Oil was licking its wounds after a heavy fall triggered by a surprise jump in US stockpiles.
Brent crude futures were up roughly 80 cents a barrel to $US84.18 in Europe after touching a seven-week low of $US83.29. US crude was at $US79.52 a barrel.
The Fed’s signals were still being digested by bond markets, which were also starting to refocus on key US non-farm payrolls data on Friday.
Ten-year Treasury yields rose 2.3 basis points to 4.611 per cent 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 per cent.
Gold rose overnight and was last holding at $US2,314.44.