By Jamie McGeever
ORLANDO, Florida, April 29 (Reuters) – Oil surged toward $120 a barrel on Wednesday on deepening supply fears, while U.S. bond yields jumped and stocks stumbled after the Federal Reserve’s decision to keep interest rates on hold masked the most divided vote since 1992.
In my column today, I look at the challenges Japan faces from the oil shock, rising bond yields and a weak currency – an unenviable trifecta with no obvious policy solution.
If you have more time to read, here are a few articles I recommend to help you make sense of what happened in markets today.
1. Fed holds rates steady amid sharp divide over policy easing bias
2. Fed chief nominee Warsh clears key hurdle in Senate confirmation process
3. Traders see the Fed on hold for now, and a rising chance of a rate hike
4. Trump met with oil firms on possible months-long extension of Iran blockade
5. Transatlantic rate convergence may be a mirage: Mike Dolan
Today’s Key Market Moves
• STOCKS: Asia higher, China +2%; Europe down – Stoxx 600 -0.6% to 3-week low, FTSE 100 -1%. Wall Street mostly lower too, Dow -0.6%, S&P 500 and Nasdaq essentially flat.
• SECTORS/SHARES: Seven of the S&P 500 sectors fall, four rise. Energy the biggest mover, +2.4%. In after-hours trade, Meta -5%, Alphabet +5%.
• FX: Dollar rises. Dollar/yen above 160.00, market on high-intervention alert.
• BONDS: U.S. 10-year yield above 4.40%, highest in a month. 10y euro zone yield highest close since 2011, 10y gilt yield further above 5% for highest close since 2008.
• COMMODITIES/METALS: Oil surges 7%, Brent has highest close in four years just under $120/bbl. Gold -1%, silver -2%.
Today’s Talking Points
* Powell to the people
“Anyway, thank you very much everyone. I won’t see you next time.” And so Jerome Powell bade farewell to reporters at the end of his last press conference as Fed chair, after the Fed kept interest rates unchanged on Wednesday as expected.
As Powell’s 8-year tenure as Fed chair draws to a close – he will stay on as governor for a while – his successor Kevin Warsh cleared a key Senate hurdle on Wednesday and is expected to be confirmed in a full Senate vote the week of May 11. A new era awaits for the Fed. And the world.
* Hyperscalers report
Four of the ‘Magnificent Seven’ U.S. tech giants reported after-the-bell earnings on Wednesday for the Jan-March quarter – Alphabet, Amazon, Meta and Microsoft. Combined revenue of around $287 billion (including just Amazon’s cloud computing revenue).
The collective outlook, particularly on the AI revolution and capex binge driving it, is what will guide sentiment and market prices in the coming weeks. Initial reaction suggests a mixed bag – Google shares jump 5%, Meta tanks 5%, Amazon and Microsoft dip a bit in choppy after-hours trade.
* Dollar/yen crosses 160
The yen has weakened below 160.00 per dollar, crossing a key level many analysts reckon could prompt Tokyo to wade into the market and buy yen. So far, the only intervention has been verbal, and authorities may judge the latest slide to be slow enough and in line with ‘fundamentals’.
But Tokyo is in a bind. The yen is near a three-decade low against the dollar in nominal terms, and record low in ‘REER’ terms. Financial conditions are loose – the Nikkei is at a record high – but JGB yields are the highest in decades. Navigating these choppy waters will be incredibly difficult.
What could move markets tomorrow?
• Developments in the Middle East
• Energy market moves
• Taiwan GDP (Q1, prelim)
• Japan consumer confidence (April)
• Japan retail sales (March)
• Japan industrial orders (March)
• China ‘official’ PMI (April)
• Bank of England rate decision
• European Central Bank rate decision
• Euro zone GDP (Q1, flash)
• Euro zone inflation (April, flash)
• Germany retail sales (March)
• Mexico GDP (Q1, flash)
• U.S. GDP (Q1)
• U.S. weekly jobless claims
• U.S. PCE inflation (March)
• U.S. Chicago PMI (April)
• U.S. earnings include Apple, Eli Lilly, Mastercard, Caterpillar
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Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.
(Reporting by Jamie McGeever; Editing by Bill Berkrot)
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