(Updates with close of European markets)

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Trump and Xi strike deal over rare earths and tariffs

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Fed's Powell hints 25 bps cut may be last of 2025

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ECB keeps rates unchanged

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Megacaps Microsoft and Meta decline, impacting global

shares

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Dollar strengthens against yen after BOJ policy

announcement

By Chuck Mikolajczak

NEW YORK, Oct 30 (Reuters) - Global shares retreated on

Thursday and were poised for their biggest daily decline in

three weeks, bogged down by megacaps Microsoft ( MSFT ) and Meta

Platforms ( META ), while the dollar rose against the yen on policy news

from the Federal Reserve and Bank of Japan.

Markets were digesting comments from Fed Chair Jerome Powell,

who dampened expectations that the U.S. central bank will cut

interest rates at its December meeting after easing by 25 basis

points on Wednesday.

Market reaction was muted after U.S. President Donald Trump

said he had struck a deal with President Xi Jinping to trim

tariffs on China in exchange for Beijing cracking down on the

illicit fentanyl trade, resuming U.S. soybean purchases and

keeping rare earths exports flowing, which markets had been

anticipating in recent days.

On Wall Street, the S&P 500 was lower, as Meta Platforms ( META )

, one of the "Magnificent Seven" group of megacap

stocks, plunged nearly 11% after reporting quarterly results and

forecast larger capital costs after the close on Wednesday.

Bloomberg reported on Thursday that the Facebook and Instagram

parent was targeting at least $25 billion in a bond sale.

Also weighing on equities was a 3.2% decline in Microsoft ( MSFT )

following its quarterly earnings.

Those declines were offset somewhat by a 3.1% climb in Google

parent Alphabet as its earnings beat expectations due

in part to strong artificial intelligence demand.

"If the market is being a little bit more discerning, company by

company based on their actual results as opposed to these MAG7

or AI-related stocks moving all in sync, that could be deemed

somewhat of a positive," said Ron Albahary, chief investment

officer at LNW in Philadelphia.

"Investors are starting to at least be more sensitized to,

all right, where is the line of sight to return on investment?

And the Meta reaction, despite the beat, could be an early sign

that narrative is going to be challenged."

Fellow heavyweights Apple ( AAPL ) and Amazon ( AMZN ) are

scheduled to report earnings after the U.S. market close on

Thursday.

Markets are pricing in a 72.8% chance of a 25 basis point cut at

the Fed's December meeting, down from more than 90% a week ago,

according to CME's FedWatch Tool.

The Dow Jones Industrial Average rose 141.30 points, or

0.30%, to 47,773.30, the S&P 500 fell 27.02 points, or

0.39%, to 6,863.39 and the Nasdaq Composite dropped

213.42 points, or 0.89%, to 23,745.05.

MSCI's gauge of stocks across the globe lost

5.10 points, or 0.50%, to 1,009.32 and was on track for its

largest daily percentage drop since October 10, while the

pan-European STOXX 600 index closed down 0.1%.

The European Central Bank (ECB) kept interest rates unchanged at

2% for the third meeting in a row and offered no hints about

future moves as it enjoys a rare period of low inflation and

steady growth, despite trade turbulence.

In currencies, the dollar index, which measures the

greenback against a basket of currencies, advanced 0.39% to

99.52, with the euro down 0.34% at $1.1566. Sterling

weakened 0.31% to $1.3154.

The dollar strengthened 0.92% to 154.11 yen after the

Bank of Japan (BOJ) kept interest rates steady. Investors had

expected a more hawkish tone from Governor Kazuo Ueda, even as

he sent the strongest signal yet that a rate hike was possible

as soon as December.

The yield on benchmark U.S. 10-year notes rose

3.5 basis points (bps) to 4.093% after jumping 7.5 bps on

Wednesday following Powell's comments, its biggest daily climb

since July 11.

The 2-year note yield, which typically moves in

step with rate expectations for the Fed, advanced 2.4 basis

points to 3.61% after a 9.2 bp increase on Wednesday, its

biggest since July 3.

U.S. crude rose 0.26% to $60.64 a barrel and Brent

advanced to $65.03 per barrel, up 0.17% on the day as

investors gauged the U.S.-China trade deal.