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World stocks steady on Fed relief, bonds benefit

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Yen settles back after more suspected intervention

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OECD upgrades global growth outlook as US outperforms

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Bitcoin steadies after washout

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Graphic: World FX rates http://tmsnrt.rs/2egbfVh

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By Marc Jones

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 ( AAPL ) 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.

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, 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 ) 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 ( AAPL )

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 takes market share in China.

Analysts on average see iPhone sales, which account for

about half of Apple's ( AAPL ) 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 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.