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

By Marc Jones

LONDON, May 2 (Reuters) - A sense of relief percolated

through world markets on Thursday after the Federal Reserve shot

down talk of pivoting back to interest rate hikes, while the yen

backtracked after another suspected bout of FX intervention.

Europe's big bourses made a sluggish start as much of

the region returned from a day off, but after a choppy few weeks

dealers were just happy the Fed hadn't inflicted any major

damage, and that borrowing costs were ticking down again.

The Fed's rate setters unanimously decided to leave U.S.

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.

BCA Research bond market strategist Ryan Swift said the

bottom line was that barring any surprise rate hikes, "October's

cyclical peak in (U.S. Treasury) yields will hold" and

"eventually break out to the downside ... but only once the

labor market data meaningfully deteriorate".

The spotlight was still on the Japanese yen's precarious

level in the currency markets too.

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".

"It caught markets off guard because, obviously, it happened

in the U.S. session and seemed to be timed with the FOMC (Fed

meeting and press conference) to take advantage of a weaker

dollar".

The main dollar index, which measures the currency

against the yen, euro, sterling and three other major peers, was

down 0.1% in Europe, following a 0.6% retreat on Wednesday from

near six-month highs.

Europe's dealers had nudged the euro up 0.1% in the other

direction 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.

APPLE EYED

Wall Street's S&P 500 futures were up 0.6%, pointing

to it recouping the ground it lost late on Wednesday.

All the focus there will be on Apple's ( AAPL ) results,

with analysts bracing for a big drop in sales and waiting to

hear how the company plans to embed AI into its iPhones.

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.

(Additional reporting by Tom Westbrook in Sydney; Editing by

Mark Potter

)