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World stocks groggy due to global growth worries

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Wall Street expected to rise after strong tech earnings

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Yen slides as Bank of Japan slashes economic forecasts

By Marc Jones

LONDON, May 1 (Reuters) - World stocks were groggy on

Thursday after a contraction in the U.S. economy, although Wall

Street was pointing higher and the dollar sprang up as a Bank of

Japan growth forecast cut blamed on U.S. trade tariffs yanked

the yen lower.

May Day public holidays around the world, including much of

Europe, meant trading was thin but that didn't make it any less

interesting.

Despite the Q1 U.S. GDP drop, Wall Street had made a sprint

finish on Wednesday, while strong after-the-bell earnings from

Microsoft ( MSFT ) and Meta doused some of recent

negativity around "Magnificent Seven" trades.

Japan's tech-heavy Nikkei followed it with a jump in

Asia although with London's FTSE stalled in Europe this

wasn't enough to keep MSCI's 47-country world stock index

out of the red.

U.S. futures were pointing higher again though for when

trading resumes there later. Gold, which has soared as investors

have run for cover this year, also drooped to its lowest level

in two weeks as some chinks of light in the global trade war

gave traders another reason to lock in some profit.

Saxo Bank's John Hardy said the moves went right to the

heart of recent questions about whether U.S. President Donald

Trump's radical shake-up of the post-World War Two global order

would end so-called "U.S. exceptionalism" in markets.

"Yesterday you had Meta and Microsoft ( MSFT ) landing five gold-star

earnings, so it just squeezes that recent narrative and the

consensus to sell the dollar," Hardy said.

Thursday's move by the Bank of Japan to slash its forecasts

and the resulting drop in the yen added to that. "Gold is off

today too, so all these things are linked," he said.

Most of Europe's bond markets were closed for the holiday.

But UK 10-year Gilt yields - a proxy for borrowing costs -

ticked lower and those on U.S. Treasuries were back down at

4.15%, with analysts now pricing four U.S. interest rate cuts

over the remainder of the year.

U.S. ISM manufacturing data was due later. That was also

expected to come in weak given the trade war, while Friday has

the monthly round of closely watched non-farm payrolls data.

In the commodities markets, oil prices steadied at $61 a

barrel after tumbling on Wednesday on the U.S. GDP drop and

signs that Saudi Arabia, the world's biggest crude exporter,

wants to increase its output this year.

"It will be interesting to see what happens if we continue

to get a drumbeat of negative data," Saxo Bank's Hardy said.