A look at the day ahead in U.S. and global markets from Mike

Dolan

Anxious bond traders seem to have taken solace from the Federal

Reserve's surprisingly sharp brake on its "quantitative

tightening" process on Wednesday, while the yen capitalized on

an easier dollar after what seemed like the second bout of

Japanese intervention this week.

It may be thin gruel after a predictably hawkish Fed meeting

that showed little inclination toward interest rate cuts any

time soon, but the widely predicted Fed slowing of its balance

sheet runoff was bigger than many had bargained for and may nod

to its sensitivity to bond market angst and banking liquidity.

The U.S. central bank said it would scale back the pace of

QT starting on June 1, allowing only $25 billion in Treasury

bonds to run off each month versus the current $60 billion.

Helped additionally by Fed chair Jerome Powell batting away

any idea that further rate rises were on the table again,

Treasury yields have fallen back from the year's highs.

Futures markets nudged up the full-year Fed easing

expectations to 35 basis points, though a first cut is still not

fully priced until after November's election.

Two-year Treasury yields recoiled from 5% -

hovering just under 4.94% on Thursday - and 10-year yields

slipped to 4.60%.

Grappling with a heavy earnings season and some outsize

price drops in artificial intelligence stocks such as Super

Micro Computers and AMD, Wall Street stock indexes have been in

two minds over the Fed reaction - ending in the red on Wednesday

but with futures back up smartly ahead of the bell.

Apple ( AAPL ) tops another blizzard of corporate updates on

Thursday.

The dollar took its cue directly from Treasury yields and

the DXY index turned tail from six-month highs.

And just as it started to fall back, the Bank of Japan

appears to have struck for the second time this week - sparking

a peak-to-trough drop of almost 5 yen, or 3%, on Wednesday.

Much like Monday's $35 billion sale of dollars for yen,

there was no immediate confirmation of the action - but traders

noted the change of tactics from the authorities in selling the

dollar as it was already softening rather than stalling its rise

at the 34-year high just above 160 yen earlier this week.

Bank of Japan data suggested on Thursday indicated that they

spent between $21 billion and $24 billion on Wednesday to pull

the yen low - bringing the total for the week close to $60

billion, the amount it spent during a three-day salvo in late

2022.

But despite the action, the yen continues to widen on the

huge U.S.-Japan interest rate gap and dollar/yen was back above

155 on Thursday - suggesting Tokyo may be in for a protracted

battle that could quickly use up its estimated $155 billion of

dollar deposits.

Atsushi Takeuchi, who headed the Bank of Japan's foreign

exchange division during intervention rounds in 2010-2012, said

Japan would likely keep intervening to prop up the yen until the

risk of speculators triggering a free fall in the currency has

been eliminated.

LABOR MARKET

Back on Wall St, attention will quickly switch from the Fed

meeting to the labor market and the April payrolls report on

Friday.

And on that score, there were some indications on Wednesday

that the jobs market is cooling a bit.

Although private sector payroll creation appeared to stay

strong last month, other data showed U.S. job openings fell to a

three-year low in March and the number of people quitting their

jobs declined - signs of easing labor market conditions that

over time could aid the Fed's fight against inflation.

An ongoing retreat in oil prices back below $80 per barrel

will also help take the edge off bond market nerves.

But global forecasters remain in little doubt about the

fundamental strength of the U.S. economy.

Showing some significant divergence with other major

economies, the OECD's last world outlook said lingering

sluggishness in Europe and Japan was being offset by the United

States, whose growth forecast was hiked to 2.6% this year from a

previous estimate of 2.1%.

In single stock moves in Europe, Danish drugmaker Novo

Nordisk lost 2.5% despite a first-quarter beat and

outlook hike, with analysts pointing to slower underlying growth

and weakness in obesity drug sales.

But Standard Chartered ( SCBFF ) jumped 7% to a six-month

high as the emerging markets-focused lender posted a 5.5% rise

in first-quarter pretax profit that beat estimates.

Key diary items that may provide direction to U.S. markets later

on Thursday:

* U.S. Q1 productivity and unit labor costs, weekly jobless

claims, March international trade balance, March factory goods

orders

* U.S. corporate earnings: Apple ( AAPL ), Amgen, Conocophillips,

Expedia, Moderna, Consolidated Edison, Moody's, Ingersoll Rand,

Motorola Solutions, Southern, Intercontinental Exchange, Linde,

Regeneron Pharmaceuticals, Cigna, Zimmer Biomet, Dominion

Energy, Alliant Energy, Coterra Energy, Stanley Black & Decker,

Xylem, Howmet Aerospace, Vulcan Materials, Pioneer Natural

Resources, WestRock, Borgwarner, Camden Property, Federal

Realty, Digital Realty, Kimco Realty, IQVIA, Teleflex, EOG,

Fortinet, Ameren, DaVita, Parker-Hannifin, Pinnacle West,

Cummins, Regency Centers, Live Nation, AES, Hologic, Illumina,

AMETEK etc

* Bank of Canada governor Tiff Macklem speaks, European Central

Bank chief economist Philip Lane speaks

* OECD Ministerial Council Meeting in Paris, Economic Outlook

released

* French President Emmanuel Macron meets Japan's Prime Minister

Fumio Kishida in Paris

* U.S. Treasury sells 4-week bills

(By Mike Dolan; Editing by Alison Williams

[email protected])