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

Dolan

With markets already cheering the Federal Reserve's restated

consensus on three interest rate cuts later this year, the Swiss

National Bank added spice on Thursday with a surprise rate cut

that sets central bank easing speculation alight again.

With bets on the first rate cuts from major central banks

mostly settling on June or July, the SNB jumped the gun with its

first rate reduction in nine years - cutting its main policy

rate by a quarter point to 1.5% as it slashed inflation

forecasts.

The Swiss franc swooned more than 1% to a four-month

low against the dollar, lifting Swiss stock benchmarks more than

1% to boot.

And with UK inflation also undercutting forecasts this week,

the Bank of England's decision later on Thursday will now be

watched closely for more dovish signals from policymakers.

Only Norway's central bank dampened the party somewhat by

indicating it was in no mind to ease until the autumn.

But led by the Fed's benign take late on Wednesday, the

evolving central bank story lit a fire under stock and bond

markets once more.

MSCI's all-country stock index - up 7.5% for

the year to date - raced to new record highs on Thursday after

both the S&P500 and the Nasdaq set new closing

records late on Wednesday.

Asian bourses surged through the night, with Japan's Nikkei

, South Korea's Kospi and Taiwan's benchmark

all gaining more than 2%, and Europe's leading indexes

jumped more than 1% on Thursday too.

U.S. stock futures were higher again ahead of Thursday's

bell.

Bonds were buoyed too - with 2-year U.S. Treasury yields now

down almost 20 basis points from Monday's peaks to 4.57%.

Much of the rush of blood is based on relief that Fed

policymakers, who set out their quarterly projections for rates

and the economy again on Wednesday, had not dialed back

December's forecasts for 75bps of rate cuts this year.

The median of officials' "dots" on expected policy rates for

this year came in unchanged at 4.6% - compared to the current

setting of 5.25-5.50% - and they also have their favored PCE

inflation gauge back to its 2% target next year.

But in a slightly more cautious signal - perhaps reflecting

greater confidence in the economy's growth potential - the

median dot for next year climbed to 3.9% from 3.6% and for the

first time since before the pandemic policymakers nudged up

their long-run equilibrium rate to 2.6% from 2.5%.

Speaking of stickier U.S. inflation reports this year that

had unnerved markets somewhat, Fed chair Jerome Powell said they

"haven't really changed the overall story, which is that of

inflation moving down gradually on a sometimes bumpy road to

2%."

All of which has futures markets upping the chances for a

first Fed cut as soon as June to some 80% and they increased the

amount of easing seen for the whole year by 10bps to 85bps.

The shifting central bank sands made for a slightly

confusing picture in currency markets.

The dollar's index initially skidded lower on the Fed

decision overnight but the Swiss move and the possibility of

other central banks beating the Fed to the punch saw it rebound

sharply on Thursday.

Sterling held the line ahead of the BOE decision, but

the euro fell back.

Despite better than forecast March business readings from

the euro zone, the overall picture there is still one of

contracting activity this month.

The PMI survey index came within a whisker of returning to

growth in March, outperforming expectations.

And the yen continued to stay weak above 151 per

dollar after its early week drop on the contrary Bank of Japan

decision to lift its policy rates out of negative territory for

the first time in eight years.

In company news, shares in memory chip maker Micron

Technology ( MU ) shot up 16% overnight after it tapped a surge

in artificial intelligence adoption to forecast third-quarter

revenue above estimates and post a surprise quarterly profit.

Elsewhere, there was one eye on the background budget

standoff in Washington. A fractured U.S. Congress struggled

behind the scenes on Wednesday to produce a massive spending

bill to fund defense, homeland security and other programs that

lawmakers must pass before the weekend to avert a partial

government shutdown.

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

on Wednesday:

* Policy decisions from Bank of England, Norges Bank, Banco de

Mexico and Central Bank of Turkey

* Flash March business surveys from United States, Europe and

around the world

* US weekly jobless claims, Philadelphia Fed's March business

survey

* Federal Reserve Vice Chair for Supervision Michael Barr speaks

* US Treasury auctions 10-year inflation-protected Treasuries,

four-week bills

* U.S. corporate earnings: Nike, FedEx, Lululemon, Accenture,

Factset, Darden Restaurants

(By Mike Dolan, editing by Nick Macfie

[email protected])