May 1 (Reuters) - A look at the day ahead in European

and global markets from Wayne Cole.

Another day when investors in Asia feel slightly foolish for

thinking things in the world were going badly, only for the U.S.

to come in and buy stocks like drunken sailors. What do surging

oil costs matter when tech earnings are so very, very bright.

Even old-economy Caterpillar ( CAT ) got into the AI act as

data center demand for its power equipment helped it blow past

Street forecasts and added almost 10% to its share value.

Apple ( AAPL ) also beat estimates, though not by as much as

in the past, leading analysts to call it a "solid" result. Which

may be why its shares are up just 1.9% after hours.

Now, momentum is undoubtedly a powerful force in markets.

Why is it going up? Because people are buying it. Why are they

buying it? Because it's going up. But, as analysts at Goldman

Sachs say, this is straying beyond momentum and into mania.

They note the recent rally on Wall Street has been one of

the narrowest on record, reflecting the fact that earnings

upgrades are also very narrow, driven almost entirely by

semiconductors, IT and communications.

And it requires investors to ignore the impact of the worst

shock to oil markets on record. Brent has come off its $126.41

peak, but that's mainly because the June contract rolled over

into July. The latter's up around 1% to above $111.00 and there

is no sign of the Strait of Hormuz opening anytime soon, with

Iran and the U.S. seemingly content to just exchange verbal

threats.

As supplies of petrol, diesel, jet fuel, bunker fuel,

fertilisers and so on, get ever shorter, prices will have to

rise to force demand down into balance.

Policymakers know this all too well, which is why four major

central banks this week warned of inflation risks ahead. The ECB

and BoE both sounded like rates could rise as early as June,

while the FOMC is in no mood for rate cuts no matter what Kevin

Warsh - and his boss - might desire.

Incidentally, high oil prices also make it harder for Japan

to succeed in its latest bout of currency intervention, given

the country's trade deficit is going to explode in coming

months.

While MOF/BOJ selling did initially manage to get the dollar

down five big figures to 155.50, it's now above 157.00 as the

market tests Tokyo's determination. Defending 160.00 is likely

going to involve dumping a lot more dollars, and what will the

U.S. Treasury and Trump think of that?

Key developments that could influence markets on Friday:

- Bank of England Chief Economist Huw Pill gives a

presentation on the central bank's latest interest rate decision

- ISM manufacturing survey for April

(By Wayne Cole; Editing by Muralikumar Anantharaman)