Market Commentary: Thursday 2nd May

The Fed have opted to hold interest rates at their 23-year high and have announced plans to slow down their quantitative tightening programme. The Federal Open Market Committee said that there had been “a lack of further progress” towards its 2% inflation target in recent months and rate cuts would be delayed until the second half of this year at the earliest. Jay Powell commented: “It is likely to take longer for us to gain confidence that we are on a sustainable path down to 2% inflation”, adding “I don’t know how long it will take,” and “I think it’s unlikely that the next policy rate move will be a hike”. US equities closed lower, reversing a mid-afternoon rally that took place during Fed's post-meeting press conference. The S&P 500 and Nasdaq Composite each ended the day 0.3% lower. Treasuries remained stronger on the day as yields fell, the yield on the two-year note was down at 4.96%.

Overnight, the Japanese yen strengthened by 2% against the dollar in late afternoon trading in New York, which analysts suspect may be an indication of intervention by Japanese officials to support the currency. The yen appreciated to ¥153 from ¥157.6 in a matter of minutes, the currency has now settled towards ¥155. The move was not seen in other parts of the FX market, suggesting an idiosyncratic driver. In Asian equity markets, Hong Kong tech stocks have made large gains this morning, the Hang Seng index rose 2.4% and the Hang Seng Tech index gained 4.2%.

In Oil markets, prices tanked after US crude inventories climbed to their highest levels since last June, reinitiating fears of a looming supply excess. Brent crude, dropped 3.1% to $83.63 per barrel, while WTI fell 3.5% to $79.09 per barrel. The Energy Information Administration said US crude inventories had climbed 7.3mn barrels to 460.9mn barrels last, economists had expected a 1.1mn barrel drawdown. These moves weighed heavily on London’s FTSE 100, with the index dropping 0.3%, BP falling 2.1% and Shell dropping 1.5%, most other markets in Europe were closed for Labour Day.

Today we have European manufacturing PMI this morning, followed by the weekly jobless claims figures, trade balance for March, and March factory orders in the US session, and Apple's earning later in the day.

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