【TrueZhuo Finance】Fed's hawkish signals; Trump rejects Iran's proposal
The Federal Reserve held steady, but deepening internal divisions have fueled expectations for a rate hike next year. Powell said he will remain on the board after stepping down as chair. Both the European Central Bank and the Bank of England are expected to keep rates unchanged on Thursday. Trump rejected Iran's proposal, vowing to maintain the maritime blockade. The yen fell below the 160 mark against the US dollar. Meta plunged after its earnings report, while Alphabet and Qualcomm surged.
Overnight Highlights
Amid surging crude oil prices, the Fed's interest rate decision, and post-market earnings from major companies, US stock markets were volatile, with the three major indices closing mixed. In the bond market, US Treasury yields across all maturities rose across the board to a one-month high, driven by the Fed's signals of increasing inflation concerns and the war in the Middle East pushing up oil prices with no short-term resolution in sight. In the currency market, the Fed's steady stance combined with safe-haven sentiment triggered by ongoing tensions in the Middle East drove the US dollar higher against all major non-US currencies. In the oil market, the deadlock in US-Iran talks heightened market fears of a prolonged disruption to Middle East energy supplies, causing international oil prices to surge over 6% to multi-week highs, with Brent breaking through the $120 mark after hours. Finally, in the metals market, gold prices remained under pressure, extending their decline to a near one-month low, as the Fed held rates as expected and traders worried about war-induced inflation.
International News
The Federal Reserve held steady but voting results showed deepening divisions within the central bank, with three members opposing the inclusion of language hinting at eventual rate cuts in the statement. Traders raised their expectations for a rate hike next year, with the 2-year Treasury yield posting its biggest gain on a Fed decision day since 2022.
Powell said he will remain on the board after stepping down as chair next month but will "keep a low profile." The Senate Banking Committee voted to advance Wash's nomination for Fed chair, and he is expected to pass a Senate vote before Powell steps down.
Trump rejected Iran's peace proposal, vowing to maintain the maritime blockade until a nuclear deal is reached with Tehran. It is reported that the US military has prepared a short-term, powerful military strike plan to further pressure Iran. Iran said plans for revenge for the martyred leader remain valid, and a new round of war would be disastrous for the US.
US core capital goods orders in March saw their biggest increase in six years, while new home starts unexpectedly surged to the highest level since December 2024.
The European Central Bank will announce its rate decision on Thursday. Germany's April CPI year-on-year increase was lower than expected, which may not be enough to push the ECB to raise rates this month. The Bank of England is also expected to hold steady, likely reiterating that it is "ready to act."
The Bank of Canada held steady, with its governor saying that if the economy and inflation evolve as expected, the magnitude of interest rate adjustments could be smaller.
Google parent Alphabet (GOOGL.US) and Meta (META.US) both reported quarterly revenue and profit exceeding expectations. Strong cloud performance drove Alphabet's stock higher after hours, but Meta's stock plunged after raising its full-year spending forecast, raising concerns about the return on massive AI investments.
Qualcomm (QCOM.US) expects to secure a large data center customer this year, and Chinese smartphone demand is expected to recover. Its stock surged after hours.
Amazon (AMZN.US) first-quarter data center expansion spending exceeded expectations, driving cloud revenue to its fastest growth in over three years. The stock rose after hours.
Microsoft (MSFT.US) quarterly cloud revenue growth slightly exceeded analyst expectations, but investors worry the company is not fully capitalizing on market demand for AI services.
Anthropic is reportedly considering financing offers valuing it at over $900 billion, according to sources.
Apple (AAPL.US) plans to add a Siri camera mode and upgrade visual AI in the upcoming iOS 27.
Greater China News
China will release its April PMI data on Thursday. Affected by seasonal factors and supply chain disruptions from the Middle East war, manufacturing PMI is expected to decline but is still likely to remain in expansion territory, while non-manufacturing PMI is expected to shift from expansion to contraction.
China warned the EU that it will take countermeasures if Huawei equipment is banned across Europe.
First-quarter profit growth accelerated at major Chinese state-owned banks like ICBC and CCB. Analysts believe the banking sector may be nearing a turnaround.
Cambricon's first-quarter revenue more than doubled, thanks to strong demand for AI chips in the domestic Chinese market.
Vanke recorded another loss in the first quarter due to declining housing deliveries dragging down overall revenue, though it narrowed slightly compared to the same period last year. A subsidiary plans to transfer approximately 99.4% of its stake in Huanshan Group for 3.27 billion yuan.
BHP is reportedly in a long-term contract agreement with China Mineral Resources Group, increasing the weighting of the domestic benchmark price denominated in yuan, indicating significant progress in China's efforts to enhance yuan pricing influence.
European countries including Germany and the Czech Republic reportedly rejected a request earlier this month by Taiwan leader Lai Ching-te to transit through their territories en route to Africa.
After meeting with Chinese leaders, Australia's foreign minister said stable trade requires reliable fuel supply support.
Commodities & Forex Markets
The Bloomberg Dollar Index rose for a second day. The yen fell below the 160 mark, hitting its lowest level since July 2024, increasing the risk of intervention by Japanese authorities.
Brent crude approached $120, with no end in sight to the US-Iran war. US crude exports last week historically exceeded 6 million barrels per day, and overall oil and fuel exports also hit a record high. Gold fell for a third day as the Iran war intensified inflation risks.
Earnings & Economic Data Focus
US Initial Jobless Claims for the week ending April 25 (in thousands) (Previous: 214, Forecast: 215)
US Federal Reserve Interest Rate Decision (Upper Bound) for the period ending April 29 (Previous: 3.75%, Forecast: 3.75%)
Source: Golden Horse Capital Management (Hong Kong) Limited
Author: Terry Chow
Proofreader: Gloria Guo
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