Morning Wrap: ASX 200 to fall, Fed Chair Powell says the next move is "unlikely" to be a hike

The money line from this morning's Federal Reserve post-meeting press conference, one where it held rates steady unanimously, is this:

So far this year, the data have not given us that greater confidence in particular. It is likely that gaining such greater confidence will take longer than previously expected.

Fed Chair Jerome Powell also flat out said that he thinks it's "unlikely" the next rate move will be a hike. That gave stock and bond markets a chance for a relief rally. But as we've also learned in recent times, talking about rate cuts too early and when you're not fully ready to pivot does have its consequences.

Let's dive in.

S&P 500 SESSION CHART

Spot when Chairman Powell started speaking. (Source: TradingView)

OVERNIGHT MARKETS

• Fed’s Powell says interest rates high enough to slow inflation, calls rate hike ‘unlikely’ (More on this below)

• US stocks close mostly lower after Fed cites lack of progress on inflation, Dow up 0.2%, S&P 500 and Nasdaq down 0.3% each

• Fed Chair Powell details two potential economic paths that could lead to rate cuts

• Cantor Fitzgerald’s Howard Lutnick says Fed will ‘show off’ with one rate cut in September

• So far... 77% of S&P 500 companies that have reported earnings have beaten expectations. This is in-line with the 5-year average and above the 10-year average of 74%.

• UK’s FTSE 100 ends session lower with most Europe markets closed

• Gold prices turn slightly higher after Federal Reserve holds interest rates steady

• Oil falls for a third day as U.S. crude inventories swell

• Yen Surges 3% in minutes as traders speculate about intervention

INTERNATIONAL STOCKS

• Qualcomm’s stock rises after earnings show traction with on-device AI

• Etsy shares plunge on decline in gross merchandise sales

• DoorDash loses more than expected, but sales top expectations

• Zillow forecasts slower second quarter, amid caution among first-time buyers and agents

• Google lays off hundreds of ‘Core’ employees, moves some positions to India and Mexico

ECONOMY

• US private payrolls increased by 192,000 in April, more than expected for resilient labour market

• China's Xi resistant to deeper economic reform as pressure piles on for Beijing to find new growth model

• US consumers becoming more cautious around spending according to Citi CEO

• Japan April manufacturing PMI revised lower, remains in contraction

• PMIs show UK factories slip back into downturn on rising cost pressures

• Australia's April PMI improves for third consecutive month

• South Korea exports boosted by chip surge, autos rise to record high

FEDERAL RESERVE MEETING

• The benchmark Fed Funds rate range of 5.25% to 5.5% has been left unchanged in a unanimous decision. It's been there since July 2023

• The press conference was far less hawkish than what markets were fearing and bracing for.

• Powell: "I think it’s unlikely that the next policy rate move will be a hike."

• But he also said that there needs to be more persuasive evidence before making the first cut - or as he put it:

• "3% can't be in a sentence with satisfied" (The Fed's inflation goal is a hard 2%)

• Adding to the "higher for longer" thesis was this line: "If higher inflation does persist, we can maintain the current level of restriction for as long as needed....given the strength in the labour market and progress on inflation so far, it's appropriate to allow restrictive policy further time to work and let the data and the evolving outlook guide us."

• And finally, on political influence: "We're always going to do what we think the right thing for the economy is."

Companies trading ex-dividend: 

• Thu 2 May: WAM Strategic Value (WAR) – $0.022, Waterco (WAT) – $0.07, Acorn Capital (ACQ) – $0.028, Bank of Queensland (BOQ) – $0.17

• Fri 3 May: None

Economic calendar (AEST):

• 9:50am – JPY – Monetary policy meeting minutes

• 11:30am – AUD – Building approvals, good trade balance

• From 5:30pm – EUR – Italian, German, French manufacturing PMIs

• 10:30pm – USD – Unemployment claims, non-farm productivity, trade balance

This Morning Wrap was written by Hans Lee and Chris Conway.