Futures Jump After Overnight Rollercoaster Session As Oil Unexpectedly Tumbles, Yen Soars

Futures erase an overnight slide, and have resumed their ascent trading near all time highs, despite a hawkish Fed statement but stronger Mag7 earnings. The hawkish Fed followed by a less hawkish press conference, plus the news that Powell is staying on seemingly removing a cut, actually have bond yields lower pre-mkt by 2-4bp as the Dollar weakens on what appears to be BOJ intervention which has sent the USDJPY plunging most since 2022. As of 8:00am ET, S&P futures are up 0.4%, erasing a 0.5% drop earlier in the session; Nasdaq futures gain 0.6%: in premarket trading Alphabet is the big gainer from the major tech companies that reported, with Amazon rising too but Meta and Microsoft falling (META -9% AMZN +2.3%, GOOG +6%, and MSFT -1.8%). Semis continue to trade higher as well as Discretionary, Industrials and Materials while Financials, Healthcare and Staples lower as Cyclicals lead Defensives. Energy names are mostly lower after striking rollercoaster in the price of oil. In commodities, energy is weaker, metals are higher led by precious, and Ags are mostly higher. Today’s US economic data calendar slate includes jobless claims, personal income and spending, 1Q employment cost index and first estimate of Q1 GDP (8:30am), April MNI Chicago PMI (9:45am, several minutes earlier for subscribers) and March Leading Index (10am)

In premarket trading, Mag 7 are mixed (NVDA +0.8%, AAPL +0.4%, TSLA +0.08%)

Alphabet (GOOGL) jumps 7% after reporting high demand for its cloud and artificial intelligence offerings, giving investors confidence that its unprecedented investments in AI infrastructure will pay off.
Amazon.com (AMZN) climbs 3% after the e-commerce and cloud-computing company reported first-quarter results that beat expectations on key metrics. Analysts are broadly positive on the report, saying that the acceleration of Amazon Web Services is underway.
Meta Platforms (META) falls 9% after the Facebook parent gave a forecast for capital expenditures that was higher than expected, a sign that investors remain skeptical about AI-related spending in some instances.
Microsoft (MSFT) slips about 2% after the software company reported third-quarter results. Some analysts said the pace of growth in its Azure cloud-computing business may have underwhelmed.
Blue Owl Capital (OWL) gains 4% as fee-related earnings and assets increased as the alternative investment firm leaned on other parts of its business amid souring sentiment toward private credit.
Carvana (CVNA) rises 11% after the company reported revenue for the first quarter that beat the average analyst estimate as used-car volumes hit a record.
Caterpillar (CAT) climbs 5% after posting first-quarter earnings that beat Wall Street expectations as surging electricity demand from artificial intelligence data centers boosted sales of the company’s power-generation equipment.
Chipotle Mexican Grill Inc. (CMG) gains 4% after eeking out higher sales last quarter, suggesting the chain is starting to win back diners who previously balked at the rising price of its burritos.
Eli Lilly (LLY) rises 7% after raising its full-year sales outlook on the strength of its weight-loss drugs and high hopes for its new obesity pill.
Ford (F) falls 4% after warning that an unexpected rise in commodity costs will weigh on earnings.
FormFactor (FORM) rises 10% after the semiconductor manufacturing company reported first-quarter results that beat expectations on key metrics, although analysts were especially positive on the company’s gross margins.
KLA Corp. (KLAC) falls 4% after analysts note the tepid growth rate at the semiconductor capital equipment company when compared to peers.
Merck (MRK) gains 3% after the drugmaker reported sales for the first quarter that topped Wall Street’s expectations.
Procept Biorobotics (PRCT) gains 15% after the medical and surgical equipment manufacturer reported revenue for the first quarter that surpassed expectations.
Stellantis (STLA) is down 5% after the carmaker posted first-quarter results that included disappointing numbers from North America.
Qualcomm (QCOM) jumps 11% after the company posted mixed results, but said that it was “excited” by its entry into data centers, where a “leading hyperscaler custom silicon engagement is on track for initial shipments later this calendar year.”
Quanta Services (PWR) gains 6% after the provider of contracting services to electric utility companies reported adjusted earnings per share for the first quarter that beat the average analyst estimate.
Royal Caribbean Cruises (RCL) rises 7% after posting first quarter adjusted EPS that topped estimates.
Smurfit Westrock (SW) falls 5% after the packaging company reported first-quarter adjusted Ebitda that missed analyst estimates.
Wayfair (W) tumbles 8% after the ecommerce firm reported adjusted earnings per share for the first quarter that missed the average analyst estimate.

In other corporate news, Starwood Capital is “temporarily suspending” share repurchases from its Starwood REIT to preserve liquidity while waiting for the commercial real estate market to improve. Stellantis shares fell after analysts pointed to the automaker’s worse-than-expected financial performance in North America. And Pop Mart reported a sharp slowdown in US sales, underscoring its challenges in diversifying beyond the Labubu toy. In other AI news, OpenAI has met a key milestone for securing AI capacity in the US several years ahead of schedule, boosting the startup’s ambitious plans for data center expansion. SoftBank plans to establish and list an AI and robotics company called Roze in the US. And banks that recently signed a $40 billion bridge loan with SoftBank for its investment in OpenAI are said to have attracted more lenders to the deal in syndication.

Market sentiment got a boost as global benchmark Brent crude oil erased an intraday jump of as much as 7.1% to above $126 a barrel. Axios had reported that President Donald Trump was slated to receive a briefing Thursday on new plans for potential military action in Iran, clouding hopes for an imminent peace agreement. It was unclear what prompted the oil reversal, although there has been speculation that the BOJ is intervening in both FX and oil.

From swings in oil prices to a divided Federal Reserve keeping rates on hold and impressive megacap tech earnings, traders are grappling with a barrage of whipsawing headlines. That’s testing a global equity rally that has wiped out war-related losses and pushed US markets to new highs as investors still look for signs of an end to the conflict.

“Equities are caught in between escalating Middle East tensions and strong fundamental earnings data being released,” said Wolf von Rotberg, equity strategist at Bank J Safra Sarasin Ltd. “Oil prices moving toward $150/bbl would likely increasingly impact the consumer in the US, which would also mark a turning point for equity markets. Thus, a deal is required to see a continued move higher over coming months.”

For stocks, “earnings expectations are behaving like a force of nature, and that is more important than anything else,” writes Bloombing Opinion columnist John Authers. Traders are also looking at the playbook from Ukraine and the tariff turmoil, but “it’s hard to believe they’re not over-confident.”

On balance, the frenzy of earnings after the close had a reassuring message, and a clear winner: Alphabet’s Google was able to point to solid growth at its cloud computing unit, which recorded estimate-beating sales of $20 billion last quarter, justifying its AI spending.

Meta was the loser of the pack, with shares sliding after it boosted full-year capex to as much as $145 billion. Investors are concerned that the investments may not pay off, as Meta’s AI system still trails its peers. “So far, Meta’s stand-alone app hasn’t had the amount of engagement vs. other frontier labs,” said BI analyst Mandeep Singh. Amazon was relatively well received, with revenue from its cloud division up 28%, the fastest growth rate since 2Q 2022. Microsoft slightly underwhelmed with a forecast for a “modest acceleration” in Azure cloud sales in the second half of the calendar year.

Japan’s currency strengthened as much as 1.6% against the dollar to 157.85, its lowest since April 17, after Japan’s top currency official Atsushi Mimura echoed Minister of Finance Satsuki Katayama’s warning earlier Thursday that “the timing for taking bold steps is nearing.”

In politics, the 74-day shutdown of the Department of Homeland Security is nearing an end after House Speaker Mike Johnson united Republicans behind a two-part budget plan to fully fund the department. Members of Trump’s administration are said to have told Anthropic that they don’t agree with the company’s plan to grant access to its Mythos technology to roughly 70 companies and organizations.

European Stocks turned positive, with the Stoxx 600 now up by 0.4% having fallen as much as 0.7% ahead of the European Central Bank’s interest-rate decision today. BNP Paribas fell after the lender reported higher credit provisions than expected. Credit Agricole and Societe Generale also dropped after results.Here are the biggest movers Thursday:

Arcadis shares gain as much as 14%, the steepest intraday gain since July 2020, after the Dutch engineering services firm’s first-quarter results met with a positive response from Degroof Petercam analysts
Glencore shares gain as much as 2.6% after the trading and mining giant posted strong profits, with 2026 full-year marketing Ebit expected to “comfortably exceed the top end of the range”
United Utilities, the water utility company, rises as much as 12% to a record high following an £800m equity raise announcement. Analysts say the raise supports accelerated asset base growth and upgraded return targets
Magnum Ice Cream shares rise as much as 13%, the biggest jump since its listing in December last year, after the former Unilever unit reported strong first-quarter volumes
Delivery Hero gains as much as 6.6% after the food delivery firm said it’s confident of achieving upper half of its Ebitda guidance range. That comes after 1Q results beat estimates and showed a modest recovery in its core market Asia
Puma shares rose as much as 4.1% on Thursday after reporting gross profit margin and sales for the first quarter that beat the average analyst estimate, with analysts saying the results were solid and showed progress
BNP Paribas shares dropped as much as 5.3% amid a wider decline for its French peers. The lender reported what analysts say are mixed results with a beat driven by its Corporate Centre unit, while the Arval unit disappointed
SocGen shares decline as much as 6.7% on earnings that KBW called lackluster after fixed income revenue missed estimates. Profit beat consensus as equity trading and French retail units jumped from a year earlier
Stellantis shares fall as much as 10% after the carmaker posted first-quarter results where key North America numbers disappointed, with analysts seeing a somewhat mixed print
Erste Group Bank shares slide as much as 4.6% after the lender reported what a Barclays analyst called a low-quality profit beat helped by one-off gains, with adjusted earnings falling short of expectations
Weir Group shares fall as much as 9.9% after the mining equipment provider reported first-quarter orders that analysts said look weak relative to peers
Technip Energies shares slump as much as 10%, the most since October 2023, after the French engineering and technology company reported weaker-than-expected earnings for the first quarter and cut its guidance

Asian stocks slumped as Brent crude surged to a four-year high, fueling inflation concerns and dragging currencies lower across the region’s emerging economies. The MSCI Asia Pacific Index slid as much as 1.6%, the most intraday since April 2, before paring some declines. Equity benchmarks in Indonesia, South Korea and the Philippines were among the top losers. All sectors on the regional gauge fell, except energy. Thursday’s losses pared the MSCI Asia gauge’s April gain to under 13%. It was still on course for its best month since November 2022, with a rally in tech names having overshadowed the impact of the US-Iran war on the broader market. Asian tech shares outperformed earlier on Thursday, following indications of continued high spending on AI infrastructure by the likes of Alphabet and Meta Platforms. Samsung Electronics’ chip arm beat expectations with a 48-fold jump in profit. However, those gains faded as the session progressed, suggesting investors likely trimmed positions ahead of the long weekend. Many of the region’s markets will be shut on Friday.

In FX, the yen the standout in currencies on increasing intervention risks, Bloomberg Dollar Spot Index down 0.4%. The pound and UK bonds gained after the Bank of England left interest rates unchanged, with several policymakers saying they might consider future hikes given high energy prices.

In rates, treasuries rebounded after the surge in oil and a hawkish hold by the Fed drove bonds lower on Wednesday. US front-end yields are more than 5bp lower on the day, steepening 2s10s and 5s30s spreads by 2bp-3bp. 10-year, lower by about 4bp at session low 4.39%, trails 7bp drop for UK 10-year. US 30-year is back below 4.98% after topping 5% late Wednesday for the first time since July. UK gilts rally after Bank of England held rates steady, meeting expectations.

In commodities, oil prices reversed an earlier spike which took them to a wartime high, after Axios reported that US President Donald Trump will receive a briefing on new military options for action in Iran, signaling the potential for fresh escalation in the Middle East. The two sides showed little sign of breaking their impasse and agreeing to another round of peace talks, with Trump saying his navy’s blockade is working. However, shortly after the European open, oil tumbled with Brent now falling back toward $114.Gold prices higher and back above $4,600/oz.

US economic data calendar slate includes jobless claims, personal income and spending, 1Q employment cost index and first estimate of Q1 GDP (8:30am), April MNI Chicago PMI (9:45am, several minutes earlier for subscribers) and March Leading Index (10am)

Market Snapshot

S&P 500 mini +0.4%
Nasdaq 100 mini +0.5%
Russell 2000 mini +0.2%
Stoxx Europe 600 +0.2%
DAX +0.2%
CAC 40 -0.8%
10-year Treasury yield -3 basis points at 4.4%
VIX -0.5 points at 18.31
Bloomberg Dollar Index -0.2% at 1199.46
euro +0.1% at $1.169
WTI crude +0.1% at $107.01/barrel

Top Overnight News

Trump will receive a briefing on Thurs about potentially resuming military operations against Iran. Brent pushed to a 4 year high. Axios
As Hormuz traffic stalls, the White House pitches a new coalition to get ships moving again. Trump reportedly wants other nations to form an alliance to help jump-start ship traffic. WSJ
Japan’s top currency officials rolled out their “final” warning to speculators after the yen slipped to its weakest level since the nation’s last salvo of market interventions in 2024. BBG
China’s factory activity held up in April, suggesting limited pressure from surging energy prices due to the conflict in the Middle East. China’s NBS PMIs for Apr were mixed, with manufacturing outperforming (50.3 vs. the Street 50.1) while non-manufacturing fell short (49.4 vs. the Street 49.8), and the RatingDog manufacturing PMI was ahead of plan too at 52.2 (vs. the Street 51). WSJ
China has given state-owned refiners the green light to export 500,000 tons of fuels to a handful of regular customers, signaling the country is effectively easing an earlier ban on shipments. BBG
California gasoline prices topped $6 a gallon as the global energy crunch from the war reverberates. No other state has ever surpassed that mark. BBG
Anthropic faces White House opposition to its plan to expand access to its Mythos AI model, an administration official said. Separately, the company is said to be weighing fresh funding that would value it at more than $900 billion. BBG
The record 74-day shutdown of the DHS is nearing an end after Mike Johnson united fractious Republicans behind a two-part budget plan aimed at fully funding the department.
US House has approved a Republican plan making way for a $70bln bill for ICE and Border Patrol.
US Senators are to introduce legislation to tighten ban on Chinese vehicles.
The US House has passed a three-year extension of the FISA re-authorisation.

Iran News

US CENTCOM is to brief US President Trump on new plans for potential military action in Iran on Thursday, Axios reported citing sources; plan includes a short and powerful strike potentially targeting infrastructure to break the nuclear issue deadlock. Other options expected to be presented include a plan to take over part of the Strait to allow for commercial shipping, which could involve ground forces, and a special forces op to secure Iran's uranium stockpile.
US CENTCOM has asked to send the Army's hypersonic missile to the Middle East for possible use against Iran, Bloomberg reported citing sources.
US CENTCOM said the US navy has redirected 42 vessels from the blockade in the Strait of Hormuz and that the military is fully committed to enforcing the blockade.
US President Trump told Israeli PM Netanyahu that Israel should only take surgical military action in Lebanon and avoid a full resumption of the war, Axios reported.
US Treasury Secretary Bessent said sprinting for the finish line with Iran, according to Fox Business; willing to do secondary sanctions on Iran oil buyers. Every day adding more economic pressure to Iran. Close to half a billion in Iran-related crypto seized. Consumers and stock market are looking through Iran. UAE and others have requested swap lines, swap lines are not a bailout.
Iran lawmaker Mottaki says a naval blockade would amount to a declaration of war, and that fighters could decide as soon as tomorrow or next week to remove such obstacles via military action.
Iran’s Navy Commander said the Islamic Republic will soon unveil a new weapon that would deeply terrify the enemy, IRNA reported. He said Iran has closed the strategic Strait of Hormuz from the Arabian Sea. Condemned the US’s illegal seizure of several Iranian vessels as part of the blockade, which he said amounted not only to “piracy” but also “hostage-taking".
Iran's Navy commander warns that Iran will soon face its enemies with a very dreadful weapon that will strike fear into their hearts, according to Press TV.
Pakistan's Foreign Ministry said channels of dialogue with officials in Washington and Tehran remain open, Al Hadath reported. "“The clock on diplomacy has snit stopped. We remain hopeful for a negotiated settlement on this issue. We will continue with our sincerest efforts”,.
China's Military said they conducted combat readiness patrols near Scarborough Shoal, according to a statement.
"No point" in negotiating over zero enrichment, Iranian lawmaker said, Al Jazeera reported; adding “I have no objection to going to the negotiating table, but we should have looked more closely at how to proceed”.
The US administration is asking countries to join a new international coalition that would enable ships to navigate through the Strait of Hormuz, WSJ reported. The Maritime Freedom Construct would be a US-led coalition that would share information, coordinate diplomatically and enforce sanctions.
A surveillance drone near the US embassy in Baghdad has been shot down, according to Iraqi security sources.
Iranian Navy Commander said we have closed the Strait of Hormuz from the Arabian sea side and will take swift action if enemy advances, Al Araby reported.

A more detailed look at global markets courtesy of Newsquawk

Asia-Pac stocks traded with a negative bias, as weakness stateside in cash hours, earnings and recent geopolitical updates drive price action. More recently, Axios reported that US CENTCOM is to brief President Trump on new plans for potential military action, which is to include a short and powerful strike to break the nuclear issue deadlock. ASX 200 printed modest losses. IT and Tech topped the sector pile while consumer staples and mining underperformed. Nikkei 225 returned from holiday closure with losses in excess of 1%, returning to the 59,000 handle. Fujitsu weighed on the index after the Co.’s Q4 op. profit and FY forecast missed estimates. On the other hand, TDK was one of the outperformers, following FY net that rose by around 20%. KOSPI lacked direction, trading either side of the unchanged mark. Initial upside came after Samsung Electronics reported Q1 earnings that beat top- and bottom-line metrics. However, the earlier gains were erased as trade continued. LG Electronics held onto its earlier gains, after the Co. reported Q1 net that beat expectations. Hang Seng and Shanghai Comp. traded mixed, with the Hang Seng the clear underperformer. Stronger-than-expected manufacturing PMIs failed to support the indices, while China Construction Bank printed losses following its Q2 earnings.

Top Asian News

Japanese Top Currency Diplomat Mimura said this is the final warning before action is taken; speculative moves in FX are mounting; getting closer to taking decisive steps; seeing speculative activity in FX market.
South Korea to launch 24hr USD/KRW trade from end-June.

European bourses (STOXX 600 -0.2%) started the session broadly in the red, but have attempted to move higher as the morning progressed; currently towards highs. From an index standpoint, the FTSE 100 (+0.5%) and the AEX (+0.5%) lead, whilst the FTSE MIB (-0.5%) lags. Initial downbeat sentiment stemmed from an Axios report which suggested that the US CENTCOM is to brief President Trump about military options in Iran on Thursday. Ahead, focus will be on the ECB and BoE policy announcements, where both are expected to stand pat on rates, but focus will be on any hawkish guidance. European sectors initially held a negative bias, but are now mixed. Basic Resources took the top spot, buoyed by strength in gold prices and after Glencore (+2%) reported a 19% jump in copper output. Utilities takes the second spot, led higher by United Utilities (+10%) after strong results and announcing an equity raise to fund a multi-billion dollar investment plan. Media is found at the foot of the pile, joined closely by Autos; the latter has been driven lower by Stellantis (-7.4%), where shares have slumped on a tariff-adjusted miss.

Top European News

POLITICO, citing UK Officials, said May 8 looks set to be a moment of real danger for the PM; said a long-time critic promised to go public with a call for PM Starmer to step down if results are as bad as expected.
US President Trump posted that the US is studying and reviewing the possible reduction of troops in Germany with a determination to be made over a short period of time.
Unilever (ULVR LN) Q1 2026 Trading Statement: Underlying Sales +3.8% (exp. 3.7%); FY26 outlook unchanged with USG at lower end of 4-6% and modest margin improvement expected.
Glencore (GLEN LN) Q1 Production Report: Maintains FY production guidance; Copper production 199.6kt (prev. 167.9kt Y/Y), Cobalt 5.8kt (prev. 9.5kt Y/Y), Zinc 176.9kt (prev. 213.6kt Y/Y), Nickel 17.2kt (prev. 18.8kt Y/Y), Gold 68koz (prev. 145koz Y/Y).

G10 FX are mostly stronger against the Buck after DXY fell on remarks from Japanese Finance Minister who said "getting closer to taking decisive steps in FX", and Mimura, the top FX diplomat, said "This is the final warning before FX action". This strong commentary saw USD/JPY fall 80 pips on Katayama, then a further 30+ ticks on Mimura's remarks.
USD/JPY, as mentioned, trades higher by around 0.6% as commentary from both officials proved more hawkish than previous verbal intervention attempts which failed to propel the JPY.
EUR/USD trades a touch below the 1.17 mark in choppy trade, with the FOMC and decent JPY moves failing to knock the single currency ahead of the ECB meeting. Full preview in the Newsquawk research suite. This morning, EZ inflation ticked up from the prior but broadly in line with expectations. There was no real reaction from the series, which sticks to the narrative that price pressures remain broadly confined to the headline measures, with the core figures steady or actually moderating from the last reading. On Energy, that lifted to 10.9% (prev. 5.1%) and remains the primary contributor to the headline rate.
EUR/GBP is also unchanged into the BoE and MPR, where it is expected to hold rates in a 9-0 vote split, with risks towards a dovish and/or hawkish dissent a possibility. Focus will be on any clues or hints towards the timing of the next move, and the MPC’s current view on market pricing. In terms of UK Politics, The Times reported that Former deputy PM Rayner is said to be weighing up mounting a direct challenge for the leadership after next week's local elections. Rayner is regarded as the most left-wing candidate, and also the bookies' favourite.
Japanese Finance Minister Katayama says timing to take decisive action is near; "we are getting closer to taking decisive steps in FX"; have long mentioned possible bold action on FX; monitoring FX while on holiday.
Japanese Top Currency Diplomat Mimura says this is the final warning before action is taken; speculative moves in FX are mounting; getting closer to taking decisive steps; seeing speculative activity in FX market.
US will reportedly seek forfeiture of Iran-linked oil tankers seized at sea.

Central Banks

Morgan Stanley expects the Fed to leave rates unchanged in 2026 (prev. forecasted cuts in Sep and Dec), expects 25bps of rate cuts each in Jan'27 and Mar'27.
US President Trump posted that Jerome "Too Late" Powell wants to stay at the Fed because he can't get a job anywhere else.
US Treasury Secretary Bessent said it is highly unusual for Powell to stay on the Fed board, calling it an insult and violation of norms; adds Warsh will be Fed Chair on time.
BoJ maintains May outright bond buying operations at the same levels as April.
BoJ Outlook Report: weak JPY pushes up prices for a wide range of good services, thereby giving a bigger boost to core consumer inflation; impact of a weak JPY shock is bigger than that of oil shock. "...while a yen depreciation shock tends to lead to a rise in the GDP deflator through wage increases and greater profit margins, an increased crude oil price shock tends to cause a decline in the GDP deflator through compressed profit margins and wages, reflecting worsened trading gains...In the current phase, it is possible that both shocks could occur at the same time...".
The BoE has raised concerns over plans to cut the capital requirements of specialist trading firms, the FT reported; BoE officials are worried they could increase financial stability risks by making firms less able to withstand a crisis.
The RBNZ is to release details on how the MPC members vote, making the votes publicly available when a consensus is not reached.
PBoC set USD/CNY mid-point at 6.8628 vs exp. 6.8414 (prev. 6.8608).
NBH Governor Varga said that the forint gains have helped the Bank reach its inflation target.
BoK official said that we act if needed to stabilise financial markets and monitor the Middle East conflict.
BCB cuts 25bps to 14.50%, as expected; decision was unanimous and it affirms serenity and caution in the conduct of monetary policy.

Fixed Income

Overall, a contained session for fixed benchmarks. USTs lifted off overnight 110-07+ lows across the European morning, up to an 110-15+ high but with gains of just a few ticks at most. Action that comes as the space eases off the hawkish lows delivered after the Fed and Powell (recap on the board).
Ahead, the US is focused on PCE, consensus chimes with the guidance from Chair Powell last night. Recent pricing data has shown that energy was the primary driver, with the core offering some relative relief as such. Though, PCE-related PPI components suggest service pressures remain sticky. Policy implications would be in line with the direction of the series, though a cooler print would likely provide only temporary relief given the clear signs of persistent price pressures elsewhere.
Bunds in the red, though only by c. 5 ticks. Got to a 110-07 base before rebounding a touch, though only as high as 124.75, where it was briefly flat. EZ Flash HICP sparked no real reaction, sticks to the narrative that price pressures remain broadly confined to the headline measures. Ahead, the ECB is expected to maintain rates, a decision merited by the relatively limited amount of data, no overt signs of second-round effects and uncertainty on the duration of the shock and degree of pass-through.
Gilts gapped lower by 29 ticks and then slipped another five to an 85.90 low, an open that took out Wednesday's 85.98 base and notched a fresh contract low. Amidst this, the UK 10yr yield got to a 5.09% peak, nearing but not testing the recent 23rd March peak at 5.12%. Ahead, attention on the BoE, where a hold is expected, and while 9-0 is technically the base case , dissent on both the dovish and hawkish side of things is very possible. Overall, we are mainly after hints from the MPC itself, and the individual statements and press conference around the timing of the next move, though neither the statement nor Bailey are likely to be that explicit at this stage. Gilts are currently incrementally in the green, amidst a recent bout of pressure in the energy space.
Japan sold JPY 2.8tln 2-year JGBs: Average yield 1.407%, b/c 5.24x, price tail 0bps.
China allocates CNY 91.5bln in special bonds for equipment upgrades.

Commodities

In geopolitics, US CENTCOM is set to brief President Trump on new military options for Iran, including potential strikes, Hormuz intervention, and uranium seizure operations, according to Axios. Meanwhile, the US blockade remains the core strategy, with Trump calling it “genius” and refusing to lift it without a nuclear deal. Elsewhere, Iran is threatening “unprecedented military action” if the blockade continues, while economic pressure is intensifying internally. The US is pushing to form a global maritime coalition to restore shipping through the Strait of Hormuz. On this note, US CENTCOM Commander Adm. Brad Cooper will brief Trump on Thursday on new Iran military plans, with Joint Chiefs Chairman Gen. Dan Caine also attending, according to Axios.
WTI June and Brent July futures are firmer as de-escalation efforts between US and Iran seem futile, with neither side publicly willing to move on demand. WTI resides in a USD 106.39-110.93/bbl range and Brent in a USD 109.63-114.70/bbl parameter. Do note that a bout of pressure was seen in the crude complex, taking contracts towards lows - a move which lacked a clear driver. Dutch TTF holds a mild upward bias and found some resistance at EUR 49/MWh before waning to near EUR 47/MWh.
Spot gold and silver are firmer as the DXY falls on recent JPY strength following the “final warning” from Japan’s Top currency diplomat with regards to JPY intervention, with Japanese Finance Minister Katayama earlier sparking JPY strength as she said the timing to take decisive action is near – which comes ahead of the Japanese market holidays between May 3rd-6th. Spot gold has topped yesterday’s high to trade in a current USD 4,539-4,629/oz.
Base metals are also benefiting from the softer USD coupled with above-forecast Chinese RatingDog and NBS Manufacturing PMIs. 3M LME copper resides in a 12,977.97- 13,120.35/t range at the time of writing.
California gasoline price tops USD 6/gallon for first time since 2023, Bloomberg reported.
IEA's Birol said oil prices over USD 120/bbl is putting a lot of pressure on many countries.
Oman crude OSP calculated at USD 104.73/bbl for June (prev. USD 124.05/bbl in May).
Japanese Prime Minister Takaichi reportedly to announce naphtha supply secured "until the new year", Nikkei reported.
Russia's Novak said OPEC+ to evaluate possibilities to supply global oil market at May 3 meeting, IFX reported.
China reportedly to allow state refiners to export some fuels to Asia buyers.
Fire at Russia's Tuapse oil refinery has been extinguished, regional Governor said.
Russia's Deputy PM Novak said UAE exit does not mean a price war, reiterates there are no plans to leave OPEC+, IFX reported. OPEC+ will continue working together.
The Japanese Government is considering reviving power and gas subsidies this summer, according to sources; Plan is to use reserve funds and no extra budget eyed for now.
The Iranian oil minister has urged the public to reduce energy consumption, while dismissing the impact of the US naval blockade, CNN reported; the government has instructed government offices to cut electricity use by up to 70%.
Iran's delegation to the UN said its enriched uranium is under the full supervision of the IAEA.
Indonesia set May Crude Palm Oil reference price at USD 1,049/mt.
US National Emergency Dominance Council Director Agun is set to travel to Venezuela on Thursday for meetings with oil, gas and mining execs.
Fire at PDVSA's Cardon refinery's FCC unit is reportedly under control.

Geopolitics

Russia's Novak said OPEC+ to evaluate possibilities to supply global oil market at May 3 meeting, IFX reported.
Ukrainian President Zelensky said Ukraine is to seek clarification from the US, on details of Russia's ceasefire proposal; Ukraine's proposal is a long term ceasefire.
Fire at Russia's Tuapse oil refinery has been extinguished, regional Governor said.
Russia's Deputy PM Novak said UAE exit does not mean a price war, reiterates there are no plans to leave OPEC+, IFX reported. OPEC+ will continue working together.
The EU is preparing a package of short-term benefits for Ukraine, which would include greater market access and deeper participation in EU programmes, Politico reported citing diplomats.

US Event Calendar

8:30 am: United States Mar Personal Income, est. 0.3%, prior -0.07%
8:30 am: United States Mar Personal Spending, est. 0.9%, prior 0.5%
8:30 am: United States Mar PCE Price Index YoY, est. 3.5%, prior 2.8%
8:30 am: United States Mar Core PCE Price Index MoM, est. 0.3%, prior 0.4%
8:30 am: United States Mar Core PCE Price Index YoY, est. 3.2%, prior 2.97%
8:30 am: United States Apr 25 Initial Jobless Claims, est. 212k, prior 214k
8:30 am: United States Apr 18 Continuing Claims, est. 1815k, prior 1821k
8:30 am: United States 1Q Employment Cost Index, est. 0.8%, prior 0.7%
8:30 am: United States 1Q A GDP Annualized QoQ, est. 2.25%, prior 0.5%
8:30 am: United States 1Q A Personal Consumption, est. 1.4%, prior 1.9%
8:30 am: United States 1Q A GDP Price Index, est. 3.9%, prior 3.7%
8:30 am: United States 1Q A Core PCE Price Index QoQ, est. 4.1%, prior 2.7%
9:45 am: United States Apr MNI Chicago PMI, est. 54.85, prior 52.8
10:00 am: United States Mar Leading Index, est. -0.2%

DB's Jim Reid concludes the overnight wrap

After a hugely eventful 24 hours in markets, the newsflow has shown no sign of easing this morning, with Brent crude up +5.96% overnight to $125.06/bbl. Significantly, that’s its highest intraday level since the Iran conflict began, and with the Strait of Hormuz still closed, that’s fed growing fears about an extended stagflationary shock. The market impact of that is already clear, particularly for sovereign bonds, and overnight we’ve seen Japan’s 10yr yield move up to 2.51%, which would be its highest closing level since 1997. It was a similar story in Europe too, with the 10yr bund yield at a post-2011 high of 3.11%, whilst 10yr gilt yields hit a post-2008 high of 5.07%. So there was little sign of respite anywhere, and that’s before we even discuss the Fed’s latest decision and earnings from 4 of the Mag 7 companies.
The main catalyst for the latest jump in oil prices was a report from Axios, suggesting that an escalation in the conflict was still being considered as an option. And overnight, they’ve reported that Trump is set to receive a briefing today on potential plans for military action. According to that article, US Central Command had prepared a “short and powerful” wave of strikes that would aim to break the negotiating deadlock. Moreover, that followed a post from Trump earlier in the day, which said that “Iran can’t get their act together. They don’t know how to sign a nonnuclear deal. They better get smart soon!”

With no sign of any peace talks and fears mounting about an escalation, oil prices have continued their gains of recent days. Indeed, even before the overnight jump, Brent crude was already up +6.08% yesterday to $118.03/bbl, marking an 8th consecutive increase. In addition, investors are pricing in a more protracted conflict as well, as longer-dated futures have moved up to their highest levels of the conflict so far. For example, the 6-month Brent future is at $91.49/bbl this morning, having not previously closed above $90/bbl in this conflict.

All that follows an eventful decision from the Fed yesterday. They kept rates on hold as expected, but there were notably 4 dissents, which is the most for an FOMC decision since 1992. That included Governor Miran, who supported a 25bp rate cut once again. But we also saw three of the regional Fed Presidents – Hammack, Kashkari and Logan – make a hawkish dissent over the inclusion of an easing bias in the statement. In the subsequent press conference, Chair Powell acknowledged a “vigorous” debate about the guidance language, commenting that the centre of the FOMC was also “moving toward a more neutral place” but that “a majority of us didn’t feel like we needed to send a signal on that right now”. He also said that the“policy stance is in a good place for us to hold” amid the uncertainty stemming from the Middle East, and our US economists write that it reinforces their baseline view that the policy rate is likely to remain unchanged this year.

Aside from policy, the other big news was that Chair Powell will stay on as a Fed Governor once his four-year term as Chair ends on May 15. As a reminder, Fed Governors have a 14-year term separate to the 4-year term as Chair, and Powell’s 14-year seat on the board goes up to January 2028, so he’d retain a vote on policy if he stays. Powell said this would be “for a period of time, to be determined”, and that he wouldn’t leave the board until the DoJ’s investigation “is well and truly over, with transparency and finality”. That decision means that the incoming chair would need to take over Governor Miran’s board seat, who voted for a 25bp cut at this meeting. There was also an update on the next chair yesterday, as the Senate Banking Committee voted to advance Kevin Warsh’s nomination to the full Senate, leaving him on track to take over as Chair next month when Powell’s term expires.

For markets, the combination of higher oil prices and a more hawkishly divided Fed saw investors price out rate cuts this year, with futures for the December meeting pricing 3bps of hikes by the close. Moreover, the path ahead is increasingly turning hawkish, with futures now pricing a 55% probability of a Fed hike by next April. So that helped Treasury yields to jump across the curve, with 2yr yields (+11.3bps) seeing their largest spike since October to 3.95%. And further out the curve, the 10yr yield (+8.4bps) reached 4.43%, and the 30yr (+6.7bps) was back at 5.00%, the highest since July for both.

In the meantime, US equities had a muted session yesterday, with the S&P 500 (-0.04%) and the NASDAQ (+0.04%) little changed. But the equity mood then turned more positive after the close, with Alphabet rising in post-market trading as it led a decent set of Mag-7 earnings. Its shares climbed by +6.6% after market, as it reported stronger-than-expected cloud revenue growth ($20.0bn vs. $18.4bn estimate) and a near doubling in its backlog of contracted work. Otherwise, Amazon rose over +2% after-hours after delivering the strongest growth in Amazon Web Services revenue since 2022 (+28% vs +25.7% est.). Microsoft’s cloud revenue growth was more in line with expectations (+39% vs +38.2% est.), with the company projecting a modest acceleration in H2. Meanwhile, Meta fell back after last night’s results, down -7% after-hours as its revenue guidance came in line with expectations but the 2026 CAPEX plan was raised by $20bn to $125-145bn.
In Asia this morning, those stagflation concerns are still top of mind, with losses across the region. For instance, the Nikkei (-1.48%), the Hang Seng (-1.23%) and the KOSPI (-1.13%) have all seen decent falls, although in mainland China, the CSI 300 (-0.01%) and the Shanghai Comp (+0.09%) are both little changed. Those losses have extended to US and European equity futures as well, with those on the S&P 500 (-0.23%) and the DAX (-0.82%) both pointing to fresh declines.

Looking forward, central banks will stay in the spotlight today, as we’ve got decisions from both the ECB and the Bank of England. For the ECB, it’s widely expected they’ll keep their deposit rate on hold at 2%. But given Europe’s exposure to the energy shock, markets are fully pricing in a hike at the next meeting in June, so the question today is whether the ECB validates that view. Our European economists think there’s still too much uncertainty about what happens to energy prices and the extent to which that propagates into inflation, so the ECB will want to gather more information before deciding in June whether to hike or not. In the meantime, they think the ECB will retain some hawkish optionality and emphasise a meeting-by-meeting approach to decisions. For more info, see their full preview here.

For the Bank of England, it’s also widely expected they’ll leave rates unchanged today, keeping them at 3.75%. Our UK economist expects they’ll emphasise the two-sided risks to the outlook, with a cut to their growth forecasts and an increase for inflation. He writes that their forecasts and scenario projections will be important signalling tools, and he thinks that one thing to look out for will be where they put their 2yr and 3yr CPI projections. That’s because a protracted CPI overshoot would be hawkish, whereas CPI at or below 2% on a 2yr or 3yr forecast horizons would be construed as marginally dovish.

Ahead of those decisions, European markets had struggled yesterday, as the uptick in oil prices led to growing fears of a lasting stagflationary shock. Indeed, the 1yr Euro inflation swap (+23.3bps) hit a three-year high of 3.87%, and markets are now pricing in 83bps of ECB rate hikes by the December meeting, up +10.9bps on the day. So collectively, that pushed yields up to new highs across the continent, with the 10yr bund yield (+4.3bps) closing at a new post-2011 high of 3.11%. Similarly in the UK, the 10yr gilt yield (+6.7bps) hit a post-2008 high of 5.07%, whilst the 30yr yield (+3.5bps) hit a post-1998 high of 5.72%. Moreover, there was little respite for equities either, with the STOXX 600 (-0.60%) hitting a three-week low.

Finally, we did get a few noteworthy data releases yesterday. In Germany, the flash CPI print for April surprised on the downside, with the EU-harmonised reading only up to +2.9% (vs. +3.1% expected). So that added to hopes that the Euro Area print today might come in softer as well. Otherwise, we had a batch of US data, which included the strongest housing starts since December 2024, at an annualised rate of 1.502m in March (vs. 1.380m expected). Meanwhile, the preliminary reading for durable goods orders was also above expectations in March, rising +0.8% (vs. +0.5% expected).

Looking at the day ahead, the main highlights will be the policy decisions from the ECB and the Bank of England. Otherwise, data releases include the Euro Area flash CPI print for April, US PCE inflation for March, and the Q1 GDP releases from the US and the Euro Area. We’ll also get the US weekly initial jobless claims, the Euro Area unemployment rate for March, and German unemployment for April. Finally, Apple will release its latest earnings.

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