US stocks finished in the green but with gains capped and price action choppy post-FOMC - Newsquawk Asia-Pac Market Open

• US stocks were ultimately higher on the day but with gains capped and price action choppy in the aftermath of the FOMC decision which was largely as expected as the Fed kept rates unchanged although the accompanying statement noted that risks to the economic outlook increased further and that risks to both sides of the mandate have risen. Furthermore, Fed Chair Powell reiterated the wait-and-see approach, while trade related headlines were somewhat mixed with President Trump unwilling to lower tariffs to get China to the table and it was reported that President Trump is to rescind global chip curbs amid AI restrictions debate although this was regarding scrapping a Biden-era "AI diffusion rule" that was set to take effect on May 15th and would have restricted how US tech is exported.
• USD was firmer on Wednesday following the FOMC meeting where the Fed held the FFR at 4.25-4.50% as expected in a unanimous decision, while the accompanying statement noted that members view the uncertainty around the economic outlook as having increased further from the March meeting and that risks of higher unemployment and higher inflation have increased. Furthermore, Fed Chair Powell maintained recent rhetoric in the press conference in which he advocated a wait-and-see/patient approach and stated they are not in a situation where they can be pre-emptive.
• Looking ahead, highlights include Philippines GDP, BoJ Minutes from the March 18th-19th Meeting, BCB Rate Decision, Supply from Japan.

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LOOKING AHEAD

• Highlights include Philippines GDP, BoJ Minutes from the March 18th-19th Meeting, BCB Rate Decision, Supply from Japan.
• Click for the Newsquawk Week Ahead.

US TRADE

• US stocks were ultimately higher on the day but with gains capped and price action choppy in the aftermath of the FOMC decision which was largely as expected as the Fed kept rates unchanged although the accompanying statement noted that risks to the economic outlook increased further and that risks to both sides of the mandate have risen. Furthermore, Fed Chair Powell reiterated the wait-and-see approach, while trade related headlines were somewhat mixed with President Trump unwilling to lower tariffs to get China to the table and it was reported that President Trump is to rescind global chip curbs amid AI restrictions debate although this was regarding scrapping a Biden-era "AI diffusion rule" that was set to take effect on May 15th and would have restricted how US tech is exported.
• SPX +0.43% at 5,631, NDX +0.39% at 19,868, DJI +0.70% at 41,114, RUT +0.33% at 1,990.
• Click here for a detailed summary.

FOMC

• Fed kept rates on hold at 4.25-4.50%, as expected, in a unanimous decision and said economic outlook uncertainty has increased further (prev. uncertainty around the economic outlook has increased), while it added that the risks of higher unemployment and higher inflation have risen. Fed said the economy continues to expand at a solid pace despite swings in net exports affecting the data, and it maintained language that unemployment has stabilised at a low level and labour market conditions remain solid.
• Fed Chair Powell said the economy is in a solid position and inflation has come down a great deal, which is running somewhat above the 2% goal, while he added that the current stance of policy leaves the Fed well positioned to respond in a timely way. Powell also stated that tariffs so far are significantly bigger than expected, and as the economy continues to evolve, the Fed will determine the appropriate policy stance. Furthermore, he repeated if dual mandate goals are in tension, they will consider the distance from the goal and the time to close gaps, but stated it is time to wait before adjusting policy.
• Fed Chair Powell said during the Q&A it is too early to say which way risks will shake out when asked about what side of the mandate is in greater risk and he thinks policy is in a good place until they get more data to determine which way to go, while he added that policy is moderately restrictive and there is no hurry. Powell said it is appropriate to be patient and when things develop, they can move quickly if appropriate. Powell also said there are cases in which rate cuts would be appropriate this year, and cases where rate cuts would not be appropriate, while he cannot confidently say he knows the appropriate rate path and noted that Trump's pressure for rate cuts does not affect the Fed's job at all. Powell also commented that his gut tells him that uncertainty is extremely elevated, downside risks have increased, and that risks of higher unemployment and higher inflation have risen but are not yet in the data. Furthermore, when asked about March projections for two rate cuts, he said that he can't make a projection now and they have to wait until June, as well as stated that they are not in a situation where they can be pre-emptive and need to see more data.

TRADE/TARIFFS

• US President Trump told the US envoy to China to 'say hello' to Chinese President Xi and to handle consequential and complex issues, while he is confident the US envoy to China will do an exceptional job. Trump said they will take a look at exemptions, but is unsure on exemptions and he is not open to pulling back 145% tariffs, while he also stated that China should reassess who asked for a meeting and he is unwilling to lower tariffs to get China to the table. Furthermore, Trump said he might be easing chip policy to the Gulf.
• US President Trump is to rescind global chip curbs amid AI restrictions debate, according to sources cited by Bloomberg. The Trump administration will not enforce the so-called AI diffusion rule when it takes effect on May 15th and instead plans to develop a new rule that would strengthen the control of chips abroad, while "One element of the move to repeal the diffusion rule will be to impose chip controls on countries that have diverted chips to China, including Malaysia and Thailand, according to one of the sources".
• US Treasury Secretary Bessent said the talks on Saturday with China are a beginning for talks and not advanced discussions, while he declined to say which countries the US could strike trade deals with this week, but noted that some trade negotiations are advancing towards agreements in principle.
• US VP Vance said there are no conversations between the US and China regarding a strategic deal on Taiwan and he believes that China will need to let its population consume more. Vance said conversations are ongoing with the EU that they want the European market to be open to the US, while he thinks they can have a better trading relationship with Europeans if they drop barriers.
• Mexican President Sheinbaum said Mexico is looking to lower tariffs on steel and aluminium, while she said the USMCA review will take place in 2026.
• EU trade chief Sefcovic said the European Commission will announce on Thursday preparatory steps on the next countermeasures to US tariffs.
• EU is to announce a provisional list of tariffs against the US on Thursday with the new EU tariffs to be enforced if talks with the US fail, while it was also reported that the EU is expected to target US-made cars with tariffs if trade talks fail, according to Bloomberg.
• EU is said to be mulling Boeing (BA) tariffs in retaliation plan, with civilian craft reportedly to be included on a list of around EUR 100bln of annual US imports to be targeted although measures would only be enacted if there is insufficient progress in talks to reduce US tariffs.
• China’s MOFCOM said China is willing to boost imports of Finnish products and tech.

NOTABLE HEADLINES

• US President Trump's big announcement is regarding a Medicare drug plan, according to Politico.
• US Treasury Secretary Bessent said the unfettered ability to borrow has made the US more prolific and the market may discipline them one day which they are working to avoid. Bessent said the conditions for a strong dollar are important for confidence and the Fed should focus on both price and employment goals.

FX

• USD was firmer on Wednesday following the FOMC meeting where the Fed held the FFR at 4.25-4.50% as expected in a unanimous decision, while the accompanying statement noted that members view the uncertainty around the economic outlook as having increased further from the March meeting and that risks of higher unemployment and higher inflation have increased. Furthermore, Fed Chair Powell maintained recent rhetoric in the press conference in which he advocated a wait-and-see/patient approach and stated they are not in a situation where they can be pre-emptive.
• EUR gave up ground to the dollar post-FOMC and tested the 1.1300 level to the downside where it found some support, while on the tariffs front, the EU is to announce a provisional list of tariffs against the US on Thursday, which will be enforced if trade talks fail.
• GBP retreated to sub-1.3300 territory amid the firmer buck and heading into a widely expected rate cut by the BoE on Thursday.
• JPY weakened against most major counterparts although further upside in USD/JPY was capped by resistance at the 144.00 level.

FIXED INCOME

• T-notes settled mildly higher but with price choppy amid the Fed statement tweaks and Powell's wait-and-see approach.

COMMODITIES

• Oil prices were lower and sold off throughout the session as risk sentiment soured alongside trade updates.
• US EIA Weekly Crude Stocks -2.032M vs. Exp. -0.833M (Prev. -2.696M)
• Iran's oil minister said it continues to support OPEC+ decisions aimed at ensuring market stability.
• Russian President Putin and Venezuelan President Maduro discussed energy and oil, according to Interfax.

GEOPOLITICAL

MIDDLE EAST

• US envoy Witkoff will be briefing the UN Security Council on the Gaza aid plan and Iranian nuclear talks, according to Axios.
• UAE is reportedly mediating secret talks between Israel and Syria, according to Reuters sources.
• Yemen's Houthis said they targeted Israel with drones and the group will not hesitate to carry out strikes against the US if US strikes on Yemen resume.
• US VP Vance said they think there is a deal that would reintegrate Iran into the global economy, while he added so far, so good on negotiations with Iran and that Iran can have civil nuclear power.

RUSSIA-UKRAINE

• US VP Vance said they think Russians are asking for too much and would like Russians and Ukrainians to agree to guidelines for talking to each other, while he added there is a big gulf between where Ukrainians and Russians are and it is probably impossible to mediate this without at least some direct negotiation between Russia and Ukraine. Vance also said that President Trump would be open to sitting down with Russia and China to reduce the number of nuclear weapons in the world.
• European Commission proposed to add 15 new entities and individuals to its Russia hybrid attack sanctions framework and proposed sanctions on Russian individuals for chemical weapons use in the Ukraine war, according to Reuters citing EU sources.
• Polish PM Tusk said Poland and Germany will keep supporting Ukraine and they should work to maintain Schengen, while he added that they should cooperate on NATO infrastructure and that all of Europe, including Germany, should protect the border with Belarus and Russia.

OTHER

• India reportedly told foreign envoys that India will respond if Pakistan respond to strikes, according to Reuters sources.

ASIA-PAC

NOTABLE HEADLINES

• China has room for a further RRR cut of at least 2 to 2.5ppts, according to a post by Yuyuantantian which is a Weibo account affiliated with state-run CCTV.

EU/UK

NOTABLE HEADLINES

• UK and the European Union are deeply split over the terms of a youth mobility scheme that is a key part of a post-Brexit “reset” agreement, according to the FT citing fresh negotiating documents.
• German Chancellor Merz said they can imagine something similar to their defence borrowing constitutional amendment on a European level, while he remains sceptical about new EU debt instruments and said EU fiscal rules could be softened for defence.
• German Finance Minister Klingbeil aims to have a 2025 budget before the summer break.

DATA RECAP

• UK S&P Global Construction PMI (Apr) 46.6 vs. Exp. 45.8 (Prev. 46.4)
• UK S&P Global PMI Composite - Output (Apr) 48.4 (Prev. 51.0)
• German HCOB Construction PMI (Apr) 45.1 (Prev. 40.3)
• EU HCOB Construction PMI (Apr) 46.0 (Prev. 44.8)
• EU Retail Sales MM (Mar) -0.1% vs Exp. 0.0% (Prev. 0.3%, Rev. 0.2%)
• EU Retail Sales YY (Mar) 1.5% vs. Exp. 1.6% (Prev. 2.3%, Rev. 1.9%)