Early Morning Call: gold hits record high, USD, oil fall after Fed decision

Fed raises rates as expected

As expected, the Federal Reserve (Fed) raised its overnight interest rate by a quarter of a percentage point to the 5.00%-5.25% range. The Fed has now boosted its rates by a full five percentage points in 10 meetings since March 2022.

At the press conference following the release, Fed chairman Jerome Powell said inflation remained the chief concern, and that it was too soon to say with certainty that the rate hike cycle is over.

That said, market commentators noticed one change in the Federal Open Market Committee (FOMC) statement. The phrase "anticipates" further rate increases, has been dropped. It doesn't mean that it is the end of the tightening cycle, but that from now on, each policy decision will be an open question.

Powell also pushed back the possibility of a rate cut this year.

Later today, it's the turn of the European Central Bank (ECB) to deliver its latest rate decision. A majority of economists expect the ECB'S main refinancing rate to rise by 25 basis points to 3.75%. The deposit facility rate is forecast to rise to 3.25%, and the marginal lending rate to 4%.

Macroeconomics

At the back end of last week, there was some pleasant news around gross domestic product (GDP) in both Spain and Italy, while Germany and France remain close to flat GDP quarter-on-quarter (QoQ). And, like in other regions worldwide, inflation remains stubbornly high.

In China, factory activity unexpectedly dipped in April. The Caixin manufacturing PMI fell to 49.5 in April, from 50 the previous month. Economists anticipated a small rise to 50.3. This marks the first contraction since January.

In Australia, trade surplus widened A$15.27 billion in March. It is the largest trade surplus since June 2022, as exports rose more than imports. Shipments rose by 4%, while imports rose by 2%.

In the US, economists await initial jobless claims, anticipating 240,000 new claimants last week. Yesterday the ADP survey showed that the US private sector created 296,000 jobs in April, almost twice as many as expected.

Now the focus has turned to tomorrow’s non-farm payrolls (NFP). Economists forecast on average 179,000 job creations, while the unemployment rate is seen rising to 3.6%, from 3.5% the previous month, and average hourly earnings should rise by 0.3% monht-on-month (MoM), 4.2% YoY, matching last month’s pace.

Equities

On the equity market, Shell posted a net profit of $9.65 billion in the first three months of the year, beating expectations.

The oil giant kept its dividend unchanged at $0.2875 per share and also announced a new $4bln share buyback programme.

Next maintained its guidance for annual profit after posting a 0.7% decline in first quarter (Q1) full-price sales. The clothing retailer forecast a 1.5% decline in full-price sales and pretax profit of £795 million, down from the £870.4mln it made in 2022-23.

A few companies reported across Europe. Airbus posted its Q1 earnings yesterday after the close of European markets. The aircraft maker reported a lower profit for the first quarter, announcing delays of the freighter version of its new A350 jetliner.

Anheuser-Busch InBev reported higher than expected earnings on Thursday. The maker of Budweiser, Stella Artois and Corona said core profit rose by 13.6% to $4.76 billion, compared with the 5.6% average increase expected in a company-compiled poll.

Volkswagen reported a rise in revenue of 22% to €76bln billion but saw a drop in operating profit to €5.7bln, after last year's first quarter profit was boosted by commodity hedging. VW confirmed its outlook for 2023.

BMW also confirmed its sales guidance, as it posted a fall in pretax profit of €5.1bln, compared to €12.2bln last year, due to the one-time effects from the consolidation of its Chinese joint venture last year. Earnings margins rose to in the first three months of the year, and the group confirmed its outlook for 2023.

In the US, Qualcomm, an all-session stock on the IG platform, fell back 9% in extended trading, after forecasting third quarter (Q3) revenue and profit below Wall Street estimates, saying the smartphone industry would take longer to use up excess chips.

Moderna is due to report before market open. The biotech firm is expected to post its first quarterly loss in two years, as demand for Covid-19 vaccines has dropped. Moderna is forecast to post a loss of $1.75 per share. For the same quarter a year ago it recorded earnings of $8.58 per share.

Vaccine revenue is anticipated to have dropped some 80% to $1.18bln. As the fall in earnings and revenue is a given, the market now wants to know how Moderna's management envisage its future, and how it will get there. Moderna's CFO James Mock told the Financial Times recently that Moderna is not "just a respiratory vaccine business. It's a latent vaccine business. It's a personalised cancer vaccine business. It's a rare disease business."

Yet up to now, it is its only marketable product. It needs to develop these drugs, which has a cost. Research costs are expected to double in the first quarter to $1bln. Thanks to Covid, Moderna has accumulated capital of $18bln, according to its CFO. $6- to $8bln of that is to be spent over the next few years to develop influenza, Covid and RSV vaccines. The plan is to generate $8 to $15Bln in sales by 2027.

Apple is scheduled to publish earnings for its second fiscal quarter tonight after market close. The street expects earnings to come in at $1.43 per share compared to $1.52 the same quarter a year ago. Revenue is poised to reach $92.9bln, almost $4.5bln less that last year.

Analysts will be looking for any indication of how the group performed in China, as the country is now on the path to recovery. Not only is China historically Apple's most volatile market, but the region now accounts for almost one-fifth of Apple's total revenues. While in Europe and the US the market is still trying to assess the impact central banks' tightening policies have had on growth, China has already showed some so-called green shoots. Recently, the IMF said it considered China as one on the regions that would grow the most in 2023.

Also after market close, keep an eye out for Coinbase. The street expects a loss of $1.39 per share on revenue of $655mln, that would be some improvement on the fourth quarter of 2022 when the group recorded a loss of $2.39, and revenue plunged 75% to $629mln.

During its Q4 2022 earnings report, Coinbase noted that crypto markets had improved. In January alone, an increase in volatility resulted in $120 million of transaction revenue. During the first three months of 2025, the price of bitcoin rose about 75%. Bitcoin represents 35% of Coinbase's trading volume and transaction revenue.

Coinbase's userbase is also a key point for investors. It shrunk to 8.3 million users during the fourth quarter, down 25% from a year earlier.

Also look out for Lyft earnings. Analysts forecast a loss of 8 cents per share on revenue on $982mln. Lyft's forecast will also be key. Earlier this week its main competitor, Uber Technologies, posted earnings in line with expectations, and a better than anticipated forecast, which has since sent the price to levels not seen since 2022.

Other US earnings scheduled today: ConocoPhillips, AIG, and Peloton Interactive.

Commodities

US crude oil inventories fell for a third week in a row by 1.3 million barrels, according to the EIA.

Gasoline stockpiles unexpectedly rose last week by 1.7 million barrels as demand weakened. Distillate stockpiles fell by 1.2 million barrels.