| Good morning. Jerome Powell said the Fed's next move is unlikely to be a hike. The yen surged in late New York trading. Elon Musk upended a deal the White House saluted. Here's what's moving markets. — Isabelle Lee The Federal Reserve signaled fresh concerns about inflation while indicating it was likely to keep borrowing costs elevated for longer. Chair Jerome Powell said it's unlikely that the Fed's next move would be to raise interest rates, saying officials would need to see persuasive evidence that policy is not tight enough to bring inflation back toward its 2% target. Still, Powell stopped short of signaling rate cuts were likely this year or that rates were at a peak, which he has said previously. Officials unanimously decided to leave the target range for the benchmark federal funds rate at 5.25% to 5.5% — where it's been since July — following a slew of data that pointed to lingering price pressures in the US economy. Stocks joined Treasury gains as the Fed agreed to slow the reduction in its bond portfolio. The S&P 500 erased a gain in late trading, while US two-year yields dropped below 5% as swap traders boosted their bets on rate cuts and projected higher odds that the first move will happen in November, instead of December. The yen advanced 3% against the dollar late in the New York session, fueling speculation that Japanese authorities could be intervening to support the currency. The yen strengthened from around 157.58 per dollar to around 155.79 per dollar in a matter of seconds shortly after 4:40 p.m., and then it extended the move to around 153 before paring the gain. The surge came even as the greenback pared losses against other Group-of-10 currencies. Japan probably intervened on April 29 when the yen weakened beyond 160 for the first time in 34 years, spending about ¥5.5 trillion ($34.8 billion) to support the currency, based on Bloomberg analysis of commercial banks' deposits held at the BOJ. The US and Saudi Arabia are nearing a historic pact that would offer the kingdom security guarantees and lay out a possible pathway to diplomatic ties with Israel. The agreement faces plenty of obstacles but would amount to a new version of a framework that was scuttled when Hamas's Oct. 7 attack on Israel triggered the conflict in the Gaza Strip. Negotiations have sped up in recent weeks and many officials are optimistic that Washington and Riyadh could reach a deal within weeks, according to people familiar with the matter. Such a deal would potentially reshape the Middle East. Beyond bolstering Israel and Saudi Arabia's security, it would strengthen the US's position in the region at the expense of Iran and even China. Elon Musk has upended a deal the White House saluted early last year to open Tesla's electric-vehicle chargers to other automakers. Musk decided to eliminate almost the entire Supercharger team at Tesla, a person familiar with the matter told Bloomberg News. The CEO hasn't publicly confirmed the move, but has said the company will slow the expansion of its charging network. In addition to potentially compromising budding partnerships with other carmakers looking to tap Tesla's chargers, another consequence of Musk's move may be undercutting Biden's EV push in the midst of his reelection campaign. Presumptive Republican nominee Donald Trump has repeatedly attacked electric cars on the campaign trail and predicted a "bloodbath" for the auto industry if he isn't elected. Traders in Asia can look to Bank of Japan meeting minutes as well as the plethora of PMIs -- including Indonesia, South Korea, Malaysia and Taiwan. Australia also has March trade data and building approvals. In the US, there's factory orders, initial jobless claims and trade. Apple also reports earnings, giving investors a better sense of how the iPhone maker is weathering a sales slump. Survey: The trading volume of US equity options hit a record last year, boosted by contracts that have zero days until expiration, also known as 0DTE. Do you think these should be expanded to include single stocks? Share your views in Bloomberg's MLIV Pulse survey. Here's what caught our eye over the past 24 hours: - Indian oil-refining giant joins army of traders of key oil price
- US, Philippines eye agreement to cut China nickel dominance
- Malaysia to raise government salaries by a record, PM says
- Chris Rokos's $17 billion hedge fund extends gains to about 20%
- Bitcoin ETFs flash sign of stress as discounts reach records
- He lost $36 billion in a week. Now Bill Hwang fights to avoid prison
- These Mother's Day gifts are so much more than merely useful
Markets initially read the Fed's messaging today as dovish as Chair Powell took a potential rate hike off the table, essentially removing a big risk for stocks. Yet the perils of the lagged impact from higher-for-longer rates are equally threatening for the economy and risk assets. The chair noted that policy makers are growing more confident that an interest rate cut will take longer than previously thought. His comments didn't really change traders' wagers on rate cuts for 2024, where at least one rate cut is fully priced in. Here's the thing though: The Fed has already kept rates unchanged in the 5.25%-5.5% range for about nine months, and Powell's comments didn't indicate a central bank that's willing to cut rates anytime soon. Holding rates unchanged for longer than a year has been rare historically. For risk assets, the danger is the cumulative impact of rate hikes will hit the economy, endangering the much-desired soft landing as rates take a toll on consumers and businesses. It will still take time to play out so it isn't an immediate concern for markets. But it's a tail risk that should keep bulls at bay. Tatiana Darie writes for Bloomberg's Markets Live blog in New York. Follow her on X at @tatianadariee. | 
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