The week's slate of major central bank meetings began with a decidedly hawkish tone from the Bank of Japan, a move that has put other central banks in focus as policymakers gather across the G7. The BOJ left official rates unchanged, but three of nine policymakers voted to raise rates and the central bank raised its inflation forecast. Market participants have increased odds of a further BOJ rate rise as soon as June.
Attention now shifts to several other high-profile meetings scheduled this week, including those of the Bank of England, the European Central Bank and the U.S. Federal Reserve. None of those central banks are widely expected to change policy rates at their upcoming meetings, yet policymakers could nonetheless telegraph a more hawkish stance, mirroring the tone set in Tokyo.
Currency, equities and oil move
In currency markets, the yen briefly firmed to about 159 per dollar on the BOJ outcome before reversing those gains. Japanese equities reacted negatively, with the Nikkei stock index retreating by roughly 1 percent following the decision.
U.S. equity benchmarks continued to push higher. The S&P 500 and the Nasdaq recorded fresh closing highs after modest gains on Monday, maintaining a recent run of record levels. That bullish tone persisted even as oil prices jumped to a three-week high, with Brent crude climbing past $111 per barrel.
The oil advance reflects continued disruption to shipping through the Strait of Hormuz and an absence of a substantive resolution to the stalemate with Iran. Most recently, reports indicated that President Trump expressed unhappiness with an Iranian proposal that would have postponed nuclear discussions until after the Gulf situation was resolved.
Despite the energy-driven uncertainty, many investors are concentrating on central bank communications and a heavy schedule of earnings from U.S. mega-cap technology firms later this week, with results due on Wednesday and Thursday.
Technology and semiconductor sectors remain strong
Technology and chip stocks continued to outperform. Qualcomm rallied 13 percent on Monday amid reports that it plans to work with OpenAI on new smartphone processors. Nvidia extended its rally to fresh records, regaining more than a trillion dollars of market capitalization over the last month. South Korea's KOSPI, which has heavy exposure to chip-related names, also hit another record on Tuesday while other Asian markets softened.
In regulatory and strategic moves affecting the AI sector, Chinese authorities ordered Meta to unwind its purchase of Manus, a Singapore-based AI startup founded by Chinese nationals, underscoring the strategic sensitivity of AI assets in Beijing's view. Separately, Microsoft and OpenAI reworked their commercial relationship in a way that permits OpenAI to sell products to Microsoft's competitors. The renegotiation broadens OpenAI's ability to strike commercial arrangements with other large technology firms, while Microsoft plans to reduce its dependence on OpenAI by developing its own AI models.
Chart of the day
Microsoft has been an early backer of OpenAI, investing a total of $13 billion since 2019. That funding helped accelerate OpenAI's rise as a leading AI developer and contributed to growth in Microsoft's Azure cloud business.
Events to watch
- U.S. Federal Reserve - the Federal Open Market Committee begins its two-day policy meeting.
- U.S. Conference Board - Consumer Confidence Index for April, published at 10 a.m. EDT.
- U.S. Treasury auctions - scheduled sales of 2-year and 7-year notes.
Market participants will be parsing central bank signals, macro data and corporate earnings for clues on the path of policy and growth. The combination of persistent geopolitical risk in the Gulf and evolving ties between large tech firms and AI developers is likely to keep both energy and technology sectors in focus as the week unfolds.