It's hard to ignore the event of the day in the markets, even if one makes a concerted effort: all eyes will inevitably turn at 2pm today to the Federal Reserve's monetary policy decision, the update of its economic and interest rate projections, and the accompanying remarks from its chairman, Jerome Powell.

Fed policymakers are heading into one of the most divisive meetings in years. The economy is offering only faint signals, thanks to a recent government shutdown that created a pothole in the data pipeline. Inflation has improved but still inspires periodic shivers. Labour-market softness suggests room for easing, yet officials appear to fear another inflationary flare-up. 

Investors are  trying to decipher what flavor of rate cut awaits them. A "hawkish cut," in which Jerome Powell lowers borrowing costs while sternly warning against expecting more, would leave markets nursing a monetary hangover. A more generous-sounding cut could fuel a rally already visible in the S&P 500, now within 1% of its record high. Small-cap shares have sprinted even faster, propelling the Russell 2000 to a new peak.

Yet the easing path beyond today remains murky. Traders once salivated over rate cuts in 2026: now they treat that prospect with suspicion. Inflation concerns have led markets in Australia, Canada and Japan to price in higher rates by the end of that year. American policymakers are similarly split. 

The Fed, for its part, seems poised to sound "cautious," not least because it wishes to retain maximum flexibility. Its balance-sheet plans, and the possibility of buying short-term bills to ensure banking-system liquidity, will be watched as carefully as Powell's adjectives.

White House economic adviser Kevin Hassett, widely tipped to succeed Jerome Powell when his term ends in late May, said yesterday that there remains significant scope to lower US rates substantially. His pronouncements have unnerved advocates of market stability, even as they delight his boss, President Donald Trump, who dreams of a Fed chair willing to serve as a conduit for his economic agenda, without asking too many questions.

In corporate news, the coming days will bring earnings from AI-heavyweights such as Oracle and Broadcom, at a time when investors are wrestling with a hangover from debt-fuelled corporate spending and complex deal-making across the sector. Skeptics worry companies may be dazzling themselves with big ideas before discovering less glamorous questions, such as how exactly they will make money.

The market's reaction to AI-linked firms remains split. GE Vernova surged after forecasting higher 2026 revenue and even expanded its dividend and share-buyback plans, suggesting that AI-related infrastructure may enjoy sturdier demand than the technologies it supports. Nvidia dipped slightly as investors debated whether a U.S. plan to let AI chips reach China would actually translate into higher sales. Palantir, meanwhile, rose after securing a contract to manage the U.S. Navy's nuclear-submarine supply chain.

Not all corporate news sparkled. GameStop disappointed. Cracker Barrel cut its outlook and saw its shares tumble. JPMorgan steadied after alarming investors with warnings of higher expenses next year. 

The dollar softened as traders bet that the Fed may lean less hawkishly.

Beyond America, China's consumer inflation has perked up to 0.7%, though not quite as much as economists expected; factory-gate prices continue to fall, underscoring persistent industrial weakness. And while diplomatic efforts swirl around the war in Ukraine, Russian and Chinese bombers decided to perform a joint patrol uncomfortably close to Japan.

Asia-Pacific markets are mirroring the US's cautious tone from yesterday. Japan, China, Hong Kong, Australia, South Korea and India are all trading slightly lower. European markets are slightly bearish, while US futures remain flat.

Today's economic highlights:

On the agenda today: PPI in Japan and CPI in China; in the United States, CPI, wholesale inventories, DOE crude oil inventories, the federal budget balance, and the FOMC rate decision (lower and upper bound). See the full calendar here.

  • Dollar index: 99,105
  • Gold: $4,197
  • Crude Oil (BRENT): $62.21 (WTI) $58.58
  • United States 10 years: 4.20%
  • BITCOIN: $92,150

In corporate news:

  • Franklin Templeton, Blackstone, KKR, and others at Abu Dhabi Finance Week voiced caution over high AI stock valuations but highlighted strong opportunities in AI infrastructure like data centers and electricity grids.
  • GE Vernova surged 10% after forecasting strong 2026 revenue, expanding its share buyback program to $10 billion, and projecting robust growth in its power and electrification segments; it also secured 80 GW of combined-cycle gas turbine contracts, anticipating increased revenues through 2026.
  • ByteDance and Alibaba are preparing to order Nvidia's powerful H200 AI chips following U.S. export approval, though uncertainties remain around supply and Beijing's regulatory stance.
  • Nvidia introduced location verification technology for its AI chips, including the H200, to prevent unauthorized exports, and it is facing scrutiny over complex AI investments.
  • DeepSeek is reportedly developing its next AI model using thousands of banned Nvidia Blackwell chips, raising export control concerns.
  • GE HealthCare expanded its partnership with Imaging Biometrics to distribute advanced neuroimaging tools FTB Express and QSMetric.
  • Chewy beat Q3 expectations with $3.12 billion in revenue and $0.32 adjusted EPS, significantly above analyst estimates.
  • Wtw will acquire Newfront for $1.05 billion, aiming to realize $35 million in synergies by 2028, with earnings accretive impact expected from 2027.
  • Microsoft and Amazon plan to invest $17.5 billion and $35 billion respectively in India over the next few years to boost AI and logistics capabilities.
  • Intel lost its EU antitrust appeal but had its fine reduced to €237 million due to the limited scope and impact of past anti-competitive practices.
  • Deere warned that Donald Trump's tariffs are intensifying financial pressure on U.S. farmers, according to the Financial Times.
  • Norway's sovereign wealth fund is avoiding direct investments in data centers due to volatility, despite strong AI-driven demand, and plans to expand into residential real estate.
  • Trump's administration has effectively frozen federal permits for wind and solar projects, threatening over 500 clean energy developments amid soaring electricity demand.
  • Ball Corporation received approval from the German Federal Cartel Office to acquire beverage can maker Benepack.
  • Honeywell appointed Indra Nooyi to its board of directors, effective January 1, 2026.
  • Ally Financial authorized a $2 billion share repurchase program.
  • Abivax shares jumped 20% amid speculation that Eli Lilly may be preparing a takeover bid following strong Phase 3 trial results.
  • JD.com will acquire a 50% stake in Hong Kong's CCB Tower for HK$3.5 billion to expand its regional office presence.
  • Ferguson beat Q1 profit expectations on data center demand but signaled weaker growth ahead for FY26, triggering an 8% stock drop.
  • Hims & Hers will launch a weight-loss program in the UK, offering Novo Nordisk's Wegovy and Eli Lilly's Mounjaro via subscription.
  • Paramount is considering sweetening its bid for Warner Bros. Discovery amid antitrust scrutiny.

Analyst Recommendations:

  • Abbvie Inc.: HSBC upgrades to buy from hold and raises the target price from USD 225 to USD 265.
  • Biogen Inc.: HSBC downgrades to reduce from hold and reduces the target price from USD 144 to USD 143.
  • Blue Owl Capital Inc.: Raymond James upgrades to strong buy from market perform with a target price of USD 20.
  • Commercial Metals Company: Jefferies upgrades to buy from hold and raises the target price from USD 70 to USD 78.
  • Confluent, Inc.: Guggenheim downgrades to neutral from buy.
  • Echostar Corporation: Morgan Stanley upgrades to overweight from equalwt and raises the target price from USD 82 to USD 110.
  • Emerson Electric Co.: Jefferies downgrades to hold from buy with a target price of USD 145.
  • GE Vernova Inc.: BM Pekao upgrades to hold from sell with a price target raised from USD 505 to USD 637.
  • Pentair Plc: Jefferies upgrades to buy from hold and raises the target price from USD 120 to USD 135.
  • Pepsico, Inc.: JP Morgan upgrades to overweight from neutral with a price target raised from USD 151 to USD 164.
  • Veralto Corporation: Jefferies downgrades to hold from buy and reduces the target price from USD 125 to USD 105.
  • Eli Lilly And Company: HSBC maintains its hold recommendation and raises the target price from USD 850 to USD 1070.
  • Exxon Mobil Corporation: Evercore ISI maintains its outperform recommendation and raises the target price from USD 120 to USD 145.
  • Gilead Sciences, Inc.: HSBC maintains its hold recommendation and raises the target price from USD 110 to USD 133.
  • Jazz Pharmaceuticals Plc: Piper Sandler & Co maintains its overweight recommendation and raises the target price from USD 147 to USD 219.
  • Netflix, Inc.: CICC maintains its outperform recommendation and reduces the target price from USD 1350 to USD 120.
  • Newmont Corporation: RBC Capital maintains its outperform recommendation and raises the target price from USD 97 to USD 120.