Volkswacht Bodensee - Stock markets retreat on revised US economic outlook

Fed boss Jerome Powell on Wednesday suggested that any increase to consumer prices caused by tariffs would likely be short-lived, even as the central bank slashed its growth outlook and hiked inflation expectations.

It followed the Fed's decision to keep US interest rates on hold, which supported the dollar.

The Bank of Japan also held rates Wednesday, while on Thursday the Swiss central bank cut and Sweden's Riksbank held its steady. The Bank of England is expected to hold borrowing costs later in the day.

Lingering tariff fears and geopolitical developments helped safe-haven gold to another record above $3,057.49 an ounce.

The price of copper reached a five-month high above $10,000 a tonne as US companies stock up on the metal targeted by Trump's tariffs.

Oil prices dipped as weak demand offsets a fresh upsurge in Gaza hostilities.

Traders kept tabs also on eastern Europe after Trump told Ukraine's President Volodymyr Zelensky that the United States could own and run his country's nuclear power plants as part of his bid to secure a ceasefire with Russia.

The main markets focus was on the United States, the world's biggest economy.

"Great uncertainty remains over the direction of travel for the US economy, with business activity likely to remain subdued until we see greater clarity over the trade relationships and potential pricing for US imports and exports," noted Joshua Mahony, analyst at Scope Markets.

Trump's painful duties on imports into the United States and threats of further tariffs have stoked recession fears.

Some observers have warned also that the president's pledges to slash tax, regulation and immigration will reignite inflation could force the Fed to hike rates rather than cutting further.

- Fed forecasts -

After a closely-watched meeting Wednesday, the US central bank stood pat on borrowing costs for the second time in a row and said "uncertainty around the economic outlook has increased".

It predicted that the US economy would expand 1.7 percent this year, compared with 2.1 percent estimated in December.

It tipped core inflation to hit 2.8 percent as opposed to the 2.5 percent previously seen.

However, its dot plot estimate for rate cuts still showed officials saw two this year.

"We do understand that sentiment has fallen off pretty sharply, but economic activity has not yet and so we are watching carefully," Powell said.

"I would tell people the economy seems to be healthy."

He added that inflation had "started to move up" and officials think that is "partly in response to tariffs. And there may be a delay in further progress over the course of this year".

Any increase would be "transitory", Powell said, but warned it would be hard to determine how much of a factor the levies -- as opposed to other factors -- would play in lifting prices.

The remarks were taken as market-supportive and 10-year US Treasury yields, a proxy of monetary policy, dropped.

Wall Street rallied Wednesday, while Trump called on decision-makers to immediately cut rates, urging on his Truth Social platform to "do the right thing".

- Key figures around 1030 GMT -

London - FTSE 100: DOWN 0.4 percent at 8,670.90 points

Paris - CAC 40: DOWN 1.3 percent at 8,069.13

Frankfurt - DAX: DOWN 1.9 percent at 22,838.76

Hong Kong - Hang Seng Index: DOWN 2.2 percent at 24,219.95 (close)

Shanghai - Composite: DOWN 0.5 percent at 3,408.95 (close)

Tokyo - Nikkei 225: Closed for a holiday

New York - Dow: UP 0.9 percent at 41,964.63 points (close)

Euro/dollar: DOWN at $1.0845 from $1.0903 on Wednesday

Pound/dollar: DOWN at $1.2944 from $1.3002

Dollar/yen: DOWN at 148.47 yen from 148.71 yen

Euro/pound: DOWN at 83.79 pence from 83.82 pence

West Texas Intermediate: DOWN 0.1 percent at $66.86 per barrel

Brent North Sea Crude: DOWN 0.5 percent at $70.73 per barrel

F.Mueller--VB