Whiplash on European markets as oil tumbles off four-year high, yen spikes
A man walks in front of an electronic screen displaying Japan's Nikkei stock prices quotation board inside a conference hall in Tokyo, Japan, April 27, 2026. REUTERS/Issei Kato
LONDON, April 30 : European markets performed a sharp U-turn on Thursday as oil prices plunged after hitting a four-year high, UK gilt yields dropped after the Bank of England held interest rates and a jump in the yen prompted speculation about foreign exchange intervention.
With a European Central Bank rate decision and earnings from iPhone maker Apple still to come, and a report suggesting U.S. President Donald Trump will be briefed on options for more strikes on Iran, it was another breathless session.
The biggest mover was Brent which dropped back to $113 a barrel, having surged as high as $126 overnight on concerns that a prolonged conflict in the Middle East could choke oil supplies for months.
The Japanese yen surged 2 per cent following stark warnings from Tokyo officials, including the finance minister, that intervention to prop up the currency could be imminent.
It pushed the dollar down 2.1 per cent to below 157 yen, putting the U.S. currency on track for its biggest one-day drop against the yen since last August, when it fell 2.25 per cent.
Japanese Finance Minister Satsuki Katayama had said earlier that the timing to take "decisive action" in the market was nearing, in her strongest signal yet of potential currency intervention to prop up the sagging currency.
Rate-sensitive 2-year UK Gilt yields fell over 10 basis points as the BoE kept interest rates at 3.75 per cent in a resounding 8-1 vote that dampened expectations that it might have been tempted to hike.
"This shock will induce a trade-off between higher inflation and softer output, and the appropriate policy response is state contingent," BoE Governor Andrew Bailey said, referring to the Iran war-related spike in oil prices.
The European Central Bank was due to announce its latest rate decision, with bets that it will be considering a rate hike soon, albeit not this month.
There had been a hawkish shift in tone from the U.S. Federal Reserve as it left rates on hold on Wednesday that had triggered a selloff in the bond markets - which in tandem with the oil price, was only now reversing.
The 2-year UK gilt yields were back below 4.5 per cent, while 2-year German yields - which are sensitive to near-term ECB rate changes - looked set to snap an 8-day run on gains.
AXIOS SAYS TRUMP TO BE BRIEFED
AXA's chief economist, Gilles Moec, said everything centred on worries about the U.S.-Israeli war against Iran.
News site Axios quoted unspecified sources as saying Trump would on Thursday receive a briefing from the leader of the U.S. Central Command, Brad Cooper, on new plans for potential military action against Iran.
Negotiations have stalled and Axios said Washington hopes to make Iran more flexible at the negotiating table on nuclear issues.
"The inflation shock is significant and probably going to last longer than expected and at the same time the damage to the economy is going to be higher," Moec said.
"This is playing into the hands of the hawks," he said, referring to central bankers calling for higher interest rates to prevent further inflationary problems.
The day's swing in oil prices was over 10 per centage points. Brent was last at $113 a barrel and down almost 4 per cent having been as high as $126.41 overnight. It is still nearly double the price it started the year at.
The rally in Japan's yen came after it had breached the key 160 threshold. Investors have built up the biggest short yen position in nearly two years, data shows.
Overnight, the yield on 10-year Japanese government bonds had climbed to 2.5 per cent, the highest since June 1997.
EYES ON APPLE
Investors were also gearing up for earnings from iPhone maker Apple later as part of what has already been a frenetic week of 'Big Tech' reports. [.N]
Google parent Alphabet's shares had leapt 7 per cent in extended Wall Street trading on Wednesday after it beat forecasts. Microsoft and Amazon's were also solid although Facebook and Instagram owner Meta tumbled 7 per cent on its plans to plough billions more into AI and datacentres.
Attention was also on what the ECB will soon signal, especially after Wednesday's shift in tone at the Fed.
Three of the U.S. central bank's board members voted to drop the easing bias in its policy statement in the most divided decision since 1992.
Outgoing Chair Jerome Powell confirmed he would stay on as a governor for now to defend the institution's independence as his successor Kevin Warsh, picked by low-rate advocate U.S. President Donald Trump, moves toward confirmation.
