The Morning Edge: Powell Signals Patience as Tariffs Complicate Fed's Mandate

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Global Sentiment:  Risk-off
Factors:  Nvidia see $5.5 billion hit; Powell says growth slowing

TODAY’S WATCHLIST

• European Central Bank monetary policy announcement
• Infosys Earnings
• US Weekly initial jobless claims data

THE BIG STORY
Federal Reserve Chair Jerome Powell struck a deliberately cautious tone Wednesday, emphasizing the central bank will remain in data-watching mode even as President Trump's tariff policies threaten to pull inflation and employment in opposite directions. In his first remarks since the administration paused some tariffs last week, Powell framed recent market volatility as investors rationally digesting policy shifts rather than signalling financial stress requiring Fed intervention.

"The economy continues to give us conflicting signals," Powell told the Economic Club of Chicago, noting the unusual challenge of tariffs simultaneously boosting prices while potentially weakening growth and labour markets. With the Fed's dual mandate goals now potentially moving farther apart, Powell stressed patience: "We are well positioned to wait for greater clarity before considering any adjustments."

DATA
The Commerce Department reported Thursday that retail sales jumped 1.4% month-over-month in March—the strongest gain since January 2023 and slightly above economists' 1.3% forecast—as consumers rushed to make big-ticket purchases ahead of impending price hikes from new tariffs. The year-over-year increase was even more dramatic at 4.6%, with strength in auto sales as buyers sought to avoid the 25% vehicle tariffs that took effect in April. While the spending spree likely provided critical support to first-quarter GDP, analysts caution this may represent front-loaded demand rather than sustainable growth, with the full impact of higher tariffs yet to be felt across consumer wallets.

WHAT HAPPENED OVERNIGHT
US stocks slumped on Wednesday after Nvidia flagged heavy losses from US chip export curbs to China, while Fed Chair Powell signalled slowing economic growth. 

US Treasury yields dropped as Powell's cautious remarks on growth and inflation rattled markets on Wednesday, with the 10-year yield slipping 4 basis points to 4.283%. The move reversed some of last week's surge, which was driven by economic stability fears.  While, the US dollar index tumbled 0.7%, hitting its weakest level since April 2022, as risk aversion weighed on demand for US assets. Safe-haven currencies surged, with the yen jumping 0.8% to a September high and the Swiss franc soaring 1.2% to a decade peak. 

Brent crude oil prices jumped nearly 2% on Wednesday, with Brent crude climbing to $65.85 a barrel – a two-week high – as new US sanctions on Chinese buyers of Iranian oil stoked supply concerns. 

Day’s Ledger
Economic Data:

• EIA to release weekly natural gas storage report
• Japan March trade data
• US April Philadelphia Fed Manufacturing index
• US Baker Hughes Oil Rig Count data
• US March housing starts data
• US Weekly initial jobless claims data

Corporate Actions

• Jan-Mar Earnings: Infosys, HDFC Asset Management Company, Jio Financial Services, HDFC Life Insurance Company, Mahindra EPC Irrigation, Tata Elxsi, Indosolar, E2E Networks, and Shrenik
• Adani Ports board to consider preferential issue of equity shares
• IDFC First Bank board to consider fund raising
• Himatsingka Seide board to consider fund raising

Policy Events

• Bank of Japan board member Nakagawa speaks  
• European Central Bank monetary policy announcement
• US Fed Vice Chair Barr speaks
• FM Sitharaman, SEBI’s Pandey at BSE event
• SEBI’s Pandey, Bajaj FinServ’s Bajaj at CII summit

TICKERS

• Angel One reports 48% decline in March quarter net profit
• BHEL signs pact with BARC for indigenous Hydrogen Electrolyser tech
• Dalmia Bharat faces provisional attachment order of ₹7.93 billion
• DLF to sell Kolkata IT SEZ for ₹6.93 billion
• Glenmark to launch generic Adderall tablets in US in May
• Kfin Technologies to acquire Ascent Fund Services for $34.68 million
• Madras High Court sets aside ₹2.31 billion GST demand against Indian Railway Finance Corp.
• Petronet LNG appoints Saurav Mitra as CFO and director of finance
• Tanla Platforms signs first overseas messaging services deal
• UltraTech Cement to acquire 26% stake in Renewable Energy Firm
• Vijay Shekhar Sharma voluntarily forfeits 21 million ESOP units
• Wipro Q4 net profit rises 6.4% QoQ, revenue flat; large deal wins surge 48.5%
• YES Bank receives additional tax demand notice of ₹2.92 billion for FY17-18
• Zydus Lifesciences faces setback in US litigation with Astellas Pharma

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