LONDON - A sense of relief percolated through world markets on Thursday after the Federal Reserve shot down talk of pivoting back to interest rate hikes, while the yen backtracked after another suspected bout of FX intervention.

Europe's big bourses made a sluggish start as much of the region returned from a day off, but after a choppy few weeks dealers were just happy the Fed hadn't inflicted any major damage, and that borrowing costs were ticking down again.

The Fed's rate setters unanimously decided to leave US rates in the 5.25 percent to 5.5 percent range they have been in since July but it was the post meeting press conference that proved most interesting.

While Fed chair Jerome Powell indicated that stubbornly high inflation would see a long-expected US rate cut pushed back, he refused to entertain talk that rates might actually need to go up again.

BCA Research bond market strategist Ryan Swift said the bottom line was that barring any surprise rate hikes, "October’s cyclical peak in (US Treasury) yields will hold" and "eventually break out to the downside ... but only once the labor market data meaningfully deteriorate".

The spotlight was still on the Japanese yen's precarious level in the currency markets too.

Shortly after Powell had finished telling reporters the Fed may have to leave rates elevated, the Japanese currency surged against the dollar in its second suspected intervention-fuelled leap of the week.

It traded as strong as 153 to the dollar before sliding back to around 156 in Asia and then moved to around 155.5 in Europe.

Kyle Rodda, senior financial market analyst at Capital.com in Melbourne, said it had been another "sneak attack" by Japan's authorities "looking to punish speculators and send a warning about shorting the yen".

"It caught markets off guard because, obviously, it happened in the US session and seemed to be timed with the FOMC (Fed meeting and press conference) to take advantage of a weaker dollar".

The main dollar index, which measures the currency against the yen, euro, sterling and three other major peers, was down 0.1 percent in Europe, following a 0.6 percent retreat on Wednesday from near six-month highs.

Europe's dealers had nudged the euro up 0.1 percent in the other direction to $1.0727 despite data showing a deepening downturn in eurozone manufacturing activity.

There was some brighter news in the German data and from Paris where the OECD upgraded its global growth forecast to 3.1 percent for this year and 3.2 percent next year, although that was largely thanks to stronger-looking US and Chinese economies.

Apple eyed

Wall Street's S&P 500 futures were up 0.6 percent, pointing to it recouping the ground it lost late on Wednesday.

All the focus there will be on Apple's results, with analysts bracing for a big drop in sales and waiting to hear how the company plans to embed AI into its iPhones.

Oil was licking its wounds after a heavy fall triggered by a surprise jump in US stockpiles. Brent crude futures were up roughly 80 cents a barrel to $84.18 in Europe, after touching a seven-week low of $83.29. US crude was at $79.52 a barrel

The Fed's signals were still being digested by bond markets, which were also starting to refocus on key US non-farm payrolls data on Friday.

Ten-year Treasury yields rose 2.3 basis points (bps) to 4.611 percent in Tokyo and Europe, having fallen 9.3 bps in New York on Thursday. Two-year yields, which fell more than 10 bps in New York overnight, rose 1 bp to 4.9497 percent.

After pricing in as many as six rate cuts for 2024 earlier this year, markets now price only one, in December.

Outside of oil, trade in other commodities was subdued by holidays in China, where markets are closed for the rest of the week. Gold rose overnight and was last holding at $2,314.44.