GLOBAL MARKETS-Stocks decline on megacap drag, yen weaker after BOJ announcement

(Updates with close of European markets)

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Trump and Xi strike deal over rare earths and tariffs

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Fed's Powell hints 25 bps cut may be last of 2025

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ECB keeps rates unchanged

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Megacaps Microsoft and Meta decline, impacting global shares

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Dollar strengthens against yen after BOJ policy announcement

By Chuck Mikolajczak

NEW YORK, Oct 30 (Reuters) - Global shares retreated on Thursday and were poised for their biggest daily decline in three weeks, bogged down by megacaps Microsoft (MSFT) and Meta Platforms (META), while the dollar rose against the yen on policy news from the Federal Reserve and Bank of Japan. Markets were digesting comments from Fed Chair Jerome Powell, who dampened expectations that the U.S. central bank will cut interest rates at its December meeting after easing by 25 basis points on Wednesday.

Market reaction was muted after U.S. President Donald Trump said he had struck a deal with President Xi Jinping to trim tariffs on China in exchange for Beijing cracking down on the illicit fentanyl trade, resuming U.S. soybean purchases and keeping rare earths exports flowing, which markets had been anticipating in recent days. On Wall Street, the S&P 500 was lower, as Meta Platforms (META) , one of the "Magnificent Seven" group of megacap stocks, plunged nearly 11% after reporting quarterly results and forecast larger capital costs after the close on Wednesday. Bloomberg reported on Thursday that the Facebook and Instagram parent was targeting at least $25 billion in a bond sale. Also weighing on equities was a 3.2% decline in Microsoft (MSFT) following its quarterly earnings. Those declines were offset somewhat by a 3.1% climb in Google parent Alphabet as its earnings beat expectations due in part to strong artificial intelligence demand. "If the market is being a little bit more discerning, company by company based on their actual results as opposed to these MAG7 or AI-related stocks moving all in sync, that could be deemed somewhat of a positive," said Ron Albahary, chief investment officer at LNW in Philadelphia.

"Investors are starting to at least be more sensitized to, all right, where is the line of sight to return on investment? And the Meta reaction, despite the beat, could be an early sign that narrative is going to be challenged."

Fellow heavyweights Apple (AAPL) and Amazon (AMZN) are scheduled to report earnings after the U.S. market close on Thursday.

Markets are pricing in a 72.8% chance of a 25 basis point cut at the Fed's December meeting, down from more than 90% a week ago, according to CME's FedWatch Tool. The Dow Jones Industrial Average rose 141.30 points, or 0.30%, to 47,773.30, the S&P 500 fell 27.02 points, or 0.39%, to 6,863.39 and the Nasdaq Composite dropped 213.42 points, or 0.89%, to 23,745.05. MSCI's gauge of stocks across the globe lost 5.10 points, or 0.50%, to 1,009.32 and was on track for its largest daily percentage drop since October 10, while the pan-European STOXX 600 index closed down 0.1%. The European Central Bank (ECB) kept interest rates unchanged at 2% for the third meeting in a row and offered no hints about future moves as it enjoys a rare period of low inflation and steady growth, despite trade turbulence.

In currencies, the dollar index, which measures the greenback against a basket of currencies, advanced 0.39% to 99.52, with the euro down 0.34% at $1.1566. Sterling weakened 0.31% to $1.3154. The dollar strengthened 0.92% to 154.11 yen after the Bank of Japan (BOJ) kept interest rates steady. Investors had expected a more hawkish tone from Governor Kazuo Ueda, even as he sent the strongest signal yet that a rate hike was possible as soon as December.

The yield on benchmark U.S. 10-year notes rose 3.5 basis points (bps) to 4.093% after jumping 7.5 bps on Wednesday following Powell's comments, its biggest daily climb since July 11.

The 2-year note yield, which typically moves in step with rate expectations for the Fed, advanced 2.4 basis points to 3.61% after a 9.2 bp increase on Wednesday, its biggest since July 3. U.S. crude rose 0.26% to $60.64 a barrel and Brent advanced to $65.03 per barrel, up 0.17% on the day as investors gauged the U.S.-China trade deal.

(Reporting by Chuck Mikolajczak; Additional reporting by Pranav Kashyap and Nikhil Sharma in Bengaluru, Amanda Cooper in London and Gregor Stuart Hunter in Singapore; Editing by Ros Russell, Nick Zieminski and Richard Chang)