Dow Jones Futures Rally On Trump's 'Major Trade Deal'; Nvidia Partner Arm Dives On Earnings

U.S. Jobless Claims Fall, But Labor Market Signals Remain Mixed

Insured Unemployment Drops but Remains Elevated

Unadjusted Claims Show Larger Drop than Expected

State-Level Data Highlights Sectoral Layoff Pressures

Federal Claims Stable, Extended Benefits Unused

Market Forecast: Neutral-to-Bearish on Labor Conditions

Source : fxempire

Investors grappling with uncertainty over the economic fallout from President Donald Trump's tariffs are facing the likelihood that the chaotic trade backdrop means the path of monetary policy remains up in the air.

The Federal Reserve kept rates steady on Wednesday, as expected, and said the risks of both higher inflation and unemployment had risen, leaving the U.S. central bank in no hurry to take any interest-rate actions for the foreseeable future and rendering the "appropriate response for monetary policy" unclear.A slowdown has yet to emerge in economic data, but investors are bracing for potential damage from the Trump administration's sweeping tariffs, while the trade backdrop remains in flux as the White House negotiates with trading partners. That is leading some investors to be more cautious, focusing on inflation-protected assets and shares of companies that stand a better chance of weathering a downturn.

With the central bank on the sidelines for now, investors said asset prices were primed to be even more sensitive to important economic data and trade developments as market participants parse them for clues about the Fed's likely next move.

"There's nothing investors like less than uncertainty and the Fed isn't in a position to offer them certainty," said Josh Jamner, senior investment strategy analyst at ClearBridge Investments.

In a press conference following the U.S. central bank's monetary policy decision, Fed Chair Jerome Powell said trade policy remains a source of uncertainty that affirms the Fed's need to maintain a wait-and-see approach.

"Powell is like every other investor: just waiting to see how this plays out," said Robert Christian, head of Absolute Return Portfolio Management at Franklin Templeton Investment Solutions.

After cutting rates by a total of one percentage point last year, the Fed has held its benchmark rate at 4.25% to 4.5% so far in 2025, but investors broadly have been expecting more easing to come this year.

Market expectations following Wednesday's meeting were similar to where they stood prior to the decision, with Fed fund futures indicating an expectation of about three 25-basis-point reductions by December, with the July meeting tipped as the likely next cut.

The projected further easing stems from the expectation that the hit to economic growth will outweigh any push higher in inflation, said Marta Norton, chief investment strategist at retirement and wealth services provider Empower.

While Norton called that her "base case," she added, "I do think we have to allow for a wider range of possibilities, particularly the idea that inflation could surprise to the upside."

Ed Al-Hussainy, senior rates strategist at Columbia Threadneedle Investments, said it was more likely that the Fed would not act until at least its September meeting.

"It would take some dramatic deterioration for the Fed to start moving before September," Al-Hussainy said. "And then by September, we'll have a little bit of a better sense of at least the direction of travel."

Indeed, traders pared back on the amount of easing expected this year, as well as discounting the chances of a cut in June, following last Friday's strong U.S. employment report. Data showed payrolls rose by a higher-than-expected 177,000 jobs last month.

On top of the lack of clarity about trade and monetary policy, there is uncertainty about fiscal policy, including how the federal budget process will shake out, said Jeffrey Palma, head of multi-asset solutions at Cohen & Steers.

"All of those suggest that market volatility stays somewhat elevated going forward," Palma said.

Markets largely took the Fed's announcement in stride. The S&P 500 (.SPX), ended up 0.4% following the meeting, with shares of chipmakers rallying after a report that the Trump administration plans to rescind artificial intelligence chip curbs. The 10-year Treasury yield was at 4.27% late on Wednesday, slightly lower on the day.

The Cboe market volatility index (.VIX), an options-based gauge of investor anxiety, edged lower but at 23.55 was still above its long-term median level of 17.6.

SAFER INVESTMENTS SOUGHT

Palma said his firm is recommending broader diversification of portfolios, with exposure to "real assets" such as real estate, infrastructure and natural resources that can buffer against an inflationary backdrop.

Given the uncertain risk/reward situation, ClearBridge's Jamner said investors would be better served by shifting into shares of companies that either have the flexibility to adjust to changing economic environments or have competitive advantages that insulate them from economic vagaries.

Financial advisers – many of whom have been working on rebalancing and cutting risk from client portfolios for several months now – said the lack of precise responses or detailed forecasts by Powell was exactly what they had anticipated.

Following the meeting, Rafia Hasan, chief investment officer of Perigon Wealth Management, said she was turning her focus to potential trade deals.

“That is what has the most potential to have a real impact on the markets,” she said.

Source: Kitco

Source: Bloomberg

The pound rose on Thursday, lifted by a surprise split in votes on rates by Bank of England policymakers, while shares in UK companies rallied, after US President Donald Trump said he had struck a "full and comprehensive" trade deal with Britain.

The BoE cut its main rate by a quarter point to 4.25%, as widely expected, although there was a three-way split among policymakers as Trump's tariffs weigh on global economic growth.

Sterling jumped, rising to US$1.332, from US$1.326 before the decision, as traders trimmed their bets on the chances of the BoE delivering another three rate cuts this year.

"Two members including chief economist Huw Pill preferred to leave rates unchanged. That may reduce speculation as to a possible back-to-back reduction at next month’s meeting," Investec chief UK economist Philip Shaw said.

The pound had received a boost from an overnight report by the New York Times that flagged the possible trade deal between Britain and the United States.

On his Truth Social platform on Thursday, Trump said he would hold a press conference later with details and the agreement would "cement the relationship between the United States and the United Kingdom for many years to come".

Britain's Prime Minister Keir Starmer will also provide an update later on Thursday on trade talks with the United States, a spokesperson for his office said.

A deal would be the second for Britain in a week after it clinched a free trade pact with India.

London's FTSE 250 index of midcap companies, which are more sensitive to the domestic economy, rose 1.1%, beating the large-cap 100 index, which rose just 0.3%.

The globally focused FTSE 100 on Tuesday racked up 16 straight days of gains, its longest winning streak on record, powered by a solid first-quarter earnings season and optimism over a thawing in global trade tensions.

"The UK has struggled to make deals with different countries following the exit from the EU and has been waiting on a deal with the US for a long time. It definitely matters but lets see what the deal is going to be," Kirstine Kundby-Nielsen, FX analyst at Danske Bank, said.

"I'm cautiously optimistic. On balance I would think it's positive for the pound," she said.

The pound was last up 0.3% against the euro at 84.78 pence per euro.

Unlike many of its major trading partners, the United States has a small trading surplus with Britain, to the tune of some US$12 billion. Britain's main U.S. goods exports are in the form of cars, steel and pharmaceuticals.

Shares in energy companies were the prime gainers on the mid-cap index, while the FTSE 100 kept in positive territory thanks to a rally in the aerospace and defence sector, while drugmakers Astrazeneca and GSK proved the biggest drags.

Source: Theedgemarkets

Source: Reuters