Weekly jobless claims surge to 241,000, more than expected, in latest sign of economic trouble

Economic

Summary:

Jobless claims jumped to 241,000 last week, the highest since February, signaling potential economic trouble amid GDP contraction and rising layoffs, especially in New York, despite stable longer-term trends.

Initial unemployment claims posted an unexpected increase last week in a potential trouble sign for the wobbling U.S. economy.

First-time filings for unemployment insurance totaled a seasonally adjusted 241,000 for the week ending April 26, up 18,000 from the prior period and higher than the Dow Jones estimate for 225,000, the Labor Department reported Thursday. This was the highest total since Feb. 22.

Continuing claims, which run a week behind and provide a broader view of layoff trends, rose to 1.92 million, up 83,000 to the highest level since Nov. 13, 2021.

Much of the gain seemed to come from one state — New York, where claims more than doubled to 30,043, according to unadjusted data. There was no apparent reason for the surge listed in the news release.

The District of Columbia, which had seen a sharp increase earlier this year amid President Donald Trump’s efforts to shrink the federal government payroll, saw a modest increase last week.

The report comes amid several trouble signs for the economy, though the labor market has remained stable.

In a release Wednesday, the Commerce Department said gross domestic product fell at a 0.3% annualized rate in the first quarter, the first contraction in three years. Much of the decline was driven by a surge in imports ahead of Trump’s tariffs announced in early April, though consumer spending cooled and a pullback in government outlays also contributed to the decline.

Despite the rise in the claims, the longer-term trend remains intact. The four-week moving average rose 5,500 to 226,000, largely in line with recent trends.

The Labor Department on Friday will release its nonfarm payrolls total for April, with economists expecting an increase of 133,000. The Thursday release will not factor into that number as it is beyond the survey week used for the report.

Source: cnbc

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Warren Takunda

Stocks

Wall Street surged early Thursday with a string of major U.S. companies posting strong quarterly earnings in an economic environment that has grown increasingly uncertain as the U.S. upends long-standing trade policies.

Futures for the S&P 500 jumped 1.2%, while futures for the Dow Jones Industrial Average gained 0.8%. Nasdaq futures rose 1.8%, pulled higher by technology giants who issued better-than-forecast results.

Microsoft climbed 9.2% in off-hours trading after the software giant said sales in its cloud computing and artificial intelligence business contributed to a 13% increase in revenue and an even bigger jump in profits. Both figures beat Wall Street estimates.

Meta, the parent company of Facebook and Instagram, also handily beat analysts targets for revenue and profit in the period. Meta said strong advertising revenue on its social media platforms was boosted by artificial intelligence tools and its shares climbed 6.4%.

On the losing side was McDonald’s, which saw its same store sales in the U.S. plunge by the most since 2020, when the pandemic effectively shut down the retail, dining and travel sectors.

Much like Chipotle last week, McDonald’s said its store traffic fell unexpectedly as economic uncertainty weighed on diners. McDonald’s shares fell less than 1% before the bell.

General Motors lowered its profit expectations for 2025 on Thursday, citing a tariff impact of between $4 billion and $5 billion. , GM now foresees full-year adjusted earnings before interest and taxes in a range of $10 billion to $12.5 billion.

GM said earlier this week that it was reassessing its projections for the year and investors, now with new guidance from the automaker, sent its shares up 2.8%.

Uncertainty about what President Donald Trump’s trade war will do to the U.S. economy remains a key focus for investors.

The U.S. has been hit with the threat of a worst-case scenario called “stagflation,” one where the economy stagnates yet inflation remains high. Economists fear it because the Federal Reserve has no good tools to fix both problems at the same time. If the Fed were to try to help one problem by adjusting interest rates, it would likely make the other worse.

A more comprehensive report on the job market from the U.S. government arrives Friday. The on-again-off-again rollout of U.S. tariffs has created a lot of uncertainty about what’s to come.

The confusion has led to historic swings for financial markets, from stocks to bonds to the value of the U.S. dollar, that battered investors.

Many markets around the world were closed for May Day, or international Labor Day holidays.

At midday in London, Britain’s FTSE 100 inched up less than 0.1%.

Tokyo’s benchmark Nikkei 225 rose 1.1% to finish at 36,452.30. As expected, the Bank of Japan decided to keep its benchmark interest rate unchanged as worries mount over the impact of Trump’s policies. The central bank also cut its economic growth forecast for the fiscal year ending March 2026 by more than half, to 0.5% from 1.1% three months ago.

“Considering the significant downgrading of growth and inflation forecasts in its Quarterly Outlook Report, the central bank will likely take a long pause to assess the impact of high global trade policy uncertainty on growth and inflation,” Shigeto Nagai of Oxford Economics said in a report.

The U.S. dollar rose to 144.39 Japanese yen from 143.06 yen. The euro cost $1.1326, inching down from $1.1331.

Australia’s S&P/ASX 200 edged up 0.2% to 8,145.60.

In energy trading, U.S. benchmark crude shed $1.34 to $56.87 a barrel. Brent crude, the international standard, gave up $1.29 to $59.77 a barrel.

Source: AP

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Michelle

Economic

Forex

The number of Americans filing new applications for unemployment benefits increased more than expected last week, potentially hinting at a pick-up in layoffs from tariffs, which weighed on the economy in the first quarter.

Initial claims for state unemployment benefits jumped 18,000 a seasonally adjusted 241,000 for the week ended April 26, the Labor Department said on Thursday. Economists polled by Reuters had forecast 224,000 claims for the latest week.

The economy contracted last quarter for the first time in three years, swamped by a flood of imports as businesses tried to avoid duties from President Donald Trump's tariffs.

Economists expect the aggressive trade policy to result in a wave of job losses. The tariffs, expected to be a drag on domestic demand, are already prompting some companies to reduce staff. United Parcel Service said on Tuesday it would slash 20,000 jobs and shut 73 facilities as part of a planned reduction in deliveries for Amazon.com.

Businesses in general have mostly adopted a wait-and-see attitude and are retaining their workforces, while remaining cautious about adding headcount.

The number of people receiving benefits after an initial week of aid, a proxy for hiring, soared 83,000 to a seasonally adjusted 1.916 million during the week ending April 19, the claims report showed.

The claims data have no bearing on April's employment report, scheduled for release on Friday. Nonfarm payrolls likely increased by 130,000 jobs last month after rising 228,000 in March, a Reuters survey of economists showed. The unemployment rate is forecast unchanged at 4.2%.

Source: Yahoo Finance

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Michelle

Economic

Forex

Why Citi Forecasts a USD JPY Correction Higher

Citi, a major player in global finance, has put forth a view that the USD/JPY pair is likely to see a move upward, or a ‘correction higher’. This prediction isn’t pulled out of thin air; it’s based on a detailed analysis of various economic indicators and central bank policies affecting both the United States Dollar and the Japanese Yen.

Here are some key factors that likely underpin Citi’s expectation:

Interest Rate Differentials: The significant gap between interest rates set by the US Federal Reserve and the Bank of Japan remains a primary driver for USD/JPY. Higher US rates generally make the dollar more attractive compared to the low-yielding Yen, creating upward pressure on the pair.
Central Bank Policy Divergence: While the Fed has hinted at potential rate cuts in the future, the Bank of Japan has only recently moved away from negative rates and remains cautious about further tightening. This divergence in monetary policy trajectories supports the dollar’s strength relative to the yen.
Economic Data: Strength or weakness in US and Japanese economic data (like inflation, GDP growth, employment figures) can influence currency valuations and market expectations about future central bank actions. Positive US data or weak Japanese data can bolster the case for a higher USD/JPY.

Understanding the Forex Market Dynamics

The Forex market, or foreign exchange market, is the largest and most liquid financial market globally. It’s where currencies are traded. The USD/JPY pair is one of the most actively traded pairs, often reflecting the economic health and monetary policy stances of the world’s largest and third-largest economies, respectively.

Movements in USD/JPY are influenced by a complex interplay of factors, including:

Global risk sentiment (JPY is often seen as a safe-haven currency, though this role can shift).
Commodity prices (Japan is a major importer, US is a producer).
Geopolitical events.
Capital flows between the two countries.

Citi’s view suggests that despite recent movements, the underlying fundamentals favor a stronger dollar against the yen, leading to this expected correction.

Navigating the Japanese Yen Landscape

The Japanese Yen has been particularly sensitive to interest rate differentials in recent years. The Bank of Japan’s long-standing commitment to ultra-low interest rates, even as other central banks tightened policy, led to significant yen weakness. While the BoJ made a historic shift away from negative rates in March 2024, their forward guidance remains dovish, suggesting a slow and cautious approach to further policy normalization.

This cautious stance contrasts with the Federal Reserve’s position, where although future rate cuts are anticipated, the timing and pace remain uncertain and dependent on inflation data. This persistent policy divergence is a core reason why analysts like those at Citi see potential for the USD/JPY to move higher, even if temporarily correcting from recent levels.

Conclusion: Preparing for the Expected Correction

Citi’s prediction of a correction higher for USD/JPY highlights the ongoing influence of interest rate policies and economic fundamentals on the Forex market. While no forecast is definitive, understanding the rationale behind a major institution’s view provides valuable context for navigating the complexities of currency trading. The persistent divergence in monetary policy between the US and Japan, coupled with economic data, forms the basis for expecting a potential strengthening of the dollar against the Japanese Yen. Traders should remain vigilant, combining such insights with their own analysis and risk management strategies as they approach the market based on this Citi forecast.

Source: CryptoSlate

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Warren Takunda

Economic

The yen slid on Thursday as the Bank of Japan (BOJ) lowered growth forecasts in light of U.S. tariffs and left rates on hold, while investors watched for signs of the trade war cooling and awaited U.S. labour market data.

The yen dropped by as much as 1.1% to 144.74 per dollar, its weakest since April 10. It was last at 144.23 per dollar.

The BOJ's decision hold on interest rates was unanimous and anticipated, but investors saw the downgraded outlook as reducing the likelihood of future hikes.

"It was no surprise that they revised both the growth and inflation down but both were significantly more than the market had expected," said Mohamad Al-Saraf, FX research associate at Danske Bank.

"The signals were clearly more dovish than expectations."

The BOJ now expects underlying consumer inflation to reach levels consistent with its 2% target around the latter half of fiscal 2026 and onward, pushing back the timing by around a year from its previous projection in January.

In a press conference after the meeting, BOJ Governor Kazuo Ueda said there was no need to raise rates in haste when underlying inflation was stalling.

Money market traders were now pricing in just 11 basis points of tightening by the end of the year, down from around 16 basis points before the meeting.

DOLLAR STABILISES

The dollar has so far been one of the bigger casualties of the trade war as President Donald Trump's flip-flopping tariffs have hit growth expectations and rattled confidence, notching its largest monthly fall for 2-1/2 years through April.

But the greenback has come off lows as Trump has suspended much of his tariff barrage and hinted at deals, including with China, which has been hit with the highest U.S. import levies.

The dollar was mostly steady against other major currencies apart from the yen on Thursday. The euro was little changed after earlier touching a two-week low of $1.1288 and sterling was flat at $1.3335. Most European markets were closed on Thursday for the May Day holiday.

"We're in a window here where we're on a de-escalation path, and there are some de-escalation trades around it," said Richard Franulovich, Westpac's head of currency strategy in Sydney.

Trump said on Wednesday that he had "potential" trade deals with India, South Korea and Japan and that there was a very good chance of reaching a deal with China.

U.S. Trade Representative Jamieson Greer had said earlier on Wednesday that no official talks were happening with China although Yuyuan Tantian, a social media account affiliated with Chinese state broadcaster CCTV, said the Trump administration had approached China seeking discussions.

A surge in imports to front-run tariffs dragged U.S. GDP into contraction mode in the first quarter, data showed on Wednesday, though some economists took resilient private demand as a positive sign.

Jobless claims and the ISM manufacturing survey are due later on Thursday, although April labour market figures on Friday will be the next piece of hard data that markets will use to gauge recession risks.

Expectations are for a slowdown in U.S. hiring to 130,000.

"It will be interesting to see how markets react if we see a notable surprise because U.S. data hasn't played a role for the whole of April," Danske Bank's Al-Saraf said.

"If we look at market reactions, the dollar has not really moved with the U.S. data."

The Australian dollar dipped slightly against its strengthening U.S. counterpart after a bumper April that saw it notch a multi-month peak.

The Aussie was last at $0.6391, having recently found support after a slightly hotter-than-expected inflation reading toned down some of the more dovish bets on the rates trajectory. The New Zealand dollar held its ground at $0.5926.

Source: Reuters

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Michelle

Economic

Commodity

Gold fell more than 2% to a two-week low on Thursday, weakened as signs of easing trade tensions enhanced risk appetite and reduced bullion's safe-haven appeal, while a stronger U.S. dollar also weighed on prices.

Spot gold fell 2.1% to $3,219.57 an ounce as of 0957 GMT, after hitting its lowest since April 15.

U.S. gold futures lost 2.8% to $3,227.20.

The dollar index (.DXY), opens new tab rose 0.4%, making dollar-denominated gold more expensive for buyers holding other currencies.

"There is ongoing hope that some trade deals are signed soon allowing lower tariffs to stay," said UBS analyst Giovanni Staunovo, adding that this optimism, combined with a stronger dollar, is exerting pressure on the gold.

U.S. President Donald Trump said on Wednesday trade deals were possible with India, Japan and South Korea. He also said there was a "very good chance" of a deal with China.

The U.S. has approached China seeking talks over Trump's 145% tariffs, a social media account affiliated with Chinese state media said.

The U.S. economy contracted for the first time in three years in first quarter, weakened by a surge of imports as businesses sought to pre-empt the imposition of higher tariffs.

However, Federal Reserve policymakers indicated that short-term interest rates would remain unchanged until there are clear signs of inflation nearing the central bank's 2% goal or potential job market deterioration.

Investors await Friday's nonfarm payrolls report for further insight into the Fed's policy direction.

"A weaker payroll report should support calls for more rate cuts by the Fed this year and allow gold to move back to $3,500/oz over the coming months," said Giovanni Staunovo.

Analysts in a quarterly Reuters poll have forecast an average annual gold price above $3,000 for the first time.

Gold, a non-yielding metal considered a hedge against political and financial turmoil, briefly hit $3,500 last week.

Spot silver fell 1.5% to $32.11 an ounce, platinum shed 0.2% to $965.10 and palladium was up 0.9% to$946.08.

Source: Reuters

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Glendon

Economic

Forex

(May 1): Janet Yellen warned that the risk of a US recession has “gone way up” after Donald Trump’s sweeping tariffs rattled financial markets, consumers and businesses.

The former Federal Reserve (Fed) chair said in an interview with the Financial Times that the tariffs on major trading partners will have “tremendously adverse consequences” for American consumers and firms.

“I am not yet ready to say that I’m forecasting a recession, but certainly the odds have gone way up,” Yellen said. She added that targeting Chinese goods could “hobble” American industries by curtailing the supply of critical minerals.

Her comments came after figures on Wednesday revealed that the US economy contracted in the first quarter as firms boosted imports to stockpile goods before the April 2 tariffs announcement. The 0.3% drop in gross domestic product on an annualised basis was the US’s worst quarterly performance in three years.

Yellen — who also served as the Treasury secretary under Joe Biden — is the latest to warn of a rising risk of recession after US business and consumer confidence surveys tumbled in response to the tariffs.

While Trump has handed many countries a temporary reprieve from the highest tariffs first unveiled last month, the US president remained defiant on Wednesday, saying the turbulence seen in markets has “nothing to do with tariffs”.

Yellen warned that the US is “highly dependent on China for most of the critical minerals that go into clean energy technologies, batteries and the like”.

“By putting enormous tariffs on them, I think we potentially hobble industries that could have a chance,” she said.