In the bond market, Treasury yields pulled lower after a report showed more US workers applied for unemployment benefits last week than economists expected. It’s an indication the pace of layoffs could be worsening, but the number still remains relatively low compared with history.
A separate report said growth for manufacturing in the mid-Atlantic region is still growing, but not as strongly as economists expected.
Such numbers are likely to keep the Federal Reserve on hold when it comes to interest rates. Last month, the Fed refrained from cutting its main interest rate for the first time at a policy meeting since it began doing so in September.
While lower rates can boost the economy and prices for investments, they can also give inflation more fuel. And Fed officials were discussing at their last meeting how Trump’s proposed tariffs and mass deportations of migrants, as well as strong consumer spending, could push inflation higher this year.
The yield on the 10-year Treasury fell to 4.50 per cent from 4.54 per cent late Wednesday. The yield on the two-year Treasury, which more closely tracks expectations for upcoming Fed moves, didn’t fall as much. It eased to 4.25 per cent from 4.27 per cent late Wednesday.
Traders have been paring back their expectations for how many cuts to interest rates the Fed may make this year, with some predicting zero. Many are pointing the potential effects of tariffs, but much of Wall Street is also banking on the ultimate impact from them being smaller than they may seem initially.
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“Given the high political costs of elevated inflation, we continue to believe that the Trump administration will not want to jeopardise US economic growth or risk higher inflation through broad and sustained tariffs,” said Solita Marcelli, chief investment officer, Americas, at UBS Global Wealth Management.
Trump has already given brief, 30-day reprieves for tariffs he had announced on Mexico and Canada to give time for more negotiations.
In stock markets abroad, indexes fell across much of Europe and Asia.
Hong Kong’s Hang Seng fell 1.6 per cent for one of the world’s larger moves after China’s central bank left its benchmark interest rate unchanged, in a move it said was meant to maintain financial stability. Stocks in Shanghai edged down by less than 0.1 per cent.
AP
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