LONDON, April 17 (Reuters) - U.S. stock futures and the dollar rose on Thursday as traders took some heart from trade talks between the U.S. and Japan, though the positive mood was curbed by Fed Chair Jerome Powell saying the Fed would be cautious about cutting interest rates.
With a holiday weekend ahead, investors were reluctant to double down on the broad-based decline in risk assets this week, though the rush into gold continued, sending it to a new record high.
U.S. President Donald Trump unexpectedly joined talks in Washington on Wednesday with a delegation from Japan, saying later that "big progress" had been made in the discussions with lead Japanese negotiator Ryosei Akazawa.
Trump gave no details, but it did give some support to those investors betting that some of the tariff impact will be negotiated away in time.
U.S. stock futures rose, suggesting a recovery after Wednesday's selloff that pushed the S&P 500 (.SPX), down 2.2% and the Nasdaq down more than 3%.
Nasdaq futures were up 0.8%, while those on the S&P were up 0.5%, as technology shares got a boost from forecast-busting earnings from Taiwan's TSMC (2330.TW), contrasting with earlier warnings from bellwethers Nvidia (NVDA.O), and ASML (ASML.AS).
The European Central Bank, also grappling with the tariff uncertainty, cut rates by 25 basis points as expected.
The bank said the uncertainty was likely to reduce confidence among households and companies, and the volatile market response would have a tightening effect on monetary conditions.
Kirstine Kundby-Mielsen, FX analyst at Danske Bank, said the ECB's statement had a dovish tone due to the trade uncertainty.
"(Their) focus has shifted to looking at the downside risk to the growth outlook, rather than upside risk to inflation."
The STOXX 600 (.STOXX), was lower after the decision but was still headed for a 4.2% gain this week, while the euro , which is not far off three-year highs against the dollar, was 0.5% lower on the day at $1.1347.
FED IN FOCUS
Central banks were also near the top of the agenda in the U.S. after Federal Reserve Chair Jerome Powell said on Wednesday that the Fed would wait for more data on where the economy was headed before making any changes to interest rates.
But he also said Trump's tariff policies risked pushing inflation and employment further from the central bank's goals.
The benchmark U.S. 10-year Treasury yield was fairly calm, up 2 basis points at 4.30%, well off the 4.59% touched last week during the height of market panic.
"As the dust is starting to settle, there are concerns regarding that stagflationary outlook that Powell warned about," City Index strategist Fiona Cincotta said.
U.S. President Donald Trump's comments on Thursday that Powell's termination "cannot come fast enough", while calling for the U.S. central bank to cut interest rates, added to uncertainty about the U.S. economy.
The dollar has been a major casualty of the turmoil stemming from tariffs and their impact on economic growth. Investors have ditched U.S. stocks and bonds in the last couple of weeks.
Against a basket of six other currencies, the dollar has fallen to its lowest in three years this month, but it was a touch firmer on Thursday.
The dollar was last up 0.5% on the Japanese yen at 142.5 and 0.7% on the Swiss franc at 0.8188, both safe havens having benefited from the turbulence.
That was a sharp turnaround for the yen, which touched a seven-month high earlier in the session, before reversing after Akazawa said foreign exchange had not been discussed at the trade talks in Washington.
In commodities, gold rose to another record high at $3,357.40 per ounce as safe-haven flows and an exodus from the dollar gathered pace.
Oil prices rose on the prospect of tighter supply, leaving Brent crude futures up 1.3% at $66.7 a barrel.
Additional reporting by Alun John and Samuel Indyk in London, Ankur Banerjee in Singapore and Purvi Agarwal in Bengaluru; Editing by Jacqueline Wong, Helen Popper and Jane Merriman
