U.S. stock index futures erased most of their gains Thursday after jobless claims jumped more than expected, but aggressive moves by the Japanese central bank helped limit losses.
(Read More: Dow Transports Drop—A Sign Rally May Be Cracking)
Weekly jobless claims popped 28,000 last week to a seasonally adjusted 385,000, hitting its highest level in four months, according to the Labor Department. It was the third straight week of gains in claims. Economists polled by Reuters had expected first-time applications last week to fall to 350,000.
Earlier, outplacement firm Challenger, Gray & Christmas said layoffs surged 30 percent in the first quarter from a year ago, even though March furlough activity declined. It was more bad news for the job market, which appears to be slowing after gaining some momentum in late 2012.
The data come ahead of the widely-followed government non-farm payrolls report, due Friday. Economists expect to see a gain of 200,000, with the unemployment rate steady at 7.7 percent, according to a Reuters poll.
(Read More: Job Insecurity High as Layoffs Show Surge)
Meanwhile, the Bank of Japan surprised the market with an overhaul of its monetary policy, adopting a new balance sheet target and pledging to double its government bond holdings in two years. The Nikkei soared more than 2 percent to close at its best level in more than four years.
"This is the muscular, aggressive BOJ the market has been looking for… I think this was very much what was expected and I think it is welcomed by the markets, both equities and fixed income alike," said James Ashley, senior economist at RBC Capital Markets.
Other Asian markets remained cautious amid the building tensions over North Korea. North Korea warned that its military has been cleared to wage an attack on the U.S. using "smaller, lighter and diversified nuclear" weapons. The Pentagon said that it will deploy a missile defense system to Guam to strengthen the region's protections against a possible attack.
In company news, Best Buy said it is offering a 30 percent discount on its current stock of Apple iPad 3 tablets, raising speculation that there could be a major launch of a new iPad in the near term.
Microsoft edged lower after Bank of America/Merrill Lynch downgraded the tech giant to "neutral" from "buy," saying the Windows product cycle and stock buyback programs haven't given the company the expected boost.
In Europe, the European Central Bank (ECB) left its benchmark unchanged at 0.75 percent for the ninth month in a row. Meanwhile, ongoing jitters over Cyprus put a damper on European shares.
Dow Jones reported on Wednesday that capital controls in Cyprus had been extended for a further week, citing a central bank spokesperson. The country is in the midst of a restructuring of its banks, as part of a 10 billion euro ($13 billion) bailout from international lenders that include the ECB, the European Commission, and the International Monetary Fund. The tough terms of the loan have reignited anti-austerity anger, with large depositors set to take sharp losses on bank deposits.
—By CNBC's JeeYeon Park (Follow JeeYeon on Twitter: @JeeYeonParkCNBC)
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THURSDAY: Bernanke speaks, natural gas inventories, Fed's George speaks
FRIDAY: Gov't jobs report, international trade, consumer credit
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