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In court papers filed late Thursday, New York Attorney General Eric Schneiderman sought to intervene in order to "protect the marketplace and the interests of New York investors, the vast majority of whom otherwise are not present before the Court in this proceeding."

In late June, BofA settled an eight-month dispute with outside investors who bought Countrywide Financial Corp mortgage bonds.

The investors -- including Pacific Investment Management Co, or PIMCO, and BlackRock Inc -- requested the bank repurchase toxic home loans that comprised a series of mortgage-backed securities.

BofA, the investors and securities trustee Bank of New York Mellon agreed to an $8.5 billion settlement that applies to all investors in nearly all Countrywide Financial-created mortgage bonds, but the deal must be approved by a New York court.

The attorney general said in a filing the accord may interfere with his ability to pursue claims against the banks involved, and claims that BofA and Bank of New York may have violated their fiduciary duties in reaching the agreement.

Bank of America and Bank of New York spokesmen declined to comment.

The case is In re: The Bank of New York Mellon, New York State Supreme Court, New York County, No. 651786/2011.

(Reporting by Andrew Longstreth; Editing by Lisa Shumaker, Bernard Orr)

The bank said this week it is unable to invest the "sudden significant" deposit increases because of their "transient nature," but it is concerned the deposits will weaken its capital ratios and raise its deposit insurance premiums.

If customers' balances are more than 10 percent above their averages in June, BNY Mellon said it will pass along some of its costs by charging the fee.

The fee reflects how global economic uncertainty spurred investors to pull assets from risky assets, creating difficulty in some stock and bond markets.

Traders said demand for U.S. Treasury bills soared on Thursday, as depositors drew down their balances and bought government securities. One-month T-bill rates dipped below zero.

BNY Mellon said the dislocations were likely temporary.

"Past history shows that once the storm passes, these deposits quickly return to the markets," BNY Mellon said. It cited the U.S. debt ceiling debate and the Greek debt crisis as having spurred clients to deposit more cash.

The charge amounts to an annual rate of 0.13 percentage point, with adjustments if one-month T-bill rates fall below zero. It will affect accounts whose average deposit is greater than $50 million.

BNY Mellon is a custody bank that offers securities, trading, and trust services to institutions, corporations, and wealthy individuals. It does not operate retail branches.

The bank urged clients to reduce their deposit balances and "to consider a variety of cash investment options to minimize any effect on you."

BNY Mellon said the fee is effective as of August 8 and will be calculated monthly.

"Recent market events such as the Greek debt crisis and the uncertainty created by the handling of the U.S. debt ceiling have caused many of our clients to alter their cash management strategies," BNY Mellon said.

(Reporting by Richard Leong and Emily Flitter, additional reporting by Dan Wilchins and Jed Horowitz; Editing by Chizu Nomiyama and Tim Dobbyn)

Initial claims for state unemployment benefits nudged down 1,000 to a seasonally adjusted 400,000, the Labor Department said. Economists had forecast claims rising to 405,000.

The claims data falls outside the survey period for the government's closely monitored employment report for July, which is scheduled for release on Friday.

Nonfarm payrolls likely increased 85,000 last month, according to a Reuters survey, after rising only 18,000 in June. The unemployment rate is expected to hold steady at 9.2 percent.

"The real problem is the lack of new hiring, which is absolutely critical. We've seen some improvement with smaller firms hiring more people again," said Scott Brown, chief economist at Raymond James in St. Petersburg, Florida.

Stock index futures trimmed losses on the data, while government bonds held their gains.

The labor market is being closely watched for any signal the economy is regaining speed after growth stalled in the first half of this year. Gross domestic product grew at an annual pace of 1.3 percent in the second quarter after a negligible 0.4 percent rate in the January-March period.

Data so far show the anemic growth pace persisted early in the third quarter, with manufacturing activity hitting a two-year low in July and the services sector expanding at its slowest pace in nearly 1-1/2 years.

Jobless claims are hovering around 400,000 and need to decisively break beneath that level to signal a sustainable improvement in the labor market.

A Labor Department official said there was nothing unusual in the data, adding there was no indication that a partial shutdown of the Federal Aviation Administration had affected last week's claims.

An impasse in Congress over the funding of the FAA has halted airport construction and inspections programs employing about 74,000 workers.

The four-week moving average of claims, considered a better measure of labor market trends, fell 6,750 to 407,750 -- the lowest since mid-April.

The number of people still receiving benefits under regular state programs after an initial week of aid rose 10,000 to 3.73 million in the week ended July 23.

The number of Americans on emergency unemployment benefits increased 12,193 to 3.18 million in the week ended July 16, the latest week for which data is available.

A total of 7.57 million people were claiming unemployment benefits during that period under all programs, down 75,192 from the prior week.

(Reporting by Lucia Mutikani; Editing by Neil Stempleman)

Data on first-time jobless claims data for the week ended July 30 is due at 8:30 a.m. EDT. Economists forecast 405,000 new filings, compared with 398,000 in prior week.

The S&P 500 index rose on Wednesday after seven straight losing sessions, but worries about the economy kept investors jittery and trading volatile.

"After the recent jolt the market took, it is difficult to regain firm footing," said Andre Bakhos, director of market analytics at Lek Securities in New York.

"With the market being near flat on the year, investors are looking for the next theme to bring us back positive. And with a headline-sensitive market, there is nothing tangible to latch on to."

S&P 500 futures fell 9 points and were below fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures lost 63 points, and Nasdaq 100 futures advanced 14.5 points.

Retailers will be in focus as chain stores report July sales. The chains, led by warehouse clubs and high-end stores, are expected to report higher sales due to deep discounts and the warmest July weather in decades.

In one early report, warehouse club operator Costco Wholesale Corp (COST.O) posted a higher-than-expected 10 percent rise in same-store sales, helped by higher gasoline prices and strengthening foreign currencies.

General Motors Co (GM.N) advanced 3.2 percent to $28.05 in premarket trading after its quarterly profit nearly doubled as the top U.S. automaker boosted global sales and raised prices on its vehicles.

Kraft Foods Inc (KFT.N) jumped 9.1 percent to $37.41 in premarket trading after it said it plans to split itself into two listed companies: global snacks and North American groceries. It also posted quarterly results.

Cigna Corp (CI.N) posted higher-than-expected second-quarter profit early Thursday on strength in its main U.S. healthcare plans and its international business. The insurer raised its full-year forecast.

American International Group Inc (AIG.N) is due to report results later Thursday.

European shares fell 0.8 percent and touched a fresh 11-month low on Thursday on a weakening outlook for the global economy, with miners the hardest hit as the price of copper and other base metals fell.

The European Central Bank is expected to keep rates on hold this month after raising them to 1.5 percent in July. The Bank of England is also likely to keep rates unchanged.

Japan's government sold one trillion yen ($12.5 billion) after days of official warnings that the yen had risen so much it threatened to derail Japan's recovery.

The move buoyed shares of big Japanese exporters, driving the Nikkei average .N225 up 0.2 percent on a day when the rest of the region fell around 1.4 percent.

(Reporting by Chuck Mikolajczak; editing by Jeffrey Benkoe)

Coming out of bankruptcy, GM Chief Executive Dan Akerson and other executives said the company had stripped out enough costs to recession-proof the business so it could thrive even in a weak auto market. The industry's sales slump in the second quarter and the risk of a double-dip recession could provide the first major test for that claim.

GM Chief Financial Officer Dan Ammann called the quarter a "good building block" for the company.

GM is pushing heavily into smaller, more fuel-efficient cars like the popular Chevrolet Cruze, but a good portion of its profit still relies heavily on sales of more profitable trucks in the U.S. market.

Net income in the second quarter rose to $2.52 billion, or $1.54 per share, from $1.33 billion, or 85 cents per share, a year earlier.

Analysts polled by Thomson Reuters I/B/E/S had expected $1.20 per share on average.

Revenue rose 19 percent to $39.4 billion, above the $36.74 billion analysts had expected during a quarter in which U.S. auto sales hit a soft patch.

GM shares rose 2 percent in premarket trading.

The results represent the second full quarter since GM's initial public stock offering last November and a restructuring intended to keep the largest U.S. automaker profitable through the industry's punishing boom-and-bust cycles.

GM emerged from bankruptcy in 2009 after a $52 billion taxpayer-funded bailout orchestrated by the Obama administration. The U.S. Treasury still owns 32 percent of GM's common shares.

The company boosted its second-quarter earnings before interest and taxes by $1 billion by pushing through higher prices on its vehicles globally.

However, those gains came as its Japanese rivals, led by Toyota Motor Corp, struggled with fewer vehicles to sell due to the earthquake in Japan in March.

Analysts worry that if the U.S. recovery hits a pothole in the second half, GM could be forced to raise incentives on its vehicles to lure shoppers. GM's first-quarter results were marred by heavy incentives, but the automaker dialed back those deals.

(Reporting by Ben Klayman and Kevin Krolicki in Detroit; Editing by Derek Caney and John Wallace)

A day after the Swiss National Bank unexpectedly cut rates to weaken its currency, the yen skidded around 3.0 percent against the dollar on the back of repeated yen selling by Japan, which fears a stronger yen will impede its economic recovery.

The Bank of Japan later in the day said it would ease policy further to bolster growth, pledging to buy more assets such as stocks and bonds.

The weaker yen buoyed shares of big Japanese exporters, driving the Nikkei share average .N225 up 0.2 percent, on a day when the rest of the region fell around 1.4 percent, weighed down by worries that the U.S. economy is stalling and may even be in danger of slipping back into recession.

European shares were seen likely to open higher as well, though the focus will be squarely on the outcome of the ECB's policy meeting due at 1145 GMT and ECB President Jean-Claude Trichet's news conference at 1230 GMT.

Interventions by the Swiss and Japanese "may increase pressure on them (the ECB) a little, and indeed on the EU too," said Christopher Gothard, head of FX for Brown Brothers Harriman in Hong Kong.

"The ECB however has been marching to its own tune of concerns about inflation pressures and we don't expect a huge turnaround in posture from them just yet."

The global economic slowdown and debt market turmoil meant the ECB would probably hit the pause button on further interest rate increases, but it might signal a readiness to buy bonds again.

Increased activity by authorities in the past 24 hours to curb gains in what were considered the safest currencies in the G10 has made traders nervous that policymakers were cracking down simultaneously in markets.

The New Zealand dollar dropped further from a 30-year peak set on Monday after the country's finance minister said he preferred the currency to be weaker.

Other Asian authorities were also seen likely to continue intervening to slow gains in their currencies.

"The uncoordinated move risks competitive intervention, especially in Asia," said Andy Ji, Asian currency strategist at Commonwealth Bank of Australia in Singapore.

The dollar rallied to a high of 79.40 yen, from near 77.00 before the intervention, while the euro surged to 113.36 yen, from around 110.70.

WARY

Reports of a merger between two Japanese industrial giants, Hitachi Ltd (6501.T) and Mitsubishi Heavy Industries Ltd (7011.T), to create one of the world's largest infrastructure firms further supported Japanese stocks.

But other stock markets in the region struggled as worries about slowing global growth sapped investor enthusiasm.

MSCI's broadest index of Asia Pacific shares outside Japan .MIAPJ0000PUS shed more than 1 percent, taking losses to more than 5 percent in three days.

South Korea's KOSPI .KS11 was among the biggest losers, falling about 2.4 percent to well below its 200-day moving average for the first time in over a year. Foreign sellers dominated for a third session.

Markets are also awaiting results of a Spanish bond auction after yields on Spanish and Italian bonds jumped in recent sessions on fears those economies would be engulfed by debt problems.

The BOJ noted tensions in Europe's debt markets and ongoing worries about the U.S. debt problem as it eased monetary policy by boosting its asset buying scheme.

Latest U.S. figures continued to paint a somber picture for the U.S. economy with the pace of growth in the services sector falling in July to its lowest since February 2010, while new U.S. factory orders also fell in June.

The reports followed poor figures on U.S. consumer spending and factory activity. That, along with the festering European debt crisis, is likely to keep buyers cautious.

Still, with the SNB and BOJ injecting a fresh round of liquidity into markets and talk of possibly more quantitative easing (QE) from the Fed, this could set the stage for a rebound in riskier assets in coming weeks.

Former top Fed officials were quoted in a Wall Street Journal article saying the Fed should consider a third round of bond purchases if inflation slowed from recent elevated levels and if the economy continued to underperform.

"I don't think QE3 is quite on the table yet in the United States, but the market will be thinking it's possible if required. All those things do suggest we shouldn't be getting too risk negative," said Greg Gibbs, a strategist at RBS.

Among other commodities, copper climbed 0.2 percent to $9,556 a tonne, while U.S. crude slipped 0.4 percent to $91.57 a barrel.