Talks about talks

Optimism is growing that President Donald Trump and China’s Xi Jinping will announce a new round of trade talks after their meeting at the G-20 on Saturday. While markets would obviously welcome more talks – it is certainly better than the alternative – the path to an actual trade deal seems to be as difficult as ever, with China saying that its demands for an accord have not changed.  The WSJ reported the country wants a lifting of the ban on the sale of U.S. technology to Huawei to be part of any deal. President Trump has other risks to negotiate over the coming days, as he is due to meet with Russian President Vladimir Putin and Turkish President Recep Tayyip Erdogan with Iran likely to remain high on the agenda.

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A gauge of economic confidence in the euro-area dropped to the lowest level in nearly three years, with the decline primarily driven by industry malaise. The data adds to fears that the region’s manufacturing slowdown will start to dominate the whole economy. It will also do nothing to change the minds of economists who now see the European Central Bank cutting interest rates at its September meeting, with analysts split on whether QE will be resumed.

CCAR day

Wall Street’s biggest banks did well when the first round of the Federal Reserve stress test results were released on Friday. The second round of those tests is due today, including the Comprehensive Capital Analysis and Review (CCAR), which will set out how much the banks can return to investors in dividends and buybacks. Analysts are predicting a higher payout than last year due to the promising first round results.

Markets rise

Overnight, the MSCI Asia Pacific Index climbed 0.9% while Japan’s Topix index closed 1.2% higher with exporters getting a boost after the yen posted its biggest decline against the dollar in more than two months. In Europe, the Stoxx 600 Index had advanced 0.1% by 5:50 a.m. Eastern Time, with corporate results helping lift retailers. S&P 500 futures pointed to a gain, the 10-year Treasury yield was at 2.055% and gold was lower.

Coming up…

At 8:30 a.m., weekly jobless claims and the third reading of first-quarter U.S. GDP are published. Pending home sales data for May is released at 10:00. Earnings today are from Nike Inc., Walgreens Boots Alliance Inc., and Accenture Plc. The second round of the Democratic presidential debate occurs later.