By Lorcan Roche Kelly
U.S. and Chinese senior officials spoke by phone yesterday, a USTR spokesman confirmed. There were no details released on what was discussed, and there was no announcement of a follow-up face-to-face meeting, which some had been hoping for. The deep differences between the two sides point to slow progress. Longstanding divisions are also on display between Japan and South Korea as the stand-off between the nations seems to worsen on an almost daily basis, with Tokyo promising fresh measures against Seoul amid rising tensions.
There was some confusion yesterday when markets interpreted a speech by Federal Reserve Bank of New York President John Williams in which he said central banks should move quickly when they see signs of trouble as referring to upcoming policy actions. A New York Fed spokeswoman later clarified that Williams’s prepared remarks were “an academic speech on 20 years of research” rather than a short-term signal. Whatever Williams meant to say, there is no getting away from market expectations of a cut at the next meeting — it’s just the magnitude that’s still under debate. Meanwhile, the European Central Bank is expected to signal further easing at its meeting next week.
Italian Prime Minister Matteo Salvini may decide as soon as this weekend to call a snap election. Tensions between Salvini and his coalition partner, Luigi Di Maio of the Five Star Movement, have been on the rise lately. Italian bonds and stocks fell in trading this morning. In the U.K. it is the last weekend of campaigning for the leadership of the Conservative Party with Jeremy Hunt needing a late surge to have any chance of beating bookies-favorite Boris Johnson. Party members have until Monday to return the ballots.
Overnight, the MSCI Asia Pacific Index climbed 1.3% while Japan’s Topix index closed 1.9% higher to cover most of the previous session’s losses. In Europe the Stoxx 600 Index was 0.2% higher at 5:50 a.m. Eastern Time, with corporate news the main driver. S&P 500 futures pointed to a gain at the open, the 10-year Treasury yield was at 2.041% and gold gave back a slice of Thursday’s rally.
Today is the last day before Federal Reserve policy makers enter their pre-meeting quiet period, so Federal Reserve Bank of St. Louis President James Bullard and Federal Reserve Bank of Boston President Eric Rosengren may be worth listening to when they speak later. University of Michigan consumer sentiment is due at 10:00 a.m. and the latest Baker Hughes rig count is released at 1:00 p.m. In earnings today Blackrock Inc., State Street Corp. and Schlumberger Ltd. are among the companies reporting.