By Lorcan Roche Kelly
Trade talks remain on track, more signs of a global slowdown, and elections grow more likely in Italy and the U.K. Here are some of the things people in markets are talking about today.
The U.S. and China are, much to the relief of markets, making moves to step back from the brink of an all-out trade war. President Donald Trump delayed the imposition of new tariffs on a wide variety of consumer products including toys and laptops until December. Chinese officials are sticking to their plans to visit Washington in September for face-to-face meetings, according to people familiar with the matter. Whatever the chances of a positive outcome, investors have welcomed the pause in escalations from both sides.
German gross domestic product contracted by 0.1% in the second quarter, in line with expectations. The drop in output was driven by a slump in exports as U.S.-China tensions rumbled on during the period. Separate data showed euro-area GDP growth slowed to 0.2%, while industrial production in the currency zone plunged the most in more than three years in June. China posted the weakest industrial output growth since 2002, while disappointing credit data increased the pressure on officials to add stimulus to the economy.
Both the U.K. and Italy are in the “may be an election soon” phase of the political cycle. British Prime Minister Boris Johnson’s staff are talking about an imminent national vote as though it were a fact, even though Johnson is not in a position to force one. In Italy, Deputy Premier Matteo Salvini has been delayed for a least a week in his push to force snap elections, with the Senate failing to agree on a date for a confidence motion. Bond investors are becoming increasingly concerned about the outlook for Italy should Salvini become leader.
Overnight, the MSCI Asia Pacific Index gained 0.7% while Japan’s Topix index closed 0.9% higher as stocks in the region rebounded following the outbreak of peace between the U.S. and China. In Europe, the Stoxx 600 Index was 0.7% lower at 5:50 a.m. Eastern Time will all but one industrial sector falling as the gauge retraced some of Tuesday’s gains. S&P 500 futures pointed to a drop at the open, whiule the 10-year yield Treasury traded at 1.628% — lower than the 2-year yield for the first time since 2007.
At 8:30 a.m., U.S. import and export price data for July is released with a 0.1% drop on the month expected for both numbers. The U.S. oil inventory report at 10:30 a.m. is expected to show another rise in inventories, which is pushing crude prices lower today. Hedge funds are due to disclose second-quarter investments in their 13f filings. Earnings today come from Macy’s Inc., Canopy Growth Corp. and Cisco Systems Inc.