By Lorcan Roche Kelly
China’s agreement to boost agricultural purchases and the White House’s decision to hold off on increasing tariffs on the country, sealed with a handshake on Friday, might be enough to keep prospects alive for a comprehensive deal between the two sides, but it isn’t sufficient for a reassessment of the global growth outlook. Adding to those doubts this morning is news that China wants further talks as soon as this month to iron out the details of the “phase one” deal before signing it. A health check for the world economy is due tomorrow when the International Monetary Fund revises its growth forecast.
Earnings season will provide another gauge of economic strength and an insight into how dividend payments are holding up in the face of disappearing profit growth. For the big U.S. banks, the focus will be on how they’re keeping costs in line in an environment where interest rates remain lower than previously forecast. JPMorgan Chase & Co. gets the ball rolling tomorrow, quickly followed by Goldman Sachs Group Inc., Wells Fargo & Co. and Citigroup Inc.
The European Union’s chief Brexit negotiator Michel Barnier said that the U.K.’s proposals for a deal lacked detail, putting both sides in a race against time to finalize an accord ahead of the EU summit on Thursday. The prime minister’s coalition allies, Northern Ireland’s Democratic Unionist Party, also expressed reservations about the plan. The pound, which had a spectacular rally at the end of last week, is giving back some ground this morning.
Overnight, the MSCI Asia Pacific Excluding Japan Index added 0.8%. Japan is closed for a holiday, with the country starting the cleanup from the most powerful typhoon to hit in decades. The rapidly evaporating optimism about an imminent trade or Brexit deal is putting pressure on European equities, with the Stoxx 600 Index down 1.2% by 5:45 a.m. Eastern Time. S&P 500 futures pointed to a decline at the open and gold was higher. The Treasury market is closed for Columbus Day.
Back on track
One month after the attack on its facilities, Saudi Aramco has returned production levels to their pre-Sept. 14 levels. Brent crude, which approached $70 a barrel in the wake of the strike on the company’s oil processing infrastructure, is trading below $60 a barrel this morning. The timing of the recovery is very important for Aramco as the company is expected to give approval for its mammoth IPO this week.