By Lorcan Roche Kelly
With a new round of U.S. tariffs on China set to kick in at the end of this week, pressure on trade officials is mounting to make sufficient progress in talks to allow that move to be postponed, at least. There have been signs of progress recently, but confusion remains as to how close both sides actually are to reaching a phase-one deal. A Chinese Ministry of Commerce official said the country hopes the talks can produce “satisfactory results.” Adding further impetus to Beijing’s search for a deal is the unexpected drop in the country’s exports last month, with the total to the U.S. down 23% from a year ago.
The U.K. election on Thursday is looking likely to produce a solid majority for Prime Minister Boris Johnson, with polls showing his Conservative Party maintaining a 10% lead over the main opposition Labour Party. Johnson is spending the final days of the campaign in Labour strongholds as he tries to maximize his majority. Should the polls prove accurate, then the U.K. should finally leave the European Union on Jan 31 next year, bringing an end to the first stage of Brexit and starting the next round of negotiations with the EU on future arrangements.
Wednesday’s Federal Reserve monetary policy decision is not expected to produce any change in policy, with last week’s blowout jobs number backing policymakers’ view that the jobs market in the U.S. remains strong. While there is also no change expected from the European Central Bank’s decision on Thursday, it will be an interesting meeting as it is the first with new president Christine Lagarde at the helm. While her predecessor Mario Draghi started his term with successive rate cuts, she is more likely to concentrate on a strategic review of the institution’s toolkit.
With this week’s calendar packed with potential market-moving events, investors are very much in wait-and-see mode. Overnight the MSCI Asia Pacific Index climbed 0.4% while Japan’s Topix index closed 0.5% higher. In Europe, the Stoxx 600 Index was broadly unchanged at 5:50 a.m. Eastern Time with retailers among the better performers. S&P 500 futures pointed to a quiet open, the 10-year Treasury yield was at 1.821% and gold was slightly higher.
Any liquidity fears will be on show as the New York Fed embarks on a $25 billion 28-day auction. There is also a $120 billion overnight operation. There is no data of note for the U.S. economy today. In earnings, Toll Brothers Inc., Thor Industries Inc. and Casey’s General Stores are among the companies reporting.