Peace rally

The prospect of war between the U.S. and Iran faded after President Donald Trump backed away from threats to launch further attacks, instead calling for a deal with Tehran to make “the world a safer and more peaceful place.” He said his administration would impose new sanctions on the Islamic Republic to push it back to the negotiating table. Markets cheered the deescalation, with oil this morning trading at levels last seen before the killing of a top Iranian general last week.

Liu He coming

China confirmed that Vice Premier Liu He will travel to Washington next week to sign the phase one trade deal with the U.S. After that, there’s round-two to look forward to. When President Trump announced the date on Twitter earlier this month he stated his intention to visit Beijing to start negotiations on the second phase. Meanwhile, China intends to open up oil and gas exploration to foreign companies, in an attempt to ease commercial frictions with the U.S.

Growth outlook

The World Bank said that the global expansion will accelerate slightly to 2.5% in 2020, down from a previous 2.7% projection. In its latest Global Economic Prospects report the lender warned that conditions remain fragile as it lowered euro area and China estimates for this year. There was some good news from Germany this morning as industrial production rebounded, raising hopes the sector may be ending its protracted slump.

Markets rise

Global equity markets are extending yesterday’s post-Trump speech rally. Overnight the MSCI Asia Pacific Index climbed 1.3% while Japan’s Topix index closed 1.6% higher as the yen weakened. In Europe, the Stoxx 600 Index had added 0.4% by 5:40 a.m. Eastern Time with Germany’s DAX Index coming close to its January 2018 peak. S&P 500 futures pointed to another positive session, the 10-year Treasury yield was at 1.870% and gold continued its slide.

Coming up…

Weekly initial jobless claims at 8:30 a.m. are expected to come in at 220,000. There are no fewer than six Fed speakers today: Vice Chairman Richard Clarida, Minneapolis Fed President Neel Kashkari, New York Fed President John Williams, Richmond Fed President Thomas Barkin, Chicago Fed President Charles Evans and St. Louis Fed President James Bullard.