Five Things You Need to Know to Start Your Day

Written by
Lorcan Roche Kelly
Written by

Lorcan Roche Kelly

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Hopes are low for China-U.S. trade talks, Fed holds course as ECB gets another headache, and May's Brexit battle continues. Here are some of the things people in markets are talking about today.

Mnuchin in Beijing

Treasury Secretary Steven Mnuchin, along with a team of top White House officials, has arrived in China for trade talks, with the ground already set for difficult negotiations. China's government has said that it won't accept any pre-conditions from the U.S. or submit to any threats. With Sino-U.S. relations decidedly frosty, fears of an early end to discussions are high.

Inflation problems

Yesterday's statement from the Federal Reserve accompanying the decision to hold rates included two mentions of the “symmetric” nature of their inflation target, meaning that the bank is not going to panic about reaching its 2 percent target. Across the Atlantic, the European Central Bank is facing a different headache as April inflation showed an unexpected drop in headline consumer-price growth to 1.2 percent, while core inflation dropped to 0.7 percent, the weakest in more than a year.

Red lines

British Prime Minister Theresa May's woes continue after pro-Brexit ministers rejected her plea for a compromise solution on access to the European Union's customs system when she was outnumbered at a meeting of her inner Cabinet yesterday. One senior official said she now faces as little as a week to get a compromise or face staying in the customs union or leaving without a deal, with either prospect risking the collapse of her government. There were further signs of softness in the U.K. economy this morning when services PMI came in below expectations at 52.8.

Markets drop

Overnight, the MSCI Asia Pacific ex-Japan Index fell 0.5 percent as trade concerns increased investor nervousness. Japan was closed for a holiday. In Europe, the Stoxx 600 Index was 0.3 percent lower at 5:40 a.m. Eastern Time, with weakness limited by a rise in resource-related sectors. S&P 500 futures point to a gain at the open, the 10-year Treasury yield was at 2.951 percent and gold was higher.

Coming up…

Initial jobless claims data are due at 8:30 a.m., with economists expecting an increase from last week's surprise 209,000 print. Also at 8:30 a.m., the U.S. trade balance for March is released. At 9:45 a.m., services and composite PMI numbers are published, with non-manufacturing ISM for April as well as March durable goods and factory orders scheduled for 10:00 a.m. The major data point for the U.S. economy is due tomorrow when the April jobs report is released.