Fed's balance sheet plan, ECB forward guidance, Trump and Xi meet, what people are talking about

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The Fed looks to shrink its balance sheet this year, Draghi sticks to his forward guidance, and Cohn has ideas for banks. Here are some of the things people in markets are talking about today.

Fed balance sheet

The minutes of the Federal Open Markets Committee March meeting show that most officials agree that they will begin reducing the size of the bank's $4.5 trillion balance sheet later this year. Traders are betting that the reduction in bond holdings will have a monetary effect, which may slow the pace of interest rate rises for the rest of 2017. The minutes also showed that some members are getting worried about stock valuations.

Cohn and banks, Trump and China

White House economic adviser Gary Cohn said he supports a policy that could radically reshape Wall Street by separating their consumer-lending businesses from investment banks in a throwback to Glass-Steagall, according to people with knowledge of the matter. Meanwhile, Donald Trump will meet with Chinese President Xi Jinping later today in a test of the U.S. president's pre-election promise to do better deals with China. On the agenda will be everything from trade to the threat posed by North Korea, with negotiating teams on both sides having plenty to work through.

Draghi restates

European Central Bank President Mario Draghi said that inflation in the euro area is not strong enough for a shift to tighter monetary policy. The euro dropped against the U.S. dollar following his dovish comments and was trading at $1.0668 by 5:32 a.m. Eastern Time. Bank of England policy-maker Gertjan Vlieghe said that faster U.K. inflation alone would not force a rate hike there.

Markets drop

Overnight, the MSCI Asia Pacific Index fell 0.8 percent, while Japan's Topix Index closed 1.6 percent lower, as automakers were hit. In Europe, the Stoxx 600 Index was down 0.4 percent by 5:50 a.m. with banks leading the losses. U.S. stock futures were unchanged. 

Coming up...

The big data event of the week is tomorrow's U.S. payrolls number, where expectations are for 180,000 jobs to have been added in March. Today we get initial jobless claims data at 8:30 a.m., with analysts predicting 250,000 new claims, down from last week's 258,000. 

What we've been reading 

This is what's caught our eye over the last 24 hours.

• Unilever buys back $5.3 billion of stock, divest spread unit. 
• China's local debt nightmare is getting a rerun after rating cut.
• German factory orders recover as economic momentum strong. 
• The world's top coffee exporter considers importing coffee.
• Billions in pre-euro currencies remain unredeemed.
• Citi Has an alternative 'Big Short' on U.S. retail.
• Why regulators should focus on bankers' incentives. 

To contact the author of this story: Lorcan Roche Kelly in Dublin at lrochekelly@bloomberg.net.

To contact the editor responsible for this story: Joe Weisenthal at jweisenthal@bloomberg.net, Tracy Alloway