Throwing toys

President Donald Trump’s announcement of sanctions on Iran’s supreme leader, Ayatollah Ali Khamenei, seem to be a tactic aimed at annoying Iranians rather than doing any real damage to the country’s already battered economy. If that was the idea, it has been a complete success, with state media saying the move has permanently closed the diplomatic path. Oil, which had risen strongly on tensions in the region, was broadly unchanged this morning as traders do not see much escalation in the latest diplomatic handbags, while looking for more details on a possible output deal from OPEC+.

Nothing to Xi

U.S. officials are playing down expectations ahead of this weekend’s meeting between President Donald Trump and China’s Xi Jinping at the G-20 in Japan. Investors are showing little sign of optimism, with Chinese fund managers happy to sit on their hands as they look further down the line for a breakthrough. Meanwhile, the real economic costs from the trade war are stacking up.

Stubborn?

Fed Chairman Jerome Powell will speak on the economic outlook in New York at 1:00 p.m. Eastern Time today. While his prepared remarks will be followed with the usual diligence by investors, the Q&A session may be dominated by Trump’s latest monetary attack. The president accused the Federal Reserve of acting like a “stubborn child” by holding rates unchanged, even as markets predict a rate cut at the meeting next month.

Markets slip

Overnight, the MSCI Asia Pacific Index eased 0.2% while Japan’s Topix index closed 0.3% lower as the yen strengthened against the dollar. In Europe, the Stoxx 600 Index was 0.1% lower at 5:45 a.m. in a quiet session that saw miners among the best performers while banks and retailers fell. S&P 500 futures pointed to a slight drop at the open, the 10-year Treasury yield was at 2.021% and gold was higher again.

Coming up…

While all eyes will be on Powell today, there is a positive easing of Fed speakers to catch today with New York Fed President John Williams, Atlanta Fed President Raphael Bostic, Richmond Fed President Thomas Barkin and St. Louis Fed President James Bullard all due to make their feelings known. In data, the U.S. Federal Housing Agency house price index April update is due at 9:00 a.m., with May new home sales and June consumer confidence both published at 10:00 a.m. Earnings today include FedEx Corp. — company that is suing the U.S. government on trade restrictions while it also risks getting blacklisted by China.