By Lorcan Roche Kelly
President Donald Trump said that the first day of high-level trade talks with China in Washington went “very well” and that he plans to meet with Chinese Vice Premier Liu He today. While there are no expectations for a major deal announcement, markets will react positively to sufficient progress toward a partial accord that would suspend a tariff increase planned for Oct. 15. China has offered to make further agricultural purchases, and may agree to roll out a previously agreed currency pact, while it is asking for an end to sanctions on its biggest shipping company and a halt to further tariffs.
An Iranian tanker was struck by missiles near the Saudi port of Jeddah, significantly damaging the vessel and causing an oil spill. A spokesman for the National Iranian Tanker Company initially said the rockets came from Saudi Arabia, a claim the company later withdrew in a statement. Brent crude futures jumped in the wake of the attack to trade above $60 a barrel. With tensions already high in the region after last month’s attack on Saudi oil facilities, the Foreign Ministry of China, which imports a significant portion of its oil from the Persian Gulf, is among those calling for restraint.
Yesterday’s meeting between U.K. Prime Minister Boris Johnson and his Irish counterpart has injected some last-minute hope for a deal on Britain’s exit from the European Union. The pound jumped as optimism for an agreement increased, with one-month options for the currency showing their strongest-ever bias in favor of contracts to buy since Bloomberg began compiling the data in 2003. Talks between the U.K. and EU are underway in Brussels today, with European Council President Donald Tusk saying there are “promising signals” that a deal is possible.
Overnight the MSCI Asia Pacific Index climbed 1.2% while Japan’s Topix index closed 0.9% higher as investors welcomed the positive trade noises from talks in Washington. In Europe, the Stoxx 600 Index was 1.3% higher at 5:45 a.m. Eastern Time as cyclical stocks led the gains. S&P 500 futures pointed to an advance of more than 1% at the open, the 10-year Treasury yield was at 1.672% and gold was broadly unchanged.
At 8:30 a.m. the U.S. September import/export price index is published. University of Michigan consumer sentiment is at 10:00 a.m., and the latest Baker Hughes rig count is at 1:00 p.m. Minneapolis Fed President Neel Kashkari, Boston Fed President Eric Rosengren and Dallas Fed President Robert Kaplan are today’s monetary policy speakers. There is no time set for the meeting between President Trump and China’s Liu He, but that and the outcome of the trade talks is likely to be the biggest market event of the day.