The much-hyped US-China talks culminated in a fragile truce that may have put a lid on simmering trade tensions between the world’s top two economies for now, but the lack of details has left investors unnerved.
For starters, China’s President Xi Jinping has yet to give his approval on the ‘deal’.
Details on how the new tariffs will be implemented are yet to be ironed out, and US export restrictions on high-end artificial intelligence chips are still in place.
With the July 8 deadline on worldwide tariffs fast approaching, Trump is back to his unilateral style of policymaking as he said he would send out letters in one to two weeks outlining terms of trade to dozens of other countries, which they could embrace or reject.
Markets will be hoping for another TACO moment.
While backward looking inflation reports are yet to reflect the price pressures, companies are starting to sound the alarm.
Zara-owner Inditex was the latest to issue a disappointing quarterly report and flag headwinds from trade uncertainty.
As if investors did not have enough to juggle with already, geopolitical tensions in the Middle East are flaring, adding to the risks of rising crude prices fuelling inflation pressures.
Supply concerns out of the oil-rich region pushed Bren and West Texas Intermediate futures to two-month highs of nearly US$70 a barrel each.
In all of this, as my colleague Jamie McGeever points out, valuations in equities and stocks are beginning to appear stretched, compounding the risks to investors in the event of a market selloff.
European futures were down 0.7%, while futures in the US are pointing to a lower open today, but the benchmark indexes in the regions are just about 2% away from their respective record highs.
Further, investors continue to question the dollar’s safe-haven status.
Today, the euro hit a seven-week high and is up 11% this year, poised for its biggest yearly advance since 2017.
The central bank bonanza next week could perhaps throw more light on the global economy’s outlook.
The US Federal Reserve along with the Bank of Japan and the Bank of England (BoE) are due to announce their policy decisions.
Meanwhile, investors will look for a string of UK economic data including reports on gross domestic product (GDP) and manufacturing output later in the day.
Both are expected to reflect a decline in activity on a monthly basis, reigned in by the BoE’s cautious approach to monetary policy easing.
Key developments that could provide more direction to markets today include: in the UK – GDP, industrial output, manufacturing output and trade data; and in the US – producer inflation data, initial weekly jobless claims report and an auction of 30-year bonds worth US$22 billion.
In addition, policymakers expected to speak include the ECB’s Jose Luis Escriva and the Reserve Bank of Australia’s David Jacobs.
Other notable developments include: UniCredit sees slim hopes for a BPM deal and says Commerzbank is too costly; Oracle raises annual forecast on strong cloud demand; and Warner Bros’ credit rating is downgraded to junk by Fitch after its split-up.