Investing.com | Here are the top five things you need to know in financial markets on Thursday, August 29:
1. China confirms discussions for September trade meeting
China’s Commerce Ministry confirmed Thursday that Beijing and Washington were discussing the scheduling of face-to-face trade talks to be held in September in the U.S. Earlier comments overnight by Treasury Secretary Steven Mnuchin had not been as forthcoming.
Finance Ministry spokesperson Gao Feng repeated the call to “create conditions” for progress, saying discussions should focus on removing new tariffs to prevent escalation and resolve issues calmly.
2. U.S. futures jump on trade optimism
China’s confirmation of eventual trade negotiations and insistence on de-escalation appeared enough to send U.S. futures jumping higher.
European shares also turned higher after the comments, while Italy led gains after the country’s president gave Giuseppe Conte the green light to put together a new coalition of the 5-Star Movement and Democratic Party (PD), which analysts expect to work constructively with the EU on resolving their budget dispute.
Asian shares had closed slightly lower ahead of the Chinese Ministry’s remarks on trade.
3. Mnuchin considers longer-term bonds, rules out currency intervention
Mnuchin said the government is seriously considering extending its debt profile well beyond the current three-decade maximum.
A flight to safety has driven yields on U.S. Treasuries lower, while investors fret over the recent inversion of the rate on two-year government debt over that of the 10-year, a phenomenon that historically precedes a recession.
Heavy buying of the 30-year bond drove its yield to an all-time low earlier this week, amid it sharpest monthly decline since 2011.
Mnuchin also told Bloomberg that the U.S. was not considering intervention in currency markets to weaken the dollar despite President Donald Trump’s recent complaints about the greenback’s strength.
4. U.S. economic growth in focus amid slew of data
The U.S. will release its revised reading of second-quarter gross domestic product at 8:30 AM ET (12:30 GMT) with forecasts for a downward revision to 2.0% from the initial 2.1%.
As ongoing trade conflicts dampen global growth, strong domestic consumption has kept the U.S. economy resilient.
Markets will also get a sense of the impact from the White House’s last tariff levy with the release of trade data for July. The goods trade deficit is expected to have narrowed slightly to $74 billion.
Weekly jobless claims will also be in focus as traders evaluate the solid U.S. labor market, while numbers on pending home sales for July will give insight into the state of real estate market in an environment of falling mortgage rates.
5. Further signs of Fed uncertainty
While markets discount a 25 basis point cut to interest rates at the next Federal Reserve policy meeting in September, policymakers themselves don’t seem as sure.
Speaking after Thursday’s market close, San Francisco Fed President Mary Dalysignaled support for additional easing, saying she believes the benefits of running a “hot” economy currently outweigh the potential costs.
Her colleague from the Richmond Fed, Thomas Barkin, however showed less enthusiasm, stating that he remained undecided. Unconvinced that subdued inflation was sufficient reason for further cuts, Barkin said he was focusing on growth, particularly abroad, and admitted that there was elevated uncertainty due to trade wars.
The Fed was divided in July over what to do with interest rates, with several policymakers opposed to cutting rates while a couple favored lowering them more aggressively than the quarter-point reduction that was approved.
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