Investing.com - Hopes for progress in the long running Sino-U.S. trade war will continue to set the mood in markets this week after the world’s two largest economies agreed on Saturday to restart talks.
Investors will also be looking ahead to the U.S. jobs report for June on Friday in what will be a holiday-shortened week. U.S. markets will be closed for the Independence Day on Thursday and they will close early on Friday.
Meanwhile, OPEC is set to meet early this week and is expected to extend oil output cuts after a weekend agreement between Russia and Saudi Arabia paved the way for a deal.
Here’s what you need to know to start your week.
1. Trade talks
The U.S. and China agreed on Saturday to restart trade talks after U.S. President Donald Trump offered concessions including no new tariffs and an easing of restrictions on tech company Huawei in order to reduce tensions with Beijing.
No deadline was set for progress on a deal, and the two sides remain at odds over significant parts of an agreement. The last major round of talks collapsed in May.
Financial markets, which have been rattled by the nearly year-long trade war, are likely to cheer the truce. Washington and Beijing have slapped tariffs on billions of dollars of each other's imports, threatening to put the brakes on an already slowing global economy. Those tariffs remain in place while negotiations resume.
2. U.S. economic data
The U.S. June jobs report, due on Friday, will likely factor into the Federal Reserve’s decision on interest rates at its next meeting in late July.
The economy is expected to have created 164,000 jobs in June while interest rate futures indicate 100% odds of a 25 basis-point cut on July 31.
But traders might be getting ahead of themselves. Fed Chairman Jerome Powell has pushed back on rate-cut pressure. And the economy looks generally robust - unemployment, at 3.6%, is at its lowest in half a century and it likely stayed there in June.
Other notable data releases on the economic calendar include the latest surveys from the Institute for Supply Management on U.S. manufacturing and service sector activity, as well as reports on factory orders and trade.
3. Fed speakers
Fed Vice Chair Richard Clarida is due to speak on Monday. Earlier this month, he said that the central bank is prepared to lower interest rates if necessary, but noted that the broad outlook for the U.S. economy remains positive.
New York Fed President John Williams is due to participate in a panel discussion about the global economic and monetary policy outlook in Zurich on Tuesday.
Cleveland Fed President Loretta Mester, a non-voting member of the Federal Open Market Committee, is due to deliver remarks at a separate event the same day.
4. OPEC meeting
The Organization of the Petroleum Exporting Countries will gather in Vienna on Monday and meet with non-OPEC states - known as OPEC+ - on Tuesday to discuss extending a deal - due to expire Sunday - on curbing oil output by 1.2 million barrels per day in order to support prices.
But Saturday’s announcement by Russian President Vladimir Putin that he and Saudi Arabia’s Prince Mohammed Bin Salman agreed to extend the current output deal has made the meeting almost redundant.
How much impact any decision will have is also debatable. Oil output in the U.S. hit a record 11 million barrels per day in 2018 and is on track to reach 12.4 million barrels per day this year according to the Energy Information Administration, offsetting OPEC’s output cuts.
International benchmark Brent crude has climbed more than 25% since the start of the year, but still remains below its 2018 highs.
5. U.K. PMIs
Surveys of the U.K. manufacturing, services and construction sectors this week are expected to indicate that second quarter growth is likely to be more-or-less flat, which will diminish the chances of a rate hike by the Bank of England this year.
Much of this is being driven by weakness in manufacturing, where new orders and production are falling and companies are stockpiling in order to prepare for the prospect of a no-deal Brexit.
“That should deliver another sub-50 manufacturing PMI, although things don’t look spectacular in the much larger service sector either. With Brexit uncertainty set to ramp up over the summer, we think it is unlikely that the Bank of England will hike rates this year,” ING said.
--Reuters contributed to this report