A top-level U.S. delegation including Treasury Secretary Scott Bessent, Commerce Secretary Howard Lutnick and Trade Representative Jamieson Greer is in the UK to meet with Chinese representatives for trade talks. China's vice premier He Lifeng is also in the UK.
The meeting follows a 90-minute phone call between Presidents Donald Trump and Xi Jinping last week to restart the stalled process.
Tensions between the countries remain high, but on a positive note, there was some relief on Friday from news that Beijing had granted temporary export licenses to suppliers of rare earth minerals to the top three U.S. automakers: Ford, General Motors and Stellantis.
Meanwhile, trade pressures on China's stuttering economy were all too evident in the latest sweep of May export and inflation numbers released on Monday.
China's exports to the U.S. plunged 34.5% year-on-year in May, the sharpest drop since February 2020 when the COVID-19 pandemic upended global trade. The decline in imports from America also deepened to an annual drop of 18%.
By contrast, Wall Street stocks were buoyed by the April U.S. payrolls report released on Friday, with the S&P500 gaining more than 1% by the close to reach its highest point since February. Both the S&P 500 and the Nasdaq are now back in positive territory for the year.
Nonfarm jobs increased by 139,000 jobs last month, slightly above consensus forecasts, the Bureau of Labor Statistics said. While downward revisions to the two prior months' figures are a cause for some concern, the sweep of the report showed few major cracks.
Treasury yields rose after the report, with 30-year yields back within a few basis points of 5% again on Monday ahead of the week's big long bond auction and the May U.S. consumer price inflation data release on Wednesday.
Despite President Trump's call for a full percentage point cut in Federal Reserve interest rates on Friday and his statement about naming Fed Chair Jerome Powell's successor soon, Fed easing expectations remain subdued. Futures now only price about a 70% chance of a move by September and expect only 46 bps of cuts by yearend.
Outside of the U.S., the Japanese yen firmed to 144.43 per dollar as Japan's economy contracted at a slower-than-expected pace in the January-March period.
Japan's government is considering buying back some super-long bonds it issued at low interest rates, according to Reuters sources. The move would come on top of an expected government plan to trim issuance of super-long bonds in the wake of sharp rises in yields.
Now for today's column, which looks at a novel proposal for expanding the size and liquidity of jointly issued euro sovereign bonds. This possible plan comes at a critical juncture when global investors are looking for possible alternatives to the dominant U.S. Treasury market.
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