Here are the top five things you need to know in financial markets on Monday, July 1:
1. U.S. and China reach trade truce
The U.S. and China agreed on Saturday to restart trade talks after U.S. President Donald Trump agreed to hold off on the implementation of new tariffs and also ease restrictions on tech company Huawei in order to reduce tensions with Beijing.
China meanwhile agreed to make unspecified new purchases of U.S. farm products and return to the negotiating table.
No deadline was set for progress on a deal, and the two sides still remain at odds over significant parts of an agreement.
Chinese state media suggested a long road remains ahead to reach a final deal and further disputes are to be expected.
2. Risk appetite boosted by trade relief
Global stocks registered solid gains on Monday as the U.S. and China agreed to refrain from further escalating tariffs, boosting risk appetite.
Asian shares surged more than 2% while European stocks jumped to a two-month high.
U.S. futures pointed to a triple-digit gain in the Dow at the open, adding to a rally in June that was its best since 1938. Dow futures jumped 256 points, or 1.0%, by 5:27 AM ET (9:27 GMT), S&P 500 futures rose 30 points, or 1.0%, while Nasdaq 100 futures traded up 126 points, or 1.6%.
As investors put risk back on the table, safe haven assets such as gold, the yen and bonds were under pressure.
The pause in the Sino-U.S. trade dispute also reduced market bets that the Federal Reserve would cut interest rates by a full half-point at its next policy decision on July 30-31. Fed fund futures still price in a quarter-point reduction.
3. OPEC set to extend production cuts after Iran’s approval
OPEC and its allies appear set to extend oil supply cuts through the end of the year as they meet in Vienna on Monday and Tuesday after Iran joined top producers Saudi Arabia, Iraq and Russia in endorsing the policy.
Iranian Oil Minister Bijan Zanganeh told reporters on Monday he would support the proposal to prolong output cuts by six to nine months.
Russian President Vladimir Putin said on Saturday he had agreed with Saudi Arabia to extend existing output cuts of 1.2 million barrels per day by six to nine months – until December 2019 or March 2020.
Saudi Energy Minister Khalid al-Falih suggested that the deal would likely be for the full nine months and said that deeper cuts were not necessary.
Oil prices surged nearly 3% on the news.
4. ISM on tap as global manufacturing weakens
Data released Monday revealed further signs of weakness in manufacturing activity worldwide, stoking concerns about the risk of a global recession and supporting the argument for central banks to take steps to offset the deterioration.
Factory activity shrank in most Asian countries in June as the simmering U.S.-China trade conflict put further strains on the region’s manufacturing sector.
Japanese big manufacturers’ business confidence also worsened to a nearly three-year low in the quarter to June.
Factory activity in the euro zone shrank faster than expected, contracting for a fifth straight month in June.
Although the U.S.-China trade truce was expected to provide some respite, analysts expressed doubts that it will lead to a sustained easing of tensions and noted that lingering uncertainty could dampen corporate spending appetite and global growth.
The Institute of Supply Management will release its own gauge for American manufacturing activity at 10:00 AM ET (14:00 GMT). The reading is expected to drop to 51.0, still in the territory of expansion but its weakest reading since August 2016.
5. Bitcoin struggles to hold $11,000 as correction continues
Bitcoin struggled to hold above $11,000 on the Investing.com Index as a two-week rally that shot the largest digital currency by market capitalization from $7,888 to nearly $14,000 lost impetus and began a correction.
Bitcoin’s rally had been attributed to a variety of bullish factors that were interpreted to show a wider acceptance of cryptocurrencies in general.
LedgerX won regulatory approval last week for a bitcoin futures contract that will be settled in bitcoin, rather than cash, while Facebook (NASDAQ:FB) revealed plans for the launch of its own digital coin Libra.
A selloff of nearly 14% last Thursday continued over the weekend, with bitcoin dropping to an intraday low of $10,728.1 overnight.
Bitcoin was last down 6.6% to $11,080.1 by 5:29 AM ET (9:29 GMT).
