By Mike Dolan
LONDON (Reuters) – What matters in U.S. and global markets today
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Soothed by another resilient U.S. employment report and optimism about trade deal breakthroughs, stocks are continuing to nudge higher as all eyes turn to U.S.-China bilateral trade talks in London on Monday.
I’ll discuss this and the rest of today’s market news below. In today’s column, I explore a plan for jointly issued euro zone debt that could be a game-changer.
Today’s Market Minute
* Three of President Donald Trump’s top aides will meet with their Chinese counterparts in London on Monday for talks aimed at resolving a trade dispute between the world’s two largest economies that has kept global markets on edge.
* California National Guard troops were deployed to the streets of Los Angeles on Sunday to help quell a third day of protests over President Trump’s immigration enforcement, a step the state’s Democratic governor, Gavin Newsom, called unlawful.
* Japan is considering buying back some super-long government bonds issued in the past at low interest rates, two sources with direct knowledge of the plan said on Monday.
* Trump’s move to double tariffs on aluminum imports increases the risk of a full-blown scrap war with the European Union, Reuters Open Interest metals columnist Andy Home says.
* Europe’s ambition to develop cheap, clean energy has recently received a harsh reality check, Reuters Open Interest energy columnist Ron Bousso argues, as power failures and a string of cancelled renewables projects make clear that the road to inexpensive power will carry a very high price tag.
London showdown
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.
Be sure to check out 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.
Chart of the day
China’s export growth slowed to a three-month low in May as U.S. tariffs slammed shipments, while factory-gate deflation deepened to its worst level in two years, heaping pressure on the world’s second-largest economy on both the domestic and external fronts. While the trade story has hogged the spotlight this year, the deflation picture has been brewing for several years, partly because the country’s property bust has depressed domestic demand.
Today’s events to watch
* New York Federal Reserve’s May survey of consumer expectations, U.S. May employment trends (10:00 AM EDT); Mexico May inflation (8:00 AM EDT)
* U.S. Treasury Secretary Scott Bessent, Commerce Secretary Howard Lutnick and Trade Representative Jamieson Greer meet Chinese trade delegation, including China’s vice premier He Lifeng, in London
* Argentina’s President Javier Milei meets with French President Emmanuel Macron in France
Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.
(By Mike Dolan; Editing by Anna Szymanski)
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