(Marketwatch) Mnuchin told CNBC that Beijing and Washington are nearing a deal on tariffs. “We were about 90% of the way there (with a deal) and I think there’s a path to complete this,” he told the financial network in Bahrain.
The Treasury Secretary said that he was “hopeful” that a deal could be struck as the market awaits a sideline conversation between President Donald Trump and Chinese President Xi Jinping at the Group of 20 gathering in Osaka, Japan, which kicks off on Friday.
Concerns about escalating trade tensions between the China and the U.S., the world’s largest economies, have fed a sense of rising uncertainty about the health of the global economy, at least partly contributing to central banks across the world signaling a willingness to reinstitute a fresh wave of economic stimulus.
On Tuesday, equity markets suffered one of the worst declines in about a month, led by a selloff in trade-sensitive informational technology shares, also among the risky assets that have helped to lead the S&P 500 index last week to its first record since April 30. Even with yesterday’s slide, the Dow Jones Industrial Average stands about 1% shy of its Oct. 3 record, while the tech-heavy Nasdaq Composite Index is within reach of its May 3 all-time closing high, despite giving up 121 points, or 1.5%, in the prior session.
Tuesday’s slump came as Federal Reserve Chairman Jerome Powell, speaking at the Council on Foreign Relations in New York, signaled that an interest-rate cut in July is not a done deal, emphasizing that the central banks was still monitoring the economy and “grappling” with signs of weakness to avoid a knee-jerk reaction as it considers dialing back benchmark rates.
What’s more, St. Louis Fed President James Bullard said he wasn’t advocating for a too-aggressive cut of 50 basis point to key federal-funds futures rates when the Fed meets next month.
Wall Street currently has the odds of an interest rate cut in July at 100%, according to the CME Group’s FedWatch tool.
“Positioning ahead of the G20 summit meeting between Trump and Xi could see investors want skin in the game ahead of what many feel could yield a very positive outcome,” said Edward Moya, senior market analyst at brokerage Oanda, in a daily research note.
“A reset of talks is likely becoming the base case scenario and if we see a timeline put in place, we could see equities resume the march towards uncharted territory,” he said.
There was more bad economic data on Wednesday, with durable-goods orders for May dropping 1.3%, weighed down by Boeing’s cancelled deal for its troubled 737 Max jet.
A separate report on international trade in goods also showed the U.S. trade deficit climbed 5.1% for the same month, which was wider than expected.
Market participants may also be partly watching the White House after reports indicated that Special counsel Robert Mueller will testify before the House Judiciary and Intelligence committees on July 17. Democrats have been wanting to hear from Mueller personally, regarding his investigation into Russian interference in the 2016 election as well as possible obstruction of justice by President Donald Trump.
