A lacklustre Asian session is paving the way for losses at the opening bell on Wall Street. Pessimism over the size and shape of any US-China trade deal appears to be growing, despite the repeated rhetoric from ‘sources’ that an agreement is close. Critically, with Trump focusing on the 2020 election, he wants this deal done but if it doesn’t carry enough weight with US companies then the hoped for shot in the arm for stocks simply won’t materialise. That will in turn force attention on to using monetary policy for stimulus, but tomorrow’s non-farm payrolls could offer some hope here.
Yesterday’s private nonfarms print fell short of expectations, suggesting that the squeeze in the labour market may be at an end. If this proves to be the case then wage inflation may become less of a concern amongst policymakers, giving added value to a swift termination to the Quantitative Tightening arrangements. A weaker dollar and more cheap money in circulation will in turn provide some cause for cheer in the short term, although whether that belies a bigger economic problem remains to be seen.
Ahead of the open we’re calling the Dow down 98 at 25575 and the S&P down 8 at 2763.