Previews and Perspectives for Monday, March 4

Weekly global market focus — The U.S. markets this week will focus on (1) any developments on the US/Chinese trade talks as reports continue that a final deal is not yet done but that a possible Trump-Xi summit is still being planned for later in March, (2) Friday's U.S. unemployment report which is expected to show a trend +185,000 increase in payrolls and a -0.1 point decline in the unemployment rate to 3.9% (i.e., 0.2 points above Sep's 49-year low of 3.7%), (3) Fedspeak with appearances by four Fed officials this week, and (4) and the tail end of Q4 earnings season with 10 of the S&P 500 companies reporting this week.

The dollar may see some weakness today after President Trump on Saturday again tried to talk the dollar down and launched new criticism of Fed Chair Powell. In his speech to the Conservative Party Action Conference (CPAC), Mr. Trump said that the dollar is too strong and that Fed Chair Powell «likes raising interest rates, „loves quantitative tightening,“ and „likes a very strong dollar.“

Washington politics will grab market attention again this week. There were reports two weeks ago that the Mueller report would be delivered to Attorney General Barr last week. The Justice Department denied those reports and the report in fact was not released last week. However, there is a possibility that the report could be released as soon as this week if the delivery of the report was delayed only because the Justice Department did not want to conflict with President Trump's summit overseas last week with North Korean leader Kim Jong Un. Under current rules, the Mueller report will be delivered privately to Attorney General Barr and Mr. Barr will then take whatever time he wishes to write a summary report to send to Congress. Mr. Barr can also determine exactly what information he will disclose about the investigation to the public.

In other political events this week, former Trump lawyer Michael Cohen testifies before the House Intelligence Committee again this Wednesday, although the testimony will be behind closed doors and is therefore unlikely to have any market impact. The House Judiciary Committee will make some waves today on reports it will subpoena up to 60 people regarding various investigations it plans to conduct into President Trump and his administration.

European focus is on ECB meeting and Brexit — The European markets this week will focus mainly on Brexit and Thursday's ECB meeting. The markets are waiting to see if the ECB this week will announce a new round of TLTRO loans to banks to roll over expiring loans and keep the banking system fully liquefied, or whether the ECB will delay that decision until its April meeting. The ECB on Thursday is likely to downgrade its economic forecasts but the consensus is that it is too early for the ECB to extend its guidance that rates will not be raised until at least summer.

In other EU news this week, EU Trade Commissioner Cecilia Malmstroem will meet with USTR Lighthizer on Wednesday in Washington to discuss US/EU trade issues. The US/EU trade talks have not yet officially started because negotiators are waiting for the EU parliament to give negotiators their official mandate. This week's Lighthizer/Malmstroem meeting may provide an occasion for President Trump to issue new warnings that he might slap tariffs on European autos since the US/EU trade talks have been slow to start and since the EU continues to refuse to accede to U.S. demands that agriculture be involved in the trade talks in addition to industrial products and autos.

The auto industry continues to call on the Trump administration to make public the Commerce Dept's recent report to the White House about whether President Trump should slap tariffs on imported autos on national security grounds. The report likely does in fact recommend tariffs on imported autos, in line with Mr. Trump's view.

Asian focus is on China National Party Congress — The focus in Asia will be on the annual China National Party Congress (NPC), which runs from Tuesday through next Friday. The NPC is the annual event at which China's legislature rubber stamps the government's various policy initiatives. The main item of interest is the Chinese government's new GDP target for the year, which will be 6.0%-6.5%, according to recent reports by Reuters and CNBC, down from about 6.5% last year. The markets will also be watching government initiatives to stimulate the economy and any measures to placate the Trump administration on trade and structural issues.

US/Chinese trade talks get a curve ball as President Trump administration calls for China to drop ag tariffs — President Trump last Friday called on China to drop its retaliatory tariffs on U.S. farm products in light of the fact that he postponed last Friday's deadline indefinitely for raising tariffs to 25% from 10% on $200 billion of Chinese products. The markets do not currently know if the evolving US/Chinese trade deal involves dropping the U.S. and Chinese penalty tariffs that were implemented last year, or whether Mr. Trump last Friday was just freelancing for an additional concession before a trade deal becomes final. The markets are hoping that the U.S. and China will continue to make progress towards finalizing a US/Chinese trade deal that could be signed at a Trump-Xi summit later in March.

PM May tries to extend last week's Brexit momentum — Prime Minister May this week will try to finalize any concessions from the EU on the Irish backstop that might allow her to push her Brexit separation agreement through Parliament at the vote scheduled for next Tuesday (March 12). In any case, the markets are no longer worried about a „no deal“ Brexit because PM May last week relented and said that Parliament next week could vote against a no-deal Brexit and in favor of a Brexit deadline extension if Parliament cannot pass a Brexit separation agreement.