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Trade tensions threaten U.S. and China growth, Iran takes a hard line on oil output, and Macron and Merkel have a plan for Europe. Here are some of the things people in markets are talking about today.

Growth warnings

President Donald Trump’s threat to impose 10 percent tariffs on $200 billion of Chinese imports could curtail growth in the Asian nation by as much as half a percentage point, if implemented, according to analysts. Bloomberg Economics’ Fielding Chen and Tom Orlik warn China’s  regional neighbors may be even more exposed to a trade spat. Meanwhile, signs are emerging that the rate of U.S. expansion may be nearing a peak, with trade headwinds adding to concerns over the housing market and signs manufacturing is coming off the boil.

OPEC battle

Plans by OPEC and its allies to announce a modest expansion in production at their meeting in Vienna on Friday have not been enough to ease Iranian opposition. “I don’t believe in this meeting we can reach an agreement,” Bijan Namdar Zanganeh, the country’s oil minister, said, adding that there’s “no need” for any additional output. A barrel of West Texas Intermediate for July delivery was trading at higher at $65.53 a barrel by 5:45 a.m. Eastern Time, with Brent crude at $75:58.

M&M

German Chancellor Angela Merkel and French President Emmanuel Macron came to an agreement on how to move forward with strengthening the euro area, citing a common regional budget, a more robust European Stability Mechanism, and a shared approach to immigration. The leaders want to make it easier to restructure sovereign debt, while also putting pressure on banks to tackle bad debt problems that continue to dog economic growth. The proposals will have to be agreed by other euro members, which may prove difficult, particularly in the case of Italy where a populist government is in power. 

Markets rise

Overnight, the MSCI Asia Pacific Index rose 0.6 percent while Japan’s Topix index closed 0.5 percent higher with the yen slipping as investors reassessed trade concerns. In Europe, the Stoxx 600 Index was 0.9 percent higher at 5:45 a.m. as markets bounced back from yesterday’s slump with both the euro and the pound slipping against the dollar. S&P 500 futures pointed to a gain at the open, the 10-year Treasury yield was at 2.904 percent and gold was lower.

Immigration policy

Less than five months ahead of November’s mid-term elections, Donald Trump’s policy of separating families who enter the U.S. illegally is putting Republican candidates in swing states in an uncomfortable position as polling shows the policy is broadly unpopular. The dilemma for candidates is that a majority of the GOP base continue to support family separations, with 58 percent in favor according to one CNN poll. House Republicans are rushing to strengthen a provision that would end the practice as part of a wider bill, while the party’s senators are more in favor of a stand-alone bill that would be narrowly focus on keeping families together. 

What we've been reading

This is what's caught our eye over the last 24 hours.

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