An electric pumping unit removes crude oil from a well. (Photographer: Daniel Acker/Bloomberg)

Five Things You Need to Know to Start Your Day

(Bloomberg) --

The U.S. and China resume trade discussions, oil plunges the most in three years, and the U.K. and European Union agree on a draft Brexit divorce deal. Here are some of the things people in markets are talking about.

Trade Talks Resume, Asean Summit Kicks Off

The U.S. and China have resumed contact “at all levels” over trade ahead of a planned meeting between Presidents Donald Trump and Xi Jinping, White House economic adviser Larry Kudlow said. There’s no certainty that China will cede to U.S. demands in trade negotiations, but “it’s better to talk than to not talk,” Kudlow said in an interview on CNBC Tuesday. A top Chinese negotiator, Liu He, will probably visit Washington shortly to advance “some informal talks,” Commerce Secretary Wilbur Ross said at a conference. Separately, Singaporean Prime Minister Lee Hsien Loong opened the Association of South Asian Nations summit with a warning that seemed directed at Trump’s “America First” policies, even if he mentioned no names. “Countries, including major powers, are resorting to unilateral actions and bilateral deals and even explicitly repudiating multilateral approaches and institutions,” Lee told a crowd that included leaders from all 10 ASEAN members.

Oil Plunges

Oil’s unprecedented decline deepened as investors fled a market hammered by swelling excess supplies, a darkening demand outlook and Trump’s Twitter critique of the world’s biggest crude exporter. Futures plunged about 7 percent in New York on Tuesday for the biggest one-day drop in three years. OPEC’s dire forecast for 2019 demand came at a time of steadily rising American production and stockpiles. Meanwhile, Trump’s Twitter critique of Saudi Arabia’s plan to curb output may dissuade other cartel members from similar moves, given the influence his past comments have had on OPEC actions.

Apple Supplier Risks

In a world where iPhone demand is on the wane, Apple Inc. has a Plan B. As customers wait longer between upgrades and the smartphone market saturates, Apple can fall back on charging higher prices for each handset and raking in more money from services such as streaming music, digital videos and data storage. But there’s no back-up for many of the companies that supply components for the iPhone. The latest evidence that what’s bad for Apple can be terrible for suppliers came on two continents within hours of each other. Japan Display Inc., which gets more than half its revenue from the iPhone maker, cut forecasts. Then Lumentum Holdings Inc., a top maker of iPhone facial-recognition sensors, lowered its second-quarter outlook. On Tuesday, Hon Hai Precision Industry Co., the biggest assembler, missed estimates.

Brexit Endgame Begins

The U.K. and the European Union have agreed on a draft divorce deal. Now Prime Minister Theresa May puts it to her Cabinet, who have to decide whether to back it or resign. Negotiators have settled on a text after working through the night this week in Brussels, according to three people familiar with the situation. May’s ministers have started filing into her office to read it and are due to meet Wednesday at 2 p.m. to sign off. EU officials cautioned that the deal isn’t done until it gets political sign-off in London. While the pound rose on this breakthrough -- talks had been at impasse for months -- there are more obstacles ahead. Cabinet is the first hurdle, but her hardest task will be to force it through the House of Commons, where the arithmetic is looking increasingly challenging.

Italian Defiance

Italy’s populist government is challenging the European Commission in the reply it is due to deliver by a Tuesday deadline, sticking to its budget deficit and growth targets for next year despite protests from Brussels, according to Premier Giuseppe Conte’s office. Ministers of the ruling coalition of the anti-migration League and the anti-establishment Five Star Movement agreed to insist on a 2.4 percent deficit target, and a 1.5 percent growth forecast for next year in the letter the government will send the European Commission. Conte is holding a cabinet meeting on the reply to commission demands for a revised budget, a government official said separately. Deputy Premier Matteo Salvini asked by reporters in Rome if the budget will be changed, responded by shaking his head.

What we’ve been reading

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

©2018 Bloomberg L.P.