US futures drop, yuan dips as trade talks loom

[TOKYO] US stock futures fell, the yen edged up and the yuan slipped in early trading Monday after a report that China may be increasingly reluctant to agree to a broad trade deal with the Trump administration. Treasuries ticked higher.

The report from Bloomberg also left Japanese stocks with limited gains in the wake of a solid rally in the S&P 500 Index on Friday. That Wall Street advance came after solid US hiring data quelled recession fears without crushing the odds of further Federal Reserve easing. Traders are now pivoting to this week's US-China talks. Senior Chinese officials have indicated the range of topics they're willing to discuss has narrowed considerably, people familiar with the matter said.

Hong Kong markets are closed for a holiday, leaving traders with limited options to respond - or not - to escalating violence in the city, with protesters setting fires and vandalizing train stations and banks over the weekend. Demonstrators pushed back against government efforts to quell demonstrations when it invoked a colonial-era emergency law. China is also shut, and Sydney has a holiday Monday.

Following a slew of disappointing economic data across the globe last week, investor focus returns to trade with the spat between the US and China seen as the main impediment to global growth. With minutes from the latest Federal Reserve meeting due this week, traders will also be looking for clues on when the next step from central bankers will come to support the economy.

Elsewhere, oil held its biggest weekly decline since July ahead of the trade talks, as a string of disappointing data sparks fears of an economic slowdown.

Here are some key events coming up this week:

- Chinese Vice-Premier Liu He visits Washington for trade talks with his US counterparts.

- The Brexit impasse continues as UK Prime Minister Boris Johnson looks to secure a deal with time running out.

- Fed Chair Jerome Powell speaks Tuesday on the final day of NABE's annual conference in Denver.

- FOMC minutes released Wednesday from the Sept 17-18 policy meeting.

- Chinese President Xi Jinping and Indian Prime Minister Narendra Modi meet at an unofficial summit.

- US releases September inflation data.

Stocks

Futures on the S&P 500 Index were down 0.4 per cent as of 9.10am in Tokyo. The underlying gauge climbed 1.4 per cent Friday.

Japan's Topix was up 0.3 per cent, and South Korea's Kospi Index rose 0.5 per cent.

Currencies

The yen was at 106.78 per US dollar, up 0.2 per cent. The offshore yuan fell 0.3 per cent to 7.1309 per US dollar. The euro bought US$1.0983, little changed.

Bonds

The yield on 10-year Treasuries dipped one basis point, to 1.52 per cent. Japanese 10-year yields were little changed at -0.213 per cent.

Commodities

West Texas Intermediate crude was at US$52.63 a barrel, down 0.3 per cent. Gold was at US$1,507.93 an ounce, up 0.2 per cent.

BLOOMBERG