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China trade talks – What to know in markets Thursday

High-level trade talks between U.S. and Chinese negotiators are slated to resume in Washington, D.C., on Thursday, providing an opportunity for both sides to make progress on a deal before the next tranches of tariffs on Chinese imports take effect.

China’s Vice Premier Liu He is set to meet with U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin Thursday and Friday, China’s Commerce Ministry said Tuesday, confirming previous reports of a mid-October resumption of trade talks.

The months since negotiations fell apart in May have been replete with new tariff announcements and other policy-based retaliation. Each new update – be it by tweet, rumor or report – has sent markets reeling, as investors scrambled to recalibrate shifting odds of a near-term deal.

“It is unlikely that sentiment will improve much if the talks break down in acrimonious recriminations,” Chris Beauchamp, chief market analyst at IG Group, wrote in an email Wednesday. “A better earnings season and continued soft Fed policy would help to mollify markets, but it is a trade war resolution that they really crave.”

As of Wednesday, China was reportedly open to the notion of coming to a partial trade deal with the U.S., according to a report from Bloomberg citing an unnamed official. Such an agreement would be contingent on the U.S. rolling back any further tariffs, including two rounds set to take effect later this month and in mid-December, the report said. In exchange, China would reportedly pick up purchases of U.S. agricultural products, and potentially make some other minor concessions.

It is as yet unclear whether these gestures would be enough to satisfy President Donald Trump, who has previously said his “inclination is to get a big deal” rather than a partial agreement.

U.S. President Donald Trump shakes hands with China's President Xi Jinping before starting their bilateral meeting during the G20 leaders summit in Osaka, Japan, June 29, 2019. REUTERS/Kevin Lamarque

And in the past few days alone, the U.S. has stepped up other restrictions on Chinese firms and officials, in moves that could test Chinese officials’ willingness to compromise with their U.S. counterparts.

The Commerce Department at the start of the week added 28 Chinese entities to a blacklist banning them from conducting business in the U.S., over allegations that these firms were linked to human rights violations in China’s Xinjiang region. On Tuesday, the Trump administration then implemented travel bans on Chinese officials allegedly connected to these abuses.

Meanwhile, U.S. companies and organizations have come under fire in mainland China after showing signs of support for antigovernment protestors in Hong Kong. The National Basketball Association remains in hot water with Beijing after a Houston Rockets executive’s now-deleted tweet last week backing Hong Kong demonstrators led to Chinese broadcasters and sponsors cutting some ties with the NBA. And Apple (AAPL) received a tongue-lashing in China’s state-run People’s Daily news site on Wednesday after approving a map app allowing protestors to track police officers’ locations.

The U.S.-China trade negotiations Thursday come less than a week before tariffs on $250 billion worth of Chinese goods are set to rise to a rate of 30% from 25% starting October 15. Further tariffs on an even broader swathe of goods are set to take effect on December 15.

Thursday’s economic data, earnings

The Bureau of Labor Statistics is set to release its September consumer price index (CPI) Thursday morning, indicating the pace of consumer price increases – or decreases – during the month.

Consensus economists expect that headline CPI rose 0.1% on a monthly basis in September, matching August’s rate, according to Bloomberg-compiled consensus data. Over last year, CPI likely rose 1.8%, or just slightly faster than August’s 1.7% pace of increase.

Excluding more volatile food and energy prices, CPI is expected to have risen 0.2% in September, versus a 0.3% gain in August. This so-called “core” measure of consumer price changes is anticipated to have risen 2.4% over last year in September, or the same level as in August.

The CPI print comes on the heels of a report earlier this week showing producer prices unexpectedly fell for in September, declining by the most since January as manufacturing sector weakness weighed on costs of goods and services and input prices.

The Department of Labor’s weekly initial jobless claims are expected to come in at 220,000 for the week ending October 5, or up by 1,000 versus the week prior, according to Bloomberg consensus data. Continuing claims for the week ending September 28 are expected to total 1.651 million, matching the level from the week prior.

Delta Air Lines (DAL) is set to report quarterly earnings before market open. Wall Street expects the airline to report adjusted earnings of $2.26 per share on revenue of $12.61 billion, according to Bloomberg consensus data.

Mark your calendars!

Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck

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