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Trade deal, Fed Beige Book, bank earnings — What to know in markets Wednesday

Heidi Chung

The signing of the phase one trade deal, the Federal Reserve’s release of its Beige Book and another round of bank earnings will keep investors busy Wednesday.

Vice Premier Liu He and a Chinese delegation is in Washington this week to sign the deal. For more than a year, the ongoing trade war between the U.S. and China weighed heavily on both investor and business sentiment. Though stocks soared to record highs, it was a bumpy ride along the way as the two powers went head to head.

U.S. President Donald Trump and China's President Xi Jinping shake hands after making joint statements at the Great Hall of the People in Beijing, China, November 9, 2017. Damir Sagolj: "It's one of those "how to make a better or at least different shot when two presidents shake hands several times a day, several days in row". If I'm not mistaken in calculation, presidents Xi Jinping of China and Donald Trump of the U.S. shook their hands at least six times in events I covered during Trump's recent visit to China. I would imagine there were some more handshakes I haven't seen but other photographers did. And they all look similar - two big men, smiling and heartily greeting each other until everyone gets their shot. But then there is always something that can make it special - in this case the background made of U.S. and Chinese flags. They shook hands twice in front of it, and the first time it didn't work for me. The second time I positioned myself lower and centrally, and used the longest lens I have to capture only hands reaching for a handshake." REUTERS/Damir Sagolj/File Photo  SEARCH "POY TRUMP" FOR THIS STORY. SEARCH "REUTERS POY" FOR ALL BEST OF 2017 PACKAGES.    TPX IMAGES OF THE DAY
U.S. President Donald Trump and China's President Xi Jinping shake hands after making joint statements at the Great Hall of the People in Beijing, China, November 9, 2017. REUTERS/Damir Sagolj/File Photo

While investors cheered the phase one deal reached by the two nations, many are skeptical about whether a potential “phase two” will come quickly or easily. Allianz Chief Economic Adviser Mohamed El-Erian warned that a such a phase-two deal will likely be challenging.

“Phase two is a lot more complicated than phase one. Phase one for me is a ceasefire. It's a truce. It doesn't deal with the really complex issues,” El-Erian said Thursday on Yahoo Finance’s On The Move. “I'm not a buyer that phase one automatically means a solid foundation, a solid stepping stone to phase two. I think phase two is going to be really hard to achieve.”

Beige Book

Additionally on Wednesday, the Federal Reserve will be releasing its Beige Book. “The Beige Book prepared for the January FOMC meeting will likely indicate a modest pace of economic expansion and inflation. We will look for additional anecdotal evidence from businesses of headwinds faced by the industrial sector, particularly given rising evidence of the industrial slowdown bottoming,” Nomura economist Lewis Alexander wrote in a note to clients Jan. 10.

“Since the last Beige Book, while there have been some positive developments around U.S.-China trade, some surveys indicated that businesses continued to express concerns over trade policy uncertainty and input cost pressures from tariffs that are currently in place. It will be important to assess if Beige Book respondents have materially revised up their near-term business outlook since the announcement. In addition, we will pay attention to any anecdotal information on effects from Boeing’s production halt and the normalization of GM’s production,” Alexander added.

The most notable earnings announcements scheduled for Wednesday include Bank of America (BAC), BlackRock (BLK), Goldman Sachs (GS), PNC (PNC) and UnitedHealth (UNH) before the market open and Alcoa (AA) after the market close.

Heidi Chung is a reporter at Yahoo Finance. Follow her on Twitter: @heidi_chung.

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