G20 leaders meet, Powell speaks — What to know in the week ahead

Stocks were back at record highs last week, after the Federal Reserve soothed investors and said the central bank would be ready to cut interest rates if necessary.

However, the market faces a major test this week.

The highly-anticipated meeting between President Donald Trump and President Xi Jinping will take place at the G20 summit in Osaka, Japan. The two leaders will be holding an “extended” meeting to discuss trade. Consensus among analysts remains that no significant deal will be reached at the meeting, and thus, it is still very likely that the next round of U.S. tariffs on Chinese imports will be imposed.

“Even if both leaders decide to resume the talks, there are too many bridges to be crossed to get a deal quickly,” ING wrote in a note Friday. “We think this will lead to the US imposing another round of tariffs this quarter to ramp up the pressure. China will retaliate. Only after both sides experience the increasing negative effects of the trade war during the remainder of this year will they be prepared to make concessions and finally strike a deal.”

While a deal may not occur immediately, the meeting between Trump and Xi will likely produce further optimism, and the markets will continue their upward trajectory for at least the nearterm, according to Capital Economics.

“While we do think the dispute with China will ultimately escalate further, next week’s meeting may well conclude with an exchange of warm words and an agreement to restart talks, probably sending the stock market even higher,” the research firm said Friday in a note. “Trump and Xi will agree a temporary truce, but we still think it’s more likely than not that tariffs will eventually be imposed on all Chinese imports.”

President Trump has also indicated that he will also be meeting with Russian President Vladimir Putin at the G20 summit.

Meanwhile at 1 p.m. ET on Tuesday, Fed Chairman Jerome Powell will be speaking in NYC. He will be discussing economic outlook and monetary policy.

“We expect little in terms of new information from Powell, but he may expand upon how central external ‘crosscurrents’ were to the Committee's evaluation of the risks to the outlook,” Deutsche Bank previewed Friday in a note to clients.

The earnings calendar this week remains light, but economic bellwether FedEx, footwear giant Nike and chipmaker Micron will release quarterly results.

Economic calendar

Monday: Chicago Fed National Activity Index, May (0.10 expected, -0.45 prior); Dallas Fed Manufacturing Activity, June (1.0 expected, -5.3 prior)

Tuesday: FHFA House Price Index month-on-month, April (0.1% prior); Richmond Fed Manufacturing Index, June (7 expected, 5 prior); New Home Sales, May (685,000 expected, 673,000 prior); Conference Board Consumer Confidence, June (132.0 expected, 134.1 prior)

Wednesday: MBA Mortgage Applications, week ended June 21 (-3.4% prior); Wholesale Inventories month-on-month, May (0.8% prior); Durable Goods Orders, May (-0.1% expected, -2.1% prior); Durable Goods excluding Transportation, May (0.3% expected, 0.0% prior)

Thursday: GDP Annualized quarter-on-quarter, Q1 (3.2% expected, 3.1% prior); Personal Consumption, Q1 (1.3% prior); GDP Price Index, Q1 (0.8% expected, 0.8% prior); Core PCE quarter-on-quarter, Q1 (1.0% prior); Initial Jobless Claims, week ended June 22; Continuing Claims, week ended June 15; Bloomberg Consumer Comfort, week ended June 23; Pending Home Sales month-on-month, May (1.0% expected, -1.5% prior)

Friday: Personal Income, May (0.3% expected, 0.5% prior); Personal Spending, May (0.4% expected, 0.3% prior); MNI Chicago PMI, June (54.3 expected, 54.2 prior); University of Michigan Sentiment, June (97.9 prior)

Earnings calendar

Monday: N/A

Tuesday: Lennar (LEN) before market open; FedEx (FDX), Micron (MU) after market close

Wednesday: General Mills (GIS) before market open; Rite Aid (RAD) after market close

Thursday: ConAgra (CAG), Walgreens Boots Alliance (WBA) before market open; Nike (NKE) after market close

Friday: Constellation Brands (STZ) before market close

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

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