MORNING BID EUROPE - Locked in a deadlock with Iran, Trump heads for China

Gregor Stuart Hunter gives us a look at what the future holds for European and global markets.

Donald Trump is on his way to Beijing, to see if Chinese president Xi Jinping demonstrates more receptiveness to a 'deal.

President Obama is expected to arrive in China today. He will be accompanied by several chief executives, including Jensen Huang of Nvidia, who was added at the last minute to the list.

Beijing appears to be more focused on Taiwan ahead of the talks. China's government has said that its opposition to Taiwan independence is as firm as a stone and that its ability to "crush separatism" is "unbreakable".

Nevertheless, there are signs of detente. China and the U.S. may extend a truce over Chinese rare earth export restrictions, even though customs data show Beijing still restricts shipments.

After Tuesday's higher-than-expected U.S. Inflation data, the growing economic toll from the Middle East Conflict has begun to weigh on markets.

The Fed is unlikely to cut rates this year, and traders are beginning to believe that a hike could be more likely. CME's FedWatch Tool shows that expectations for a 25-basis point increase in the federal fund rate at the December meeting are now at more than 35 percent, up from less than 22 percent earlier in the week.

The prospect of a recession sent the markets into a frenzy on Wednesday. However, regional shares recovered later in trading. S&P 500 futures were up 0.1%, while MSCI’s broadest Asia-Pacific share index outside Japan was up 0.1%.

Korean shares dropped as much as 3.2 percent before recovering to gain 2.4%. Samsung Electronics shares plunged as much 6.1%, before recovering to trade at 1.8% higher after the electronics giant failed to reach a wage deal with its South Korean labor union on Wednesday.

This sets up more than 50,000 workers to go on strike, which could disrupt the production of AI and other chips.

Early European trading saw pan-regional futures rise 0.6%. German DAX Futures increased by 0.4%, and FTSE Futures were 0.5% higher.

The following are key developments that could impact the markets on Wednesday.

Earnings releases:

Cisco, Alibaba, Takeda Pharmaceuticals, SumitomoMitsui Financial Group, Allianz, Siemens, and Alstom

Economic Events

U.S.: EIA crude stock and PPI for April

France: ILO unemployment rates for Q1, CPI April

Germany: wholesale price index for April and current account balance for march

Debt auctions:

Germany: 28-year government debt

(source: Reuters)