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Good morning! Today we look at the latest wrinkles and roadblocks in trade talks with China, the EU, Canada and Mexico, financial well-being in the U.S., student loan delinquencies, and the incomplete comeback for the U.S. housing market.
TRADE WARS: THE SENATE STRIKES BACK
U.S. lawmakers are moving to thwart Trump administration efforts to ease restrictions on Chinese telecommunications giant ZTE Corp. and other sensitive technology. The Senate Banking Committee unanimously approved legislation that would tighten national-security reviews of Chinese technology deals, strengthen export controls and prohibit the Trump administration from lifting stiff penalties imposed on ZTE, Kate O’Keeffe and Bob Davis report. It’s the latest twist in trade negotiations between the world’s largest economies.
‘WE’LL SEE WHAT HAPPENS’
What does this mean for U.S. trade policy? First, it shows lawmakers are skeptical of the Trump administration’s trade tactics, at least toward China. Second, it could make it tougher for the White House to execute deals. The administration appeared ready to lift a ban on U.S. component sales to ZTE, an urgent lifeline for the Chinese company. In return, ZTE would shake up management and possibly pay a fine. Meanwhile, Beijing would remove tariffs on billions of dollars of U.S. farm products. The U.S. also wants China’s help on North Korea. “I don’t like to talk about deals until they’re done,” Mr. Trump said. “So we’ll see what happens.”
What do you think of the Senate’s move to keep up pressure on ZTE and China? Write to Jeffrey Sparshott at realtimeeconomics@wsj.com, tweet to @WSJecon and visit wsj.com/economy for the latest.
WHAT TO WATCH TODAY
U.S. new-home sales for April are expected to fall to an annual rate of 679,000. (See the Charts of the Day for more on the housing market.)
Minutes from the Federal Reserve’s May 1-2 meeting are out at 2 p.m. ET. WSJ Fed watcher Nick Timiraos says inflation will be a key theme. How high do officials see inflation rising now that it’s near their 2% target? How high above the target are they willing to let it go? They’ve answered the first question a bit but said very little on the second. The minutes could be one place to show us a little more about that discussion.
The Minneapolis Fed’s Neel Kashkari speaks on energy in Bismark, N.D., at 2:15 p.m. ET.
TOP STORIES
NAFTA DEADLOCK
Talks to renegotiate the North American Free Trade Agreement have reached a stalemate, with Mexico and the U.S. accusing one another of intransigence and inconsistency after missing a key deadline. The most troublesome points remain the rules governing auto production and the so-called America First provisions that President Trump wants in any new deal, Robbie Whelan reports.
TRUMP TARGETS EU EXPORTS
President Trump is weighing measures to cut European Union steel and aluminum exports to the U.S. by about 10%. But the EU is still trying to figure out precisely what Mr. Trump wants ahead of his June 1 deadline, when the bloc’s temporary exemptions will expire. Quotas are one idea floated by U.S. negotiators, but their scope and details aren’t yet clear, Emre Peker reports.
EUROPEAN SLOWDOWN
Europe could use a little good news. Business activity in the eurozone slowed for the fourth straight month in May, a sign that economic growth has yet to rebound from a surprisingly weak showing in the first quarter. The eurozone economy recorded its fastest expansion in a decade during 2017. But official figures for the opening months of the year are significantly weaker and there are, as yet, few signs of a revival, Paul Hannon reports.
DOING OK IN THE U.S. OF A.
Americans report steady improvements in their financial well-being and more of them are optimistic about their future employment prospects, according to a Federal Reserve survey. But people’s perceptions of their economic situation varied by race and educational attainment. The report also found persistent signs of economic fragility, with many workers continuing to struggle to save for unexpected emergencies or retirement. More than a quarter had skipped medical treatment due to cost, David Harrison and Paul Kiernan report.
STUDENT-LOAN DELINQUENCY IS FALLING
The share of new delinquencies on student loans has fallen to the lowest level in more than decade. Several factors are likely behind the decline. A strong labor market means more borrowers are in a better position to make payments. But more borrowers are using options to postpone payments, or to reduce the amount they are required to pay each month. With forbearance, and in many cases with income-driven repayment, borrowers’ balances rise as interest accrues, Sarah Chaney reports.
CHARTS OF THE DAY: HOUSING
The U.S. housing market peaked in 2005, and then crashed spectacularly. By some measures it hasn’t recovered.
Of course, measuring it from the peak of a bubble isn’t ideal. Let’s say 2000 was pre- or perhaps very early in the bubble. If that’s the starting point, existing-home sales are back to normal. New-home sales are lagging.
A big part of the reason? Home builders aren’t building as many homes. That’s one cause of the tight inventories and rising prices gripping the market.
QUOTE OF THE DAY
“Export control and sanctions laws should not be negotiable, because fidelity to the rule of law is a key part of what distinguishes the U.S. from a country like China that is ruled by a Communist dictatorship.” – Senate Majority Whip John Cornyn (R., Texas), Sen. Marco Rubio (R., Fla.), Minority Leader Chuck Schumer (D., N.Y.), Sen. Sherrod Brown (D., Ohio) and other lawmakers, in a letter to President Trump
TWEET OF THE DAY
[wsj-responsive-sandbox id = "0" ]How can you make money off of a scavenger hunt? The Atlantic looks at the economic subculture of contract workers who go around finding and charging Bird electrical rental scooters. “But while Bird hunting is fun and games for some, other chargers take the job much more seriously. Charging in some cities, like San Diego, has become a cutthroat competition between workers where every last dollar counts.”
The rich get richer. “The vacation home market in the Swiss Alpine region is showing signs of recovery,” Swiss bank UBSid in its latest report on the Alpine property market. Switzerland has the two most expensive markets—St. Mortitz and Gstaad—with vacation homes fetching 15,400 francs ($15,537) and 14,300 francs, respectively, per square meter. Ski resort areas in France and Austria round out the top five.
UP NEXT: THURSDAY
The European Central Bank releases minutes from its April 25-26 meeting at 7:30 a.m. ET.
U.S. jobless claims, out at 8:30 a.m., are expected to slip to 220,000.
U.S. existing-home sales for April, out at 10 a.m. ET, are expected to fall slightly to an annual rate of 5.55 million.
The New York Fed’s William Dudley speaks on reference rate reform in London at 4:15 a.m. ET. There’s also a Dallas Fed conference featuring the Dallas Fed’s Robert Kaplan and the Atlanta Fed’s Raphael Bostic at 10:35 a.m. ET, the Philadelphia Fed’s Patrick Harker at 2 p.m. ET, and Mr. Kaplan again at 8 p.m. ET.
from Real Time Economics https://ift.tt/2KLkXKO
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