After Trump on Saturday said he would impose a 30% tariff on most imports from the EU and Mexico from August 1, the EU on Sunday said it would extend its suspension of countermeasures until early August and continue to press for a negotiated settlement.
The euro and European stocks fell - the single currency hitting a three-week low - but the declines were small. Investors still appear to be optimistic that talks will ultimately be fruitful and a palatable deal will be reached.
Trade figures from China earlier in the day were certainly better than expected, although they were boosted by exporters rushing to beat a fragile tariff truce between Beijing and Washington ahead of a looming August deadline. Exports rose 5.8% year-on-year and imports rebounded 1.1%.
The next couple of weeks will see bilateral US-EU and US-China trade talks intensify as the early August deadlines approach, and investors can expect a blizzard of headlines to hit their screens. If Monday is any guide, investors are well poised to weather the incoming storm.
Trade may have been the main narrative for stock markets on Monday, but less so bonds, which also had the shadows of Federal Reserve independence, Chair Jerome Powell's future, and renewed weakness in Japanese Government Bonds hanging over them.
The U.S. Treasury market was mostly stable although the 30-year yield did flirt with 5.00% and hit a one-month high. Government bond prices elsewhere came under heavier pressure, particularly at the long end of the German and Japanese curves.
The 10-year Bund yield rose to its highest since early April and the 30-year Bund yield climbed to highs not seen in almost two years. Yields on Japanese government bonds surged back toward the historic highs from May, on concern that an upcoming election could pave the way for increased fiscal spending.
Investors' attention on Tuesday will turn to the monthly economic 'data dump' from China, which also includes second quarter GDP figures. Economists polled by Reuters expect the annual growth rate to have slowed slightly to 5.1% from 5.4% in the January-March period.
After that, U.S. CPI inflation figures for June will set the tone for the U.S. trading day. Economists expect inflation rose moderately across all measures - core, headline, monthly and annual - with the annual core rate regaining a 3% handle.
