LYNXNPEF0U1HK L — China and the U.S. start to talk trade again, Covid investigations in full flow and Shell (LON:RDSa) loses a court battle. Stocks are set for a weaker open ahead of a data deluge, led by weekly jobless claims. Here’s what’s moving markets on Thursday, May 27th.

1. U.S.-China trade talks

The United States and China, the two largest economies in the world, are back talking to each other about trade.

The chief trade negotiators of the two countries held a conversation earlier Thursday, marking the first formal engagement between the trade chiefs since U.S. President Joe Biden took office in January.

Both sides agreed that the bilateral trade relationship is very important, as they attempted to put aside the distrust that has existed since the previous U.S. administration instigated a two-year tariff war.

However, agreement won’t be easy. 

The Biden administration is conducting a comprehensive review of U.S.-China trade policy, ahead of the expiry of the Phase 1 deal at the end of 2021.

That deal, signed in January 2020 just before the Covid-19 pandemic began, called for China to dramatically increase purchases of U.S. agricultural goods, manufactured products, energy and services. 

However, China fell about 40% short of its purchase targets in 2020, and is behind in its imports in 2021.

Additionally, the touchy subjects of technology transfer and subsidies for state-owned enterprises still have to be addressed, while Biden has also sharply criticized China on human rights abuses.

2. Stocks set to edge lower; Nvidia, Snowflake in focus

U.S. stocks are set to open slightly lower Thursday, as investors digest the possibility of the Federal Reserve reining in its ultra-easy monetary policies ahead of key employment data.

By 6:30 AM ET, Dow Jones futures were down 25 points, or 0.1%, at just over 34,250, S&P 500 futures were 0.2% lower and Nasdaq 100 futures dropped 0.5%.

Randak Quarles, the Fed Vice Chairman for Supervision, stated Wednesday that the central bank will need to start discussing shortly plans to reduce its bond purchases if the economy continues to show massive improvement as it emerges from the pandemic.

While discussing changes can be far removed from actually implementing changes, the mere mention of the Fed potentially easing back its ultra-easy policies could weigh.

That said, losses are unlikely to be major as investors await new labor-market data (see below) to gauge the pace of the economic recovery ahead of the Memorial Day weekend.

More retailers are out with their quarterly results on Thursday, including Best Buy (NYSE:BBY), Dollar General (NYSE:DG) and Costco (NASDAQ:COST), while software maker (NYSE:CRM) is also due.

Additionally, Snowflake (NYSE:SNOW) will be in focus after the data-analytics software company reported widening losses after the close Wednesday. Nvidia (NASDAQ:NVDA) will also be in the spotlight after the chip giant’s first quarter beat expectations, with its revenue growing almost 90% compared with last year.

3. Jobless claims due

The weekly number of Americans filing new claims for unemployment benefits is scheduled for release later Thursday, and investors will undoubtedly watch it closely for clues about the pace of the recovery of the labor market, particularly ahead of the May official employment report next week.

Economists are expecting a total of 425,000 Americans to have filed unemployment benefits in the week ended May 22, at 8:30 AM ET, after this measure fell to a new pandemic-era low of 444,000 the previous week.

Also of importance will be the number of continuing claims, which are measured with a one-week time lag to initial ones, after they rose by over 100,000 to 3.751 million last week.

Federal Reserve officials have consistently argued that they should not withdraw monetary stimulus until the labor market has made “substantial progress”. 

Also due for release Thursday are more housing-related data, with the National Association of Realtors’ index of pending home sales for April expected to rise 0.8% from the prior month, durable goods data for April, and the second reading of the first-quarter GDP number.

4. Covid-19 investigations

The U.S. and Europe seem to be getting on top of the Covid-19 virus, helped by a ramped-up vaccination programs. And now attention is turning to finding out how the virus originated and what governments could have done better in combating it.

President Joe Biden said Wednesday that U.S. intelligence agencies are pursuing two main theories about the origin of the virus, whether the novel coronavirus “emerged from human contact with an infected animal or from a laboratory accident.”

A report by the World Health Organisation, written jointly with Chinese scientists in March, said the virus had probably been transmitted from bats to humans through another animal, and that “introduction through a laboratory incident was considered to be an extremely unlikely pathway.”

In the U.K., a parliamentary committee investigating the government’s handling of the pandemic heard evidence from Dominic Cummings, Prime Minister Boris Johnson’s former top adviser.

Cummings described Britain’s early plan to combat the virus as a “disaster”,  and said Prime Minister Boris Johnson’s incompetent handling of the pandemic led to tens of thousands of unnecessary deaths.

With almost 128,000 deaths, the United Kingdom has the world’s fifth highest official Covid-19 toll, far higher than the government’s initial worst-case estimates of only 20,000.

5. Shell loses landmark climate case

Royal Dutch Shell is going to have to drastically rethink its plans to cut its greenhouse gas emissions, after the oil major lost a Dutch court case – a landmark ruling that could trigger legal action against energy companies around the world.

Shell set out plans earlier this year to cut the carbon intensity of its products by 20% by 2030 from 2016 levels, and by 100% by 2050.

This was widely considered one of the sector’s most ambitious climate strategies, but the Dutch court considered this to be insufficient, ordering Shell to reduce its carbon emissions by 45% by 2030 from 2019 levels.

The company said it would appeal the ruling, but it will still ring alarm bells in the boardrooms of energy companies across the globe, and comes amid rising pressure from investors and governments for a shift away from fossil fuels towards renewable sources of energy.

This pressure was illustrated by an activist shareholder succeeding in winning two board seats at Exxon Mobil (NYSE:XOM) in the U.S. after opposing the oil giant’s climate strategy.

Meanwhile, crude oil prices slipped lower Thursday, but stayed in a tight range as traders digested optimism over the U.S. driving season along with the possible return of Iranian exports.

By 6:30 AM ET, U.S. crude was down 0.8% at $65.66 a barrel, while Brent was down 0.8% at $68.16.

The market was supported late Wednesday by a bigger-than-expected drawdown in U.S. oil inventories, with the Energy Information Administration reporting a draw of 1.662 million barrels for the week to May 21, but the focus remains on the Iranian nuclear talks and whether sanctions on its oil exports are lifted.

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