Global equity markets, commodities and the Chinese yuan all traded higher overnight on positive outlook of U.S.-China trade talk reports Bill Baruch, President of Blue Line Futures.

A couple of themes boosted risk-sentiment into the end of last week.

A new round of high-level trade talks between the United States and China are set to begin Wednesday, but it was news that lower-level delegates from China are preparing to arrive in Washington Monday to lay early groundwork that started the session off on strong footing; global equity markets, commodities and the Chinese yuan all traded higher overnight.

A stronger tailwind was the result of the Wall Street Journal’s latest bullish article. No, they did not say the United States was weighing lifting tariffs on China again. This time, they said that the Federal Reserve is weighing the end of their balance sheet unwind or Quantitative Tightening (QT). Ironically, Federal Reserve members, the only ones who could truly comment on such an article, are in a black-out period ahead of this Wednesday’s policy announcement. Adding another piece to the puzzle, Friday afternoon President Trump signed a funding bill to reopen the government for three weeks.

Through the month of January, this week has stood out as absolutely the most crucial. Where will the trade talks lead and what rhetoric will the Federal Reserve exude? Not to mention, we are entering the heart of earnings season; Apple (AAPL), Amazon (AMZN), Microsoft (MSFT), Facebook (FB), Caterpillar (CAT) and much more all report throughout the week. To cap things off the employment situation report including the crucial nonfarm payroll data is due on Friday.

This begs the question, where is that pendulum of perception? Overall, the potential for positive news from the trade talks coupled with a belief the Fed will give a slightly dovish blueprint has become priced-in and earnings have been good so far. Anything that contradicts this rhetoric will bring extreme volatility.

Monday

ECB President Mario Draghi speaks at 8:00 am CT and BoE Governor Carney speaks at 8:30 am CT.

Tuesday

U.S Consumer Confidence.

Wednesday

The Federal Reserve ends their two-day policy meeting with a statement at 1:00 pm CT and Fed Chair Powell will hold a press conference at 1:30 pm CT.

Also, higher-level trade talks between Chinese vice Premier Liu He and the U.S (Trade Representative Lighthizer and Treasury Secretary Mnuchin) are set to begin.

Consumer data from Europe regionally as well as the Eurozone as a whole is due. ADP Payrolls are released at 7:15 am CT; however, the first release of Q4 GDP is a casualty to the government shutdown. Wednesday evening, Chinese Manufacturing PMI will prove critical.

Thursday

The first look at Q4 Eurozone GDP is out. The U.S the government shutdown has postponed the Fed’s preferred inflation indicator the PCE index along with Personal Income and Spending data. Canadian GDP is also due. In the evening, the HSBC Caixin Chinese Manufacturing survey is released.

Friday

Employment situation report.  We also get final Eurozone PMIs along with U.S ISM Manufacturing and Michigan Consumer data.