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EU Throws Down Brexit Gauntlet as Talks Edge Closer

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Congress inks a deal on spending, China data disappoints, and Theresa May stands accused of intergalactic space travel. Here are some of the things people in markets are talking about today.

Trump's not part of the deal

U.S. House and Senate negotiators reached a bipartisan deal on a $1.16 trillion spending bill that largely tracks with Democratic priorities and rejects most of President Donald Trump's wish list, including money to begin building a wall along the U.S.-Mexican border. The compromise measure (full text here) would keep the government open through the end of September. Under House procedures, a vote could be held as early as Wednesday.  

A miss on China data

Lower commodities prices knocked China's official factory gauge off its almost five-year high. The manufacturing purchasing managers index fell to 51.2 in April, missing the median estimate of 51.7 in a Bloomberg survey and falling short of all analyst projections. The services PMI decreased to a six-month low of 54 from 55.1, but both gauges still show momentum given that readings over 50 indicate improving conditions.

European politics

The European Union's summit in Brussels ended with EU leaders suggesting that British Prime Minister Theresa May's ambitions for the looming Brexit negotiations are unrealistic. May stuck to her guns, however, arguing that Britain should be allowed to line up a "comprehensive" free-trade deal with the EU post-Brexit and denying accusations that she's in a "different galaxy." Meanwhile, Marine Le Pen and Emmanuel Macron are kicking off the final week of the French presidential campaign with major rallies in Paris. Macron is still leading the polls, although his margin has slipped slightly in recent days.

Markets seem happy

Many markets in Europe and Asia are closed for holidays, but what is open is painting a positive picture to start the first day of the new month. The MSCI Asia Pacific Index rose after capping a fourth straight month of gains on Friday, while the Topix also jumped to its highest level since March. Futures on the S&P 500 Index increased 0.1 percent as of 4:23 a.m. Eastern Time, shrugging off the China data and growing tensions around North Korea thanks to news of the tentative government spending deal.

Oil optimism wanes

We have less than a month before OPEC gathers in Vienna, where the oil group is widely expected to decide on whether or not to extend its production cut agreement. Optimism about crude prices is waning ahead of that meeting, however, as the relentless ramp-up in U.S. shale production has investors questioning the impact of the curbs. The latest CFTC data shows money managers slashing their bullish bets on crude by 21 percent last week, while Baker Hughes Inc. says U.S. drillers added another nine rigs.

What we've been reading 

Here's what caught our eye over the weekend.

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