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Trump Heads to Israel with Unified Front on Iran

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Trump goes to Israel, West Texas Intermediate crude above $50, and pressure against Brazil’s Temer mounts. Here are some of the things people in markets are talking about.

Trump Travels

U.S. President Donald Trump will visit Israel on Monday, with Prime Minister Benjamin Netanyahu preparing to ask for more sanctions against Iran. President Hassan Rouhani easily won re-election on Friday in Iran, defeating his harder-line rival. In a speech delivered in Saudi Arabia on Sunday, Trump framed the war on terror as a struggle of good versus evil, rather than a clash of faiths. King Salman of Saudi Arabia and the U.S. president both singled out the Iranian regime as a backer of terrorism. On the president’s first day in the kingdom – the site of his first trip abroad as head of state, U.S. arms sales to Saudi Arabia topped $100 billion.

OPEC Meeting in Focus

While Saudi Arabia and Russia don’t agree on much, their lone source of understanding is helping to breathe life into oil prices. West Texas Intermediate front-month futures broke above $50 per barrel for the first time this month on Friday amid increasing faith that OPEC and its partners will extend production curbs until at least the end of the year. OPEC and other major oil producers are scheduled to meet on Thursday in Vienna to discuss an extension of their deal to limit output. According to Saudi Arabian energy minister Khalid Al-Falih, the bloc is unified on the need to maintain the cuts through the first quarter of 2018. The Tadawul All Share Index was the best-performing Middle Eastern bourse on Sunday, rising 0.8 percent.

Demonstrations Against Temer

Brazilians across the country took to the streets calling for embattled President Michel Temer to resign on Sunday less than one year after his predecessor, Dilma Rousseff, was impeached and removed from office. A Brazilian association of lawyers overwhelmingly voted in favor of an impeachment hearing for Temer, who last week faced allegations that he engaged in a cover-up. The president said he will not resign and that the recorded evidence, which suggests he paid for a jailed former lawmaker’s silence, was doctored. Though Brazilian financial assets rebounded to end the week, the political chaos has slammed a number of mutual funds that overweight the region. The central bank is scheduled to release a survey of economists’ forecasts for its policy rate on Monday after traders began to price in a smaller rate cut for the Copom’s next meeting on May 31.

Political Headaches for the Dollar

U.S. stocks ended the week on a soft note, paring nearly half their gains on Friday after news that investigators are focusing on a current White House official as a person of interest amid their inquiry into Russia’s influence on the election. Former FBI Director James Comey, who was fired by Trump, has agreed to testify before the Senate Intelligence Committee to discuss the probe. Representative Jason Chaffetz, Republican chairman of the House Oversight and Government Reform Committee, plans to talk to Comey on Monday following reports the president asked the former FBI director to shut down an investigation into Michael Flynn, the administration’s former national security adviser. The Bloomberg Dollar Spot Index suffered its worst week since July as political turmoil weighed on the greenback.

Coming Up…

There’s a smattering of Japanese economic data due out Monday, headlined by the release of trade figures at 8:50 a.m. Tokyo time. Economists are calling for the monthly surplus to shrink to nearly $521 billion yen in April, down from $641 billion in March. Shipments abroad helped extend Japan’s streak of quarterly growth to five in the first three months of 2017. Export growth is expected to moderate to 8 percent year-on-year from 12 percent, with import growth down a percentage point to an annual pace of 14.8 percent. Also due out: the final reading of Japan’s leading and coincident indexes for March and convenience store sales for April.

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