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Top 5 Things to Know in the Market on Monday

Investing.com - Here are the top five things you need to know in financial markets on Monday, Jan. 7: 1. U.S.-

Investing.com - Here are the top five things you need to know in financial markets on Monday, Jan. 7:

1. U.S.- China Trade Talks Kick Off

Two days of trade talks between the U.S. and China got underway in Beijing on Monday, with investors hoping the two sides can strike a comprehensive trade deal before the end of a 90-day truce in the trade war.

Washington and Beijing have until March 1 to make a deal, after which U.S. President Donald Trump has pledged to ramp up tariffs to 25%, from 10%, on $200 billion worth of Chinese imports.

The prolonged trade spat between the world’s two largest economies has given rise to fears over an economic slowdown in China following a recent string of weak economic data and fueled concerns over the impact on the broader global economy after Apple (NASDAQ:AAPL) issued a revenue warning last week.

2. Relief Rally in Equities Fades

U.S. stock index futures pointed to a flat to lower open on Wall Street as a relief rally in global equities markets lost momentum.

At 5:40 AM ET (10:40 GMT), the blue-chip Dow futures were flat, S&P 500 futures dipped 0.09%, while the Nasdaq 100 futures traded down 0.23%.

In Europe, stock markets slipped into the red, giving up gains after a higher open.

Risk appetite was sapped with U.S. lawmakers still unable to reach an agreement to end a government shutdown, while risks from Brexit continued to cloud the outlook in Europe.

Overnight, Chinese stocks firmed after the country's central bank announced an easing in policy aimed at addressing an economic slowdown, while the resumption of trade talks between Washington and Beijing had also buoyed risk appetite, sending Asian markets broadly higher.

U.S. markets had rebounded Friday after a stronger-than-expected U.S. jobs report and following comments by Federal Reserve Chairman Jerome Powell, who indicated the central bank would be patient and flexible on monetary policy this year.

3. Oil Prices Jump around 3%

Oil prices jumped higher on hopes that easing trade tensions between the U.S. and China would boost the demand outlook, while supply cuts by major producers also supported crude.

Global benchmark Brent crude futures were last at $58.75 per barrel, up $1.68, or 3% from their last close.

U.S. West Texas Intermediate (WTI) crude oil futures were at $49.37 per barrel, up $1.41 or 2.96%.

Despite the likelihood of an economic slowdown as a result of the trade war crude prices were being supported by supply cuts started late last year by a group of producers around the Middle East-dominated Organization of the Petroleum Exporting Countries (OPEC) as well as non-OPEC Russia.

Goldman Sachs said the cuts would result in a gradual increase in spot crude prices in 2019 as high inventories revert to their 5-year averages.

4. Dollar Loses Ground

The greenback was broadly lower against the other major currencies, with the U.S. dollar index, which measures the greenback’s strength against a basket of six major currencies, down 0.3% to 95.46.

The U.S. dollar remained on the back foot following Friday’s Fed comments, while the resumption of U.S.-China trade talks undermined safe haven demand for the buck.

The euro was stronger, with EUR/USD up 0.41% to 1.1437 even after data showing that German factory orders fell more than expected in November. Separate reports showed that euro zone investor moral fell to a four-year low in January, but retail sales in the bloc rose strongly in November.

Read more: The U.S. Dollar Looks Vulnerable - Marc Chandler

5. ISM Non-Manufacturing PMI

On the data front, ISM non-manufacturing figures for December are due to be released at 10:00 AM ET and are expected to show a modest decline, but the risk is that they turn in a downside surprise like last week’s ISM manufacturing index.

The ISM non-manufacturing PMI is expected to tick down to 59.6 from November’s 60.7.

Data last Thursday showed that U.S. factory activity slowed sharply to a two-year low in December, suggesting the economy is probably not immune to slowing growth in China and Europe, despite the labor market remaining strong.

-- Reuters contributed to this report.