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Trade deal, Fed Beige Book, bank earnings — What to know in markets Wednesday

Heidi Chung

The signing of the phase one trade deal, the Federal Reserve’s release of its Beige Book and another round of bank earnings will keep investors busy Wednesday.

Vice Premier Liu He and a Chinese delegation is in Washington this week to sign the deal. For more than a year, the ongoing trade war between the U.S. and China weighed heavily on both investor and business sentiment. Though stocks soared to record highs, it was a bumpy ride along the way as the two powers went head to head.

U.S. President Donald Trump and China's President Xi Jinping shake hands after making joint statements at the Great Hall of the People in Beijing, China, November 9, 2017. REUTERS/Damir Sagolj/File Photo

While investors cheered the phase one deal reached by the two nations, many are skeptical about whether a potential “phase two” will come quickly or easily. Allianz Chief Economic Adviser Mohamed El-Erian warned that a such a phase-two deal will likely be challenging.

“Phase two is a lot more complicated than phase one. Phase one for me is a ceasefire. It's a truce. It doesn't deal with the really complex issues,” El-Erian said Thursday on Yahoo Finance’s On The Move. “I'm not a buyer that phase one automatically means a solid foundation, a solid stepping stone to phase two. I think phase two is going to be really hard to achieve.”

Beige Book

Additionally on Wednesday, the Federal Reserve will be releasing its Beige Book. “The Beige Book prepared for the January FOMC meeting will likely indicate a modest pace of economic expansion and inflation. We will look for additional anecdotal evidence from businesses of headwinds faced by the industrial sector, particularly given rising evidence of the industrial slowdown bottoming,” Nomura economist Lewis Alexander wrote in a note to clients Jan. 10.

“Since the last Beige Book, while there have been some positive developments around U.S.-China trade, some surveys indicated that businesses continued to express concerns over trade policy uncertainty and input cost pressures from tariffs that are currently in place. It will be important to assess if Beige Book respondents have materially revised up their near-term business outlook since the announcement. In addition, we will pay attention to any anecdotal information on effects from Boeing’s production halt and the normalization of GM’s production,” Alexander added.

The most notable earnings announcements scheduled for Wednesday include Bank of America (BAC), BlackRock (BLK), Goldman Sachs (GS), PNC (PNC) and UnitedHealth (UNH) before the market open and Alcoa (AA) after the market close.

Heidi Chung is a reporter at Yahoo Finance. Follow her on Twitter: @heidi_chung.

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