Despite a pullback in March, equity investors are kicking off Q2 in a mildly bullish mood following a strong first quarter for U.S. indices. The Dow gained 4.6%, the S&P 500 rose 5.5%, while the Nasdaq soared 9.8%. Traders will now start looking ahead to the upcoming earnings season and how U.S. trade and economic policies are beginning to shape global growth.

Economy

In an interview with the FT, President Trump said he would discuss North Korea with Xi Jinping next weekend during his first meeting with the Chinese President. "If they do [help us], that will be very good for China, and if they don't, it won't be good for anyone," he declared, adding that the U.S. is willing to take unilateral action against the nuclear regime.

Business conditions among large Japanese manufacturers improved over the first three months of the year, according to the latest Tankan survey from the BOJ. The headline reading for factory activity rose to 12, up from 10 last quarter, but slightly below economists' expectations. It also pointed to improved conditions among medium- and small-sized enterprises.

The Caixin/Markit China Manufacturing PMI fell from 51.7 to 51.2 in March, contrasting with readings of China's official factory survey on Friday, which showed activity growing at the fastest pace in nearly five years. However, Caixin/Markit's survey tends to focus more on smaller manufacturers, which may be benefiting less from a months-long construction boom.

French presidential candidate Marine Le Pen told a political rally on Sunday that she will throw off "the shackles of the common currency" and restore France's monetary sovereignty. "We are at the mercy of a currency adapted to Germany and not to our economy. The euro is mostly a knife stuck in our ribs to make us go where others want us to go."

Iceland is considering pegging its krona to a major currency amid concerns the nation's economy risks overheating. Growth was 7.2% last year, while the krona gained around 15% against the greenback. Finance Minister Benedikt Johannesson said three currencies might be considered - the dollar, pound and euro - but the latter was "the only realistic option."

Spain has been accused of using Brexit to make a "land grab" for Gibraltar under official negotiating guidelines drawn up by the EU; Madrid will be given an effective veto on whether Brexit applies to the peninsula. Rows over Gibraltar have held up entire EU deals in the past, including current legislation governing air travel.

Eurozone factory growth accelerated in March, as an improving global economy boosted export demand in the region's biggest economies. IHS Markit said its final manufacturing PMIs for Germany, France and Italy all rose compared with the previous month. It helped push the euro-region gauge to 56.2, the highest since 2011, from 55.4 in February.

South Africa's parliamentary speaker is considering allowing a "no confidence" vote in President Zuma, as his new finance minister talks of radical reforms to redistribute wealth. The rand has extended losses against the dollar, trading 1.5% lower, amid political uncertainty and fears of a sovereign rating downgrade.

More unrest in the emerging markets? There are anti-government protests in Paraguay (where the congress building was set ablaze on Friday), Ecuador and Brazil. Venezuela's Supreme Court also declared the National Assembly illegal and assumed its powers - before suddenly reversing course on Saturday following an international outcry.

Crude stockpiles are starting to decline in a sign that the production cuts implemented this year are bringing the market to balance, according to OPEC's Secretary-General Mohammad Barkindo. Oil had its biggest weekly increase in 2017 last week, with futures advancing 5.5% to climb back above $50/bbl.

Stocks

Vying with others for Toshiba's (OTCPK:TOSYY) NAND flash memory unit, Apple (NASDAQ:AAPL), Amazon (NASDAQ:AMZN) and Google (GOOG, GOOGL) have joined the bidding for the prized semiconductor operation, Yomiuri Shimbun reports. On Friday, sources told Nikkei that private equity firm Silver Lake Partners and Broadcom (NASDAQ:AVGO) offered Toshiba about ¥2T ($18B) for the division.

Meanwhile, Toshiba shares fell as much as 9.4% overnight after the struggling conglomerate signaled it may miss a third deadline to release results for Q4 of 2016. The company will be able to apply to the Tokyo Stock Exchange for another extension, but it could impact its review of Toshiba's (OTCPK:TOSYY) qualifications for remaining listed.

Credit Suisse took out ads in several British newspapers on Sunday, stressing a zero-tolerance policy on tax evasion, as it tries to limit any damage to its reputation from raids on three of its offices. Credit Suisse (NYSE:CS) was pulled into an international probe on Thursday when coordinated searches were carried out on locations in London, Paris and Amsterdam.

Reckitt Benckiser is weighing strategic options for its food business as it seeks to pay down debt following its planned $16.6B purchase of Mead Johnson (NYSE:MJN). A sale of the business, which includes labels like French's mustard and Frank's hot sauce, could fetch more than £2.4B, and leave Reckitt (OTCPK:RBGLY) increasingly focused on consumer health.

Selling the most important pieces of its oil infrastructure in the North Sea, BP has confirmed the sale of its Forties pipeline and other associated facilities. Ineos will make a cash payment of $125M on completion and transfer a share of future earnings up to $125M over seven years for a total of $250M.

Bill O'Reilly and Fox News made payouts totaling about $13M to five women to settle claims of sexual harassment and other inappropriate behavior, the NYT reports. "In my more than 20 years at Fox News Channel (FOX, FOXA), no one has ever filed a complaint about me with the HR Department," O'Reilly declared. Still, "I have put to rest any controversies to spare my children."

Shares in Imagination Technologies crashed almost 70% in London after its biggest customer Apple (AAPL) said it would stop using the firm's graphics technology within two years' time. "Apple has asserted that it has been working on a separate, independent graphics design in order to control its products," Imagination Tech (OTC:IMGTY) said in a statement.

Designed to counter medium-range missiles, the middle layer of Israel's three-tier missile shield has become operational. David's Sling was developed by Israeli defense firm Rafael with American defense giant Raytheon (NYSE:RTN). The system adds to the Iron Dome, which defends against short-range rockets, and Arrow 3, aimed at long-range ballistic missiles in the stratosphere.

Tesla delivered just over 25,000 vehicles in the first quarter, up 69% from a year ago and a new record for the electric-car maker. The figure beat analysts' expectations and keeps Tesla (NASDAQ:TSLA) on track for its target to deliver 47-50K in H1. It should also boost investor confidence in CEO Elon Musk as he works to bring out a $35K sedan - called the Model 3 - later this year.

More recalls for Ford? The company is calling back nearly 53K F-250 pickup trucks sold in the U.S. and Canada because the vehicles could roll even after they are parked. It builds on the news from last week, when Ford (NYSE:F) recalled 230K vehicles over the risk of engine fire and another 211K to replace potentially faulty side door latches.

Today's Markets

In Asia, Japan +0.4%. Hong Kong +0.6%. China +0.4%. India +1%.
In Europe, at midday, London +0.1%. Paris flat. Frankfurt +0.4%.
Futures at 6:20, Dow +0.1%. S&P +0.1%. Nasdaq +0.1%. Crude -0.1% to $50.55. Gold -0.3% to $1247.20.
Ten-year Treasury Yield -1 bps to 2.38%

Today's Economic Calendar

9:45 PMI Manufacturing Index
10:00 ISM Manufacturing Index
10:00 Construction Spending
2:00 PM Gallup US Consumer Spending Measure