Stock investors rejoice over China trade talks — and weak labor market data

• S&P 500 futures edged up slightly this morning, reflecting cautious optimism among investors. Asian markets mostly rose while European markets were flat in early trading. Investor sentiment is being buoyed by U.S.-China trade talks in London and downward revisions to U.S. payroll estimates—suggesting the Fed may consider cutting interest rates later this year, a move typically supportive for stocks.

S&P 500 futures traded up marginally this morning. After most Asian markets rose and Europe stayed flat in early trading. Investors appear to be focused on two things which are both good for stocks: 

• U.S.-China trade talks are happening in London today, offering some hope that tariff rates might eventually be lowered.
• Early signs of weakening U.S. labor market data indicate that the U.S. Federal Reserve may be tempted to cut interest rates later this year—and low rates are generally good for stocks.

In the labor market data, analysts noted that there has been a series of downward revisions to initial payroll estimates, which indicates that the hard data is weakening even though the U.S. economy is still holding up well.

“Mr. Trump is right; the labor market will need substantial Fed easing soon,” Pantheon Macroeconomics’ Samuel Tombs and Oliver Allen told clients in a research note. “The pattern of downward revisions to initial estimates of payrolls has re-emerged with a vengeance.” 

At Daiwa Capital Markets, Lawrence Werther and Brendan Stuart said something similar: The Fed will take note of “large downward revisions to recent payroll growth, disappointing data from the household survey obscured somewhat by a stable, low unemployment rate, and a pickup in layoffs, to name a few. Again, these are only a subset of the employment statistics – and in our view they do not portend an immediate collapse in hiring – but they do keep ajar the door to cuts later this year,” they said in a note seen by Fortune.

And then there is government spending. Growth in fiscal spending is likely to slow, according to JPMorgan. That could also tempt the Fed to lower interest rates in order to make money cheaper. “A less appreciated slowdown in US government spending and tightening in immigration policy are set to weigh on the expansion. … These policy shifts are largely a US story and are reflected in our forecast that a period of sustained above-potential US growth is over. However, this will also weigh on global growth,” Bruce Kasman and his team told clients.

Here’s a snapshot of the action prior to the opening in New York this morning:

• S&P 500 futures traded up marginally this morning.
• The index itself closed above 6,000 on Friday, re-achieving a level it last saw in February. It’s up 2% YTD.
• The Stoxx Europe 600 and the UK’s FTSE 100 were both flat in early trading.
• Hong Kong’s Hang Seng closed up 1.63% this morning.
• South Korea’s Kospi was up 1.55%.
• Japan’s Nikkei 225 was up 0.92%.
• China’s SSE Composite was up 0.43%.

This story was originally featured on Fortune.com