Three before you leave — What to watch for in the market Thursday including trade talks, inflation

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Chinese President Xi Jinping chats with President Donald Trump during a welcome ceremony in Beijing on Nov. 9, 2017.

AP Photo | Andy Wong

Here are the most important things to know about Thursday before you hit the door.

1. Showdown begins

The make-or-break U.S.-China trade talks are set to resume on Thursday. Somewhat positive headlines on Wednesday sparked a rally in stocks, but nerves are still running high as the two sides could put more pressure on the markets and an already fragile economy.

Reports said China is open to a small deal as long as President Donald Trump doesn’t impose more tariffs. In the meantime, officials in China are offering to increase annual purchases of U.S. agricultural products.

Nonetheless, expectations are low on Wall Street with many predicting a tariff postponement to be the best outcome. Strategist said an increasing lack of trust is making it more difficult to reach any agreement. Many expect to see a slimmed down trade deal before year end with issues like intellectual property theft and technology transfers left unresolved.

Earlier this week, tensions between the two economic superpowers reached a fever pitch. The U.S. blacklisted 28 Chinese entities over alleged human rights violations against Muslim minorities in Xinjiang, while putting visa restrictions on Chinese officials involved. China responded “stay tuned” for retaliation against the blacklist.

2. Tame inflation?

Investors will get an update on the state of U.S. inflation on Thursday when the Labor Department releases September consumer price index. Core CPI, which excludes food and energy, is expected to rise just 0.1%, according to economists surveyed by Dow Jones.

A measure of underlying U.S. producer prices released on Tuesday unexpectedly fell, leading to the smallest annual increase in nearly three years. Weak inflation could bolster the case for the Federal Reserve to cut interest rates further.

3. How big is the deficit?

The Treasury Department is set to release the Monthly Treasury Statement for September, the final month of the fiscal year. U.S. budget deficit had smashed the $1 trillion mark in August, hitting the highest in seven years. The Congressional Budget Office estimates the 2019 fiscal budget deficit will be $960 billion. Last year closed with a $779 billion deficit.

Trump’s tax cuts and increased fiscal spending have ballooned the U.S. government’s red ink. The total shortfall rose to nearly $1.07 trillion through the first eleven months of the fiscal year.

Major events (all times ET):

8:30 a.m. Weekly jobless claims

8:30 a.m. Consumer price index

2:00 p.m. Monthly Treasury Statement of Receipts & Outlays

Major Earnings:

7:00 a.m. Delta Air Lines

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