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Stocks Likely To Open Sharply Higher On Easing Trade Tensions - U.S. Commentary


Stocks are likely to move sharply higher in early trading on Monday, adding to the substantial gains posted last week. The major index futures are currently pointing to a higher open for the markets, with the Dow futures up by 434 points.

Early buying interest is likely to be generated amid a positive reaction to the highly anticipated meeting between President Donald Trump and Chinese President Xi Jinping over the weekend.

At the meeting, Trump and Xi agreed to a 90-day truce in the escalating trade war between the world's two largest economies as they work to reach a long-term trade deal.

A White House statement said Trump agreed not to raise the tariffs on $200 billion worth of Chinese goods to 25 percent from 10 percent on January 1st as planned.

In return, China agreed to purchase a "not yet agreed upon, but very substantial, amount" of agricultural, energy, industrial, and other product from the U.S.

The White House said the U.S. and China will use the next 90 days to attempt to reach an agreement on issues such as forced technology transfer, intellectual property protection, and non-tariff barriers.

If the two countries are not able to reach an agreement by the end of the time period, the 10 percent tariffs on Chinese goods will be raised to 25 percent.

In remarks to reporters aboard Air Force One, Trump called the agreement with Xi an "incredible deal," claiming it will have an "incredibly positive impact" on "every type of product."

Trump also said China will be "opening up" and "getting rid of tariffs," stating in a subsequent post on Twitter that China has agreed to reduce and remove tariffs on cars coming into the country from the U.S.

Shortly after the start of trading, the Institute for Supply Management is scheduled to release its report on manufacturing activity in the month of November.

The ISM's purchasing managers index is expected to inch edge down to 57.5 in November from 57.7 in October, with a reading above 50 indicating growth in the manufacturing sector.

The Commerce Department is also due to release its report on construction spending in the month of October at 10 am ET. Construction spending is expected to rise by 0.3 percent.

After recovering from an early move to the downside, stocks moved mostly higher over the course of the trading session on Friday. The major averages more than offset Thursday's modest losses, adding to the strong gains posted earlier in the week.

The major averages saw further upside going into the close, ending the day just off their highs of the session. The Dow climbed 199.62 points or 0.8 percent to 25,538.46, the Nasdaq advanced 57.45 points or 0.8 percent to 7,330.54 and the S&P 500 rose 22.40 points or 0.8 percent to 2,760.16.

With the rebound on the day, the major averages moved sharply higher for the week. The Nasdaq soared by 5.6 percent, while the Dow and the S&P 500 spiked by 5.1 percent and 4.8 percent, respectively.

In overseas trading, stock markets across the Asia-Pacific region moved significantly higher during trading on Monday. Japan's Nikkei 225 Index jumped by 1 percent, while Hong Kong's hang Seng Index surged up by 2.6 percent.

The major European markets have also shown strong moves to the upside on the day. While the German DAX Index is up by 2.1 percent, the U.K.'s FTSE 100 Index is up by 1.6 percent and the French CAC 40 Index is up by 0.9 percent.

In commodities trading, crude oil futures are spiking $2.34 to $53.27 a barrel after falling $0.52 to $50.93 a barrel last Friday. Meanwhile, an ounce of gold is trading at $1,237.30, up $11.30 from the previous session's close of $1,226. On Friday, gold slid $4.40.

On the currency front, the U.S. dollar is trading at 113.52 yen compared to the 113.57 yen it fetched at the close of New York trading on Friday. Against the euro, the dollar is valued at $1.1337 compared to last Friday's $1.1317.

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