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Growing Optimism About Trade Talks May Help Extend Rally

The major U.S. index futures are currently pointing to a higher opening on Friday, with stocks likely to extend the rally seen over the two previous sessions.

Growing optimism about ongoing U.S.-China trade talks is likely to contribute to continued strength on Wall Street as the high-level negotiations move into their second day.

President Donald Trump told reporters shortly after the close of trading on Thursday that the talks with China are going "really well."

"So, we just completed a negotiation with China. We're doing very well. We're having another one tomorrow. I'm meeting with the Vice Premier over at the White House," Trump said. "And I think it's going really well, I will say. I think it's going really well."

While Trump is almost always upbeat about talks with China, his remarks were backed up by a White House official, who told Reuters the talks had gone very well, "probably better than expected."

A U.S. Chamber of Commerce official briefed on the talks also told reporters the two sides could at least reach a partial deal that includes the U.S. calling off a planned increase in tariffs on Chinese goods.

Traders are likely to remain focused on any reports of progress in the talks or a lack thereof, potentially leading to some volatility on Wall Street.

Following the strong upward move seen on Wednesday, stocks saw some further upside during trading on Thursday. With the gains, the major averages further offset the sharp pullback that was seen earlier in the week.

The major averages pulled back off their best levels of the day but remained firmly positive. The Dow climbed 150.66 points or 0.6 percent to 26,496.67, the Nasdaq advanced 47.04 points or 0.6 percent to 7,950.78 and the S&P 500 rose 18.73 points or 0.6 percent to 2,938.13.

Buying interest emerged on Wall Street after Trump revealed he plans to meet with Chinese Vice Premier Liu He as part of high-level U.S.-China trade talks.

"Big day of negotiations with China. They want to make a deal, but do I? I meet with the Vice Premier tomorrow at The White House," Trump tweeted.

The tweet from Trump offset concerns generated by reports suggesting Liu could leave Washington earlier than originally planned.

Adding to the positive sentiment, Liu told Chinese state-run media Xinhua the Chinese delegation has come to the talks with "great sincerity and is willing to make serious exchanges with the U.S. on issues of common concern."

"On the basis of equality and mutual respect, China is willing to reach consensus with the U.S. through this round of consultations on issues of mutual concern to prevent further escalation and spread of friction," Liu said.

Traders are likely to remain focused on reports regarding the highly anticipated negotiations and any signs of progress or lack thereof.

As a result of the focus on the trade talks, traders largely shrugged off a usually closely watched report from the Labor Department showing U.S. consumer prices were essentially flat in the month of September.

The Labor Department said its consumer price index was unchanged in September after inching up by 0.1 percent in August. Economists had expected another 0.1 percent uptick.

Consumer prices came in unchanged as higher prices for shelter and food were offset by declines in prices for energy and used cars and trucks.

Excluding food and energy prices, core consumer prices crept up by 0.1 percent in September after rising by 0.3 percent for three straight months. Core prices had been expected to rise by 0.2 percent.

"The muted gain in core consumer prices in September underlines that even after the introduction of additional tariffs on Chinese imports, inflationary pressures are still well-contained," said Andrew Hunter, Senior U.S. Economist at Capital Economics.

"With wage growth leveling off and unit labor costs growth stable, we don't think core inflation will rise further from here," he added. "As a result, the Fed will remain focused on the incoming activity data, which we expect to prompt one more 25bp rate cut by year-end."

A separate report released by the Labor Department showed a modest decrease in first-time claims for U.S. unemployment benefits in the week ended October 5th.

Steel stocks turned in some of the market's best performances of the day, benefiting from the optimism about the U.S.-China trade talks.

Reflecting the strength in the steel sector, the NYSE Arca Steel Index surged up by 2.9 percent, climbing further off the more than one-month closing low set on Tuesday.

Significant strength also emerged among oil service stocks, as reflected by the 1.8 percent gain posted by the Philadelphia Oil Service Index. The index also continued to rebound after ending Tuesday's trading at its lowest closing level in well over a month.

Financial, transportation, and natural gas stocks also saw considerable strength on the day, moving higher along with most of the other major sectors.

Commodity, Currency Markets

Crude oil futures are climbing $0.77 to $54.32 a barrel after jumping $0.96 to $53.55 a barrel on Thursday. Meanwhile, after slumping $11.90 to $1,500.90 an ounce in the previous session, gold futures are sliding $12 to $1,488.90 an ounce.

On the currency front, the U.S. dollar is trading at 108.34 yen versus the 107.98 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.1044 compared to yesterday's $1.1005.


Asian stocks rose on Friday after U.S. President Donald Trump hinted at progress in his high-stakes trade battle with China and Chinese news agency Xinhua reported that Beijing was willing to reach an agreement to avoid further escalation.

Chinese Vice Premier Liu He told Chinese state-run media Xinhua the Chinese delegation has come to the talks with "great sincerity and is willing to make serious exchanges with the U.S. on issues of common concern," raising hopes that the two countries would reach a deal to end their protracted trade war.

China's Shanghai Composite Index climbed 25.95 points, or 0.9 percent, to 2,973.66, while Hong Kong's Hang Seng Index soared 600.51 points, or 2.3 percent, to 26,308.44.

Japanese shares advanced as the safe-haven yen weakened on optimism about the U.S.-China trade talks. The Nikkei 225 Index jumped 246.89 points, or 1.2 percent, to 21,798.87, its highest level since October 1. The broader Topix closed 0.9 percent higher at 1,595.27.

Shipping companies benefited from trade optimism, with Kawasaki Kisen climbing 5.7 percent and Mitsui O.S.K. Lines adding 3.4 percent. Market heavyweight Fast Retailing advanced 2.6 percent after the Uniqlo chain operator reported record profits and sales for the fiscal year through August. Seven & i Holdings soared 4.9 percent on restructuring news.

Australian markets rose sharply amid bets that high-level U.S.-China trade talks would yield at least a partial deal. The benchmark S&P/ASX 200 index climbed 59.70 points, or 0.9 percent, to 6,606.80, while the broader All Ordinaries Index ended up 59 points, or 0.9 percent, at 6,721.90.

Mining heavyweights BHP and Rio Tinto jumped over 2 percent each as investors awaited quarterly production reports from major Australian miners next week. The big four banks rose between 0.6 percent and 1.1 percent.

IOOF Holdings rallied 3.6 percent after it sold its stake in domestic fund manager Perennial Value Management to focus on its core wealth management business.

Michael Hill International soared 19.3 percent after the jeweler reported an 11.9 percent increase in same-store sales for the first quarter compared to the prior year.

Energy stocks such as Woodside and Santos rose around 1 percent after crude oil prices gained overnight, but gold miners Evolution and Newcrest declined around 1.5 percent each as gold prices fell from a one-week high.

Seoul stocks ended on a firmer note as investors cheered signs of progress in trade talks between the United States and China. The benchmark Kospi climbed 16.46 points, or 0.8 percent, to finish at 2,044.61.


European stocks have advanced on Friday, extending gains from the previous session as Brexit worries ease and optimism prevails for some sort of a partial trade deal between the United States and China.

While the German DAX Index has spiked by 2 percent, the French CAC 40 Index is up by 1.1 percent and the U.K.'s FTSE 100 Index is up by 0.8 percent.

German software giant SAP has moved sharply higher after pre-announcing strong third quarter earnings and revealed its long-term CEO has stepped down.

France's Renault has also rallied ahead of an expected vote on whether to remove Chief Executive Thierry Bolloré amid concerns over the company's performance and its tense relationship with Nissan Motor Co.

Vinci has also moved to the upside after its third-quarter passenger numbers across all VINCI Airports facilities grew 6.9 percent from last year to 72 million passengers.

On the other hand, German luxury fashion brand Hugo Boss has come under pressure after cutting its 2019 sales outlook again.

Man Group has also slumped after its third-quarter funds under management declined to $112.7 billion from $114.1 billion last year.

In economic news, German consumer price inflation slowed as initially estimated in September to the lowest since early 2018, final data from Destatis showed.

Consumer price inflation slowed to 1.2 percent in September from 1.4 percent in August. This was the lowest rate since February 2018, when the rate was 1.1 percent.

U.S. Economic Reports

A report released by the Labor Department showed an unexpected increase in U.S. import prices in the month of September, although the report also showed an unexpected decrease in export prices.

The Labor Department said import prices rose by 0.2 percent in September after dipping by a revised 0.2 percent in August.

Economists had expected import prices to come in unchanged compared to the 0.5 percent drop originally reported for the previous month.

Meanwhile, the report said export prices edged down by 0.2 percent in September after sliding by 0.6 percent in August. Export prices had also been expected to come in unchanged.

At 10 am ET, the University of Michigan is scheduled to release its preliminary report on consumer sentiment in the month of October. The consumer sentiment index is expected to pull back to 92.0 in October after rebounding to 93.2 in September.

Boston Federal Reserve President Eric Rosengren is due to speak at the American Economic Challenges Symposium at the University of Wisconsin-Madison in Madison, Wisconsin, at 1:15 pm ET.

At 3 pm ET, Dallas Fed President Robert Kaplan is scheduled to participate in a moderated Q&A at a Commonwealth Club of California luncheon in San Francisco, California.

Stocks In Focus

Shares of Fastenal (FAST) are moving sharply higher in pre-market trading after the maker of fasteners, tools and manufacturing supplies reported third quarter results that beat analyst estimates on both the top and bottom lines.

Streaming video device maker Roku (ROKU) is also likely to see initial strength after RBC Capital upgraded its rating on the company's stock to Outperform from Sector Perform.

Shares of The Trade Desk (TTD) may also move to the upside after RBC Capital upgraded its rating on the online advertising company to Outperform from Sector Perform.

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