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Optimism About Trade Deal May Lead To Continued Strength On Wall Street

The major U.S. index futures are currently pointing to a higher opening on Monday, suggesting stocks will see further upside following the rally last Friday.

The markets may benefit from optimism about a U.S.-China trade agreement, with Commerce Secretary Wilbur Ross expressing optimism phase one of a trade deal could be signed this month.

"We're in good shape, we're making good progress, and there's no natural reason why it couldn't be," Ross said in an interview with Bloomberg on Sunday.

Ross called the phase one agreement "particularly complicated" and acknowledged it is "always possible" the signing of the deal could "slip a little bit."

In the interview, Ross also said licenses for U.S. firms to sell components to China's Huawei Technologies would be coming "very shortly."

President Donald Trump has also continued to express optimism about a trade deal, recently suggesting phase one of an agreement could be signed somewhere in the U.S. as soon as this month.

Stocks moved sharply higher over the course of the trading session on Friday as traders reacted to much better than expected U.S. jobs data. With the strong upward moves, the Nasdaq and the S&P 500 reached new record closing highs.

The major averages saw further upside going into the close, ending the session at their best levels of the day. The Dow surged up 301.13 points or 1.1 percent to 27,347.36, the Nasdaq soared 94.04 points or 1.1 percent to 8,386.40 and the S&P 500 jumped 29.35 points or 1 percent to 3,066.91.

For the week, the Dow shot up by 1.4 percent, while the Nasdaq and the S&P 500 skyrocketed by 1.7 percent and 1.5 percent, respectively.

The rally on Wall Street came as the much stronger than expected U.S. jobs data washed away concerns about the economic outlook.

The Labor Department said non-farm payroll employment climbed by 128,000 jobs in October compared to economist estimates for an increase of about 89,000 jobs.

The report also showed substantial upward revisions to job growth in September and August, with revised data showing employment jumped by 180,000 jobs and 219,000 jobs, respectively.

With the upward revisions, employment gains in September and August combined were 95,000 more than previously reported.

"The upshot is that the three-month average gain is now 175,000, which is easily enough to outpace population growth," said Michael Pearce, Senior U.S. Economist at Capital Economics.

He added, "That is in stark contrast with much of the recent survey evidence, which had pointed to a sharp slowdown in employment growth."

Despite the stronger than expected job growth, the report said the unemployment rate inched up to 3.6 percent in October from 3.5 percent in September. The uptick matched economist estimates.

The unemployment rate crept up from the nearly 50-year low hit in the previous month as a 325-person jump in the size of the labor force more than offset a 241,000-person increase in the household survey measure of employment.

Renewed optimism about a U.S.-China trade deal added to the positive sentiment, as a report from China's Xinhua News Agency said negotiators have "reached consensus on principles."

Meanwhile, traders largely shrugged off a separate report from the Institute for Supply Management showing a continued contraction in U.S. manufacturing activity in the month of October.

The ISM said its purchasing managers index crept up 48.3 in October from 47.8 in September, although a reading below 50 still indicates a contraction in manufacturing activity. Economists had expected the index to rise to 48.9.

In the previous month, the index fell to its lowest level since hitting 46.3 in June of 2009, the last month of the Great Recession.

"Comments from the panel reflect an improvement from the prior month, but sentiment remains more cautious than optimistic," said Timothy Fiore, Chair of the ISM Manufacturing Business Survey Committee. "Global trade remains the most significant cross-industry issue."

Energy stocks turned in some of the market's best performances on the day, benefiting for a sharp increase by the price of crude oil.

Reflecting the strength in the energy sector, the Philadelphia Oil Service Index soared by 5.4 percent, the NYSE Arca Natural Gas Index surged up by 3 percent and the NYSE Arca Oil Index jumped by 2.3 percent.

Substantial strength was also visible among steel stocks, as reflected by the 4.3 percent spike by the NYSE Arca Steel Index. The index ended the session at its best closing level in well over a month.

U.S. Steel (X) helped lead the sector higher after reporting a narrower than expected third quarter loss on revenues that exceeded analyst estimates.

Biotechnology, transportation and financial stocks also saw significant strength on the day, while gold, networking and telecom stocks bucked the uptrend.

Commodity, Currency Markets

Crude oil futures are climbing $0.56 to $56.76 a barrel after soaring $2.02 to $56.20 a barrel last Friday. Meanwhile, an ounce of gold is trading at $1,512.30, up $0.90 from the previous session's close of $1,511.40. On Friday, gold fell $3.40.

On the currency front, the U.S. dollar is trading at 108.41 yen compared to the 108.19 yen it fetched at the close of New York trading on Friday. Against the euro, the dollar is valued at $1.1158 compared to last Friday's $1.1166.

Asia

Asian stocks rose on Monday as investors cheered unexpectedly strong U.S. jobs data for October as well as the prospects of a long-term U.S.-China trade deal. The Japanese markets were closed for the Culture Day holiday.

The "Phase One" trade deal with China, once completed, will be signed somewhere in the U.S., President Donald Trump told reporters on Sunday.

Separately, U.S. Commerce Secretary Wilbur Ross told Bloomberg that licenses would be released "very shortly" for U.S. firms to sell components to Huawei Technologies Co.

China's Shanghai Composite Index climbed 17.29 points, or 0.6 percent, to 2,975.49 and Hong Kong's Hang Seng Index jumped 446.54 points, or 1.7 percent, to 27,547.30 after the Chinese Commerce Ministry said the world's two largest economies had reached "consensus on principles" during a "serious and constructive" telephone call between their main trade negotiators.

Encouraged by Beijing's increasing efforts to open up its financial markets, investors awaited Chinese President Xi Jinping's planned keynote speech at the Shanghai international import exhibition for further direction.

Australian markets closed higher even as banks declined after Westpac Banking Corp. reported a 15 percent slide in full-year cash profit, cut its dividend for the first time in a decade, and announced a $2.5 billion capital raising.

Shares of Westpac entered a trading halt until November 5, while the other three big banks fell between 0.9 percent and 2.5 percent ahead of the RBA's monthly policy meeting due on Tuesday.

The benchmark S&P/ASX 200 Index rose 17.80 points, or 0.3 percent, to 6,686.90, while the broader All Ordinaries Index ended up 20.70 points, or 0.3 percent, at 6,799.80.

Mining stocks surged as investors cheered signs of progress in U.S.-China trade talks. BHP, Rio Tinto and Fortescue Metals Group climbed 2-4 percent.

Woodside Petroleum, Oil Search and Origin Energy rose between half a percent and 1 percent after oil prices jumped 4 percent on Friday following stronger than expected economic data in both the U.S. and China.

Australia's retail sales growth halved in September, reflecting weak consumer spending despite interest rate cuts, official data revealed today.

Retail turnover climbed 0.2 percent month-on-month in September, slower than the 0.4 percent increase seen in August. Economists had forecast sales to grow 0.4 percent again.

Seoul stocks rose for the third straight session and the Korean won hit a nearly four-month high against the U.S. dollar on hopes the U.S. and China will reach a phase one trade deal this month.

The Kospi surged up 30.04 points, or 1.4 percent, to close at 2,130.24, the highest level in almost four months. Tech heavyweight Samsung Electronics rallied 2.2 percent, chipmaker SK Hynix advanced 1.9 percent and national carrier Korean Air Lines added 3.6 percent.

Europe

European stocks have moved sharply higher on Monday, extending gains from the previous session amid renewed optimism over U.S.-China trade talks.

Tariff-exposed automakers and commodity-related mining stocks have led the surge after U.S. Commerce Secretary Wilbur Ross told Bloomberg that licenses would be released "very shortly" for U.S. firms to sell components to Huawei Technologies Co.

Ross also said that there was "no natural reason" why a "phase one" trade deal with China couldn't be reached this month.

In economic releases, a measure of Eurozone manufacturing was finalized at 45.9 in October, up from September's seven-year low reading of 45.7.

While the German DAX Index has surged up by 1.5 percent, the French CAC 40 Index and the U.K.'s FTSE 100 Index are both up by 1.1 percent.

Automaker Daimler Group has jumped after launching its new corporate structure on November 1, 2019. BMW, Volkswagen, Renault and Peugeot have also moved notably higher.

German medical-equipment maker Siemens Healthineers has spiked after reporting a rise in net profit and revenue during the fourth quarter of the year.

Lubricant manufacturer Fuchs Petrolub has also rallied on news the company has agreed to buy the business of ZIMMARK INC.

Lender Deutsche Bank has also climbed after appointing Claudio de Sanctis as Global Head of Deutsche Bank Wealth Management, succeeding Fabrizio Campelli, who joins the group Management Board as Chief Transformation Officer.

Budget airline Ryanair Holdings has also soared as it reported higher second quarter earnings despite rising fuel and staff costs.

On the other hand, struggling baby goods retailer Mothercare has plunged after saying it is planning to call in administrators to the troubled firm's U.K. business.

U.S. Economic Reports

At 10 am ET, the Commerce Department is scheduled to release its report on new orders for manufactured goods in the month of September. Factory orders are expected to drop by 0.5 percent.

San Francisco Federal Reserve President Mary Daly is due to speak in a fireside chat at NYU's Stern Center for Global Economy and Business in New York at 3:05 pm ET.

Stocks In Focus

Shares of Wright Medical Group (WMGI) are soaring in pre-market trading after the medical device maker agreed to be acquired by larger rival Stryker (SYK) for $30.75 per share in cash.

Drugmaker Bausch Health (BHC) may also see initial strength after reporting better than expected third quarter revenues and raising its full-year guidance.

On the other hand, shares of Under Armour (UAA) are likely to come under pressure after the athletic apparel maker reported better than expected third quarter results but revealed a federal probe of its accounting practices.

Fast good giant McDonald's (MCD) may also move to the downside after firing President and CEO Steve Easterbrook over a consensual relationship with an employee.

For comments and feedback contact: editorial@rttnews.com

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