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Traders Continue To Express Optimism About U.S.-China Trade Deal

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

The markets may continue to benefit from optimism about a potential U.S.-China trade deal, as President Donald Trump and Chinese President Xi Jinping are widely expected to sign phase one of an agreement sometime this month.

As part of the deal, the U.S. is likely to scrap tariffs on about $156 billion worth of Chinese imports currently set to take effect on December 15th.

A report from the Financial Times said the U.S. is also considering China's request to lift the 15 percent tariff on about $125 billion worth of Chinese goods that went into effect on September 1st.

A person familiar with Beijing's negotiating position told Reuters that China is continuing to press Washington to "remove all tariffs as soon as possible."

Stocks moved mostly higher during the trading day on Monday, extending the strong upward move seen in the previous session. With the continued advance, the major averages all reached new record closing highs.

The major averages finished the session off the best levels of the day but still firmly in positive territory. The Dow climbed 114.75 points or 0.4 percent to 27,462.11, the Nasdaq advanced 46.80 points or 0.6 percent to 8,433.20 and the S&P 500 rose 11.36 points or 0.4 percent to 3,078.27.

The strength on Wall Street came as traders remain hopeful 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."

The comments from Ross came after a report from China's Xinhua News Agency last Friday said U.S. and Chinese trade negotiators have "reached consensus on principles."

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.

News on the merger-and-acquisition front also generated some positive sentiment, with shares of Wright Medical Group (WMGI) soaring after the medical device maker agreed to be acquired by larger rival Stryker (SYK) for $30.75 per share in cash.

Regional banks First Horizon (FHN) Iberiabank (IBKC) also posted notable gains after agreeing to combine in an all-stock merger of equals.

Meanwhile, shares of Under Armour (UAA) came under pressure after the athletic apparel maker reported better than expected third quarter results but revealed a federal probe of its accounting practices.

Energy stocks turned in some of the market's best performances on the day amid a continued increase by the price of crude oil.

Reflecting the strength in the energy sector, the NYSE Arca Natural Gas Index and the Philadelphia Oil Service Index soared 4.6 percent and 4.4 percent, respectively. The NYSE Arca Oil Index also surged up by 2.3 percent.

Significant strength also emerged among transportation stocks, as reflected by the 2.3 percent jump by the Dow Jones Transportation Average. The average ended the session at its best closing level in over six months.

Semiconductor, financial, and steel stocks also saw considerable strength on the day, while gold, housing and utilities stocks showed notable moves to the downside.

Commodity, Currency Markets

Crude oil futures are climbing $0.43 to $56.97 a barrel after rising $0.34 to $56.54 a barrel on Monday. Meanwhile, after edging down $0.30 to $1,511.10 an ounce in the previous session, gold futures are sliding $13.60 to $1,497.50 an ounce.

On the currency front, the U.S. dollar is trading at 108.88 yen compared to the 108.58 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is valued at $1.1098 compared to yesterday's $1.1128.

Asia

Asian stocks rose on Tuesday amid renewed hopes of further progress in U.S.-China trade talks on signing a partial deal.

Sentiment got a further boost after the Financial Times reported that the U.S. is considering dropping tariffs on $112 billion worth of Chinese imports.

President Donald Trump and Chinese President Xi Jinping are expected to meet in the U.S. soon to sign the first phase of a trade deal between the world's two largest economies.

China's Shanghai Composite Index climbed 16.07 points, or 0.5 percent, to 2,991.56 and Hong Kong's Hang Seng Index rose 136.10 points, or 0.5 percent, to 27,683.40 after China's Foreign Ministry said Xi and Trump have been in constant contact through "various means."

Japanese shares hit a 13-month high as traders returned to their desks after a long holiday weekend. The Nikkei 225 Index jumped 401.22 points, or 1.8 percent, to 23,251.99, its highest level since October 10 of last year. The broader Topix closed 1.7 percent higher at 1,694.16, its higher level in more than a year.

Construction machinery maker Komatsu jumped 5.4 percent and Hitachi Construction Machinery advanced 5.1 percent on hopes for a U.S.-China trade deal.

Chip-related stocks surged, with Sumco Corp. ending up over 3 percent and Renesas Electronics soaring 7 percent.

Market heavyweight SoftBank Group rallied 2.4 percent after saying it would book a 277 billion yen ($2.56 billion) gain in the second quarter under income on equity method investments.

Fujifilm Holdings jumped 6.7 percent after it agreed to end a 57-year-old joint venture with Xerox Holdings Corp. Z Holdings, formerly known as Yahoo Japan Corp., soared 16.4 percent after the e-commerce firm reported an 11 percent rise in operating profit in the July-September quarter.

Seoul stocks gained ground for the fourth straight session on hopes of an interim trade deal between the United States and China. The Kospi rose 12.40 points, or 0.6 percent, to 2,142.64, with technology, auto and steel stocks pacing the gainers.

Australian markets fluctuated before finishing slightly higher after the Reserve Bank adopted a wait-and-see approach by holding its key interest rate at a historic low of 0.75 percent.

The benchmark S&P/ASX 200 Index inched up 10.20 points, or 0.2 percent, to 6,697.10, while the broader All Ordinaries Index ended up 11.80 points, or 0.2 percent, at 6,811.60.

Westpac Banking Corp. lost 2.6 percent after the country's second-largest lender announced the completion of an A$2 billion share placement. The other three big banks rose between 0.4 percent and 0.8 percent.

Strength in oil prices pushed energy stocks higher, with Woodside Petroleum and Origin Energy rising around 1 percent.

Mining heavyweights BHP and Rio Tinto gained more than 1 percent each, while gold miners Evolution, Newcrest Mining and St Barbara tumbled 2-3 percent.

In economic news, the services sector in Australia expanded at a faster rate in October, the latest survey from the Australian Industry Group revealed with a Performances of Services Index score of 54.2, up from 51.5 in September.

Europe

European stocks have moved modestly higher on Tuesday, with hopes for a U.S.-China trade deal that could boost global growth offsetting disappointing earnings news from the likes of Pandora, Adecco Group and Telefonica.

While the German DAX Index has inched up by 0.1 percent, the French CAC 40 Index and the U.K.'s FTSE 100 Index are both up by 0.3 percent.

Specialty chemicals company Evonik Industries has moved sharply higher after the company reported that its net income for the third quarter surged to 1.48 billion euros from 329 million euros in the same period last year.

Luxury fashion brand Hugo Boss has also moved to the upside after saying it expects sales and operating profit to recover in the fourth quarter.

Shares of Associated British Foods are also seeing significant strength after the company delivered a 'resilient' performance over the last financial year.

On the other hand, Danish jewelry maker Pandora has slumped after it swung to an unexpected third-quarter net loss and cut its revenue growth guidance.

Adecco Group, a provider of human resources solutions, has also moved lower after its net profit and revenue fell for the third quarter.

Telefonica has also moved to the downside. The Spanish telecommunications firm slipped to a third-quarter net loss of 443 million euros, compared to last year's profit of 1.14 billion euros, reflecting restructuring costs of 1.40 billion euros.

U.S. Economic Reports

A report released by the Commerce Department showed the U.S. trade deficit narrowed in the month of September, as the value of imports slumped by more than the value of exports.

The Commerce Department said the trade deficit narrowed to $52.5 billion in September from a revised $55.0 billion in August. The narrower deficit matched economist estimates.

The deficit shrank as the value of imports tumbled by 1.7 percent to $258.4 billion, while the value of exports slid by 0.9 percent to $206.0 billion.

At 10 am ET, the Institute for Supply Management is scheduled to release its report on activity in the service sector in the month of October.

The ISM's non-manufacturing index is expected to rise to 53.4 in October after slumping to 52.6 in September, with a reading above 50 indicating growth in the service sector.

The Labor Department is also slated to release its Job Openings and Labor Turnover Survey for the month of September at 10 am ET. Job openings are expected to rise to 7.21 million.

At 12:40 pm ET, Dallas Federal Reserve President Robert Kaplan is due to speak at the Real Estate Council Speaker Series in Dallas, Texas, with audience and media Q&A.

The Treasury Department is scheduled to announce the results of this month's auction of $38 billion worth of three-year notes at 1 pm ET.

At 6 pm ET, Minneapolis Fed President Neel Kashkari is due to speak at the Thrivent Financial Business Development Conference in Minneapolis, Minnesota.

Stocks In Focus

Shares of Xerox (XRX) are moving notably higher in pre-market trading after the copier maker said it would receive approximately $2.3 billion for its 25 percent stake in Fuji Xerox, the company's joint venture with Fujifilm.

Software developer Adobe (ADBE) is also likely to see initial strength after forecasting fiscal 2020 adjusted earnings and revenues above analyst estimates.

On the other hand, shares of Myriad Genetics (MYGN) are plunging in pre-market trading after the molecular diagnostic company reported weaker than expected fiscal first quarter results and lowered its full-year guidance.

Ridesharing company Uber (UBER) may also come under pressure after reporting better than expected third quarter revenues but another steep loss.

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