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Traders May Remain Reluctant To Make Significant Moves

The major U.S. index futures are pointing to a slightly higher opening on Wednesday, with stocks likely to extend the lackluster performance seen in the previous session.

Traders may remain reluctant to make significant moves amid some uncertainty about the near-term outlook for the markets after the recent run to record highs.

Optimism about a potential U.S.-China trade deal contributed to the strength on Wall Street, but traders now seem to be looking for more concrete developments.

U.S. and Chinese officials have continued to tout progress in the ongoing trade talks, building anticipation for phase one of an agreement to be signed sometime this month.

However, traders may start to get antsy the longer negotiations drag on without an announcement of new plans for a meeting between President Donald Trump and Chinese President Xi Jinping.

After failing to sustain an early move to the upside, stocks showed a lack of direction over the course of trading session on Tuesday. The major averages spent the day bouncing back and forth across the unchanged line, although the Dow and the Nasdaq still crept up to new record closing highs.

The major averages finished the day on opposite sides of the unchanged line. While the S&P 500 edged down 3.65 points or 0.1 percent at 3,074.62, the Dow ticked up 30.52 points or 0.1 percent to 27,492.63 and the Nasdaq inched up 1.48 points or less than a tenth of a percent to 8,434.68.

The early strength on Wall Street came amid continued optimism about a potential U.S.-China trade deal, with Trump and Xi Jinping 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."

Buying interest was somewhat subdued, however, as traders wait for more concrete developments before continuing to buy stocks following the recent run to record highs.

Stocks gave back ground following the release of a report from the Institute for Supply Management showing growth in U.S. service sector activity reaccelerated by more than anticipated in the month of October.

The ISM said its non-manufacturing index climbed to 54.7 in October from 52.6 in September, with a reading above 50 indicating growth in the service sector. Economists had expected the index to inch up to 53.2.

The better than expected data may have raised concerns about the outlook for interest rates after the Federal Reserve indicated last week that it is putting further rate cuts on hold.

A separate 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.

Most of the major sectors ended the day showing only modest moves, contributing to the lackluster close by the broader markets.

Gold stocks showed a significant move to the downside, however, with the NYSE Arca Gold Bugs Index slumping by 1.6 percent. The weakness among gold stocks came amid a steep drop by the price of the precious metal.

Interest rate-sensitive commercial real estate and utilities stocks also came under pressure over the course of the trading session.

On the other hand, tobacco stocks moved sharply higher on the day, driving the NYSE Arca Tobacco Index up by 2 percent to its best closing level in almost two months.

Notable strength was also visible among computer hardware stocks, as reflected by the 1.1 percent gain posted by the NYSE Arca Computer Hardware Index.

Commodity, Currency Markets

Crude oil futures are slipping $0.30 to $56.93 a barrel after climbing $0.69 to $57.23 a barrel on Tuesday. Meanwhile, an ounce of gold is trading at $1,490, up $6.30 compared to the previous session's close of $1,483.70. On Tuesday, gold plunged $27.40.

On the currency front, the U.S. dollar is trading at 108.97 yen compared to the 109.16 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is trading at $1.1087 compared to yesterday's $1.1075.

Asia

Asian stocks ended mixed in cautious trading on Wednesday after reports suggested Beijing wants Washington to lift punitive tariffs as part of a truce in their trade war.

Chinese shares ended lower as investors awaited more clarity on trade talks and policy easing. The benchmark Shanghai Composite Index dropped 12.97 points, or 0.4 percent, to 2,978.60, while Hong Kong's Hang Seng Index inched up 5.24 points, or less than a tenth of a percent, to 27,688.64.

Japanese shares posted modest gains to end at a fresh 13-month high as the minutes of the Bank of Japan's October monetary policy meeting kept easy money policy in the cards.

Investors shrugged off survey data showing that Japan's private sector contracted for the first time in more than three years in October.

The Nikkei 225 Index rose 51.83 points or 0.2 percent, to 23,303.82, its highest level since October 10 of last year. The broader Topix ended little changed at 1,694.45.

Exporters and financials were among the prominent gainers. Hitachi rallied 2.1 percent and Mitsubishi UFJ Financial Group rose 1 percent.

Australian markets declined as gold miners succumbed to selling pressure on renewed U.S.-China trade optimism. The benchmark S&P/ASX 200 Index dropped 36.90 points, or 0.6 percent, to 6,660.20, while the broader All Ordinaries Index ended down 38.40 points, or 0.6 percent, at 6,773.20.

Gold miner Evolution Mining declined 1 percent and Newcrest shed 2.6 percent after safe-haven gold prices closed lower for a second straight session overnight.

The big four banks ended mixed, a day after the RBA held interest rates steady as expected at its policy review. Oil & gas exploration company Oil Search gained 1.9 percent and refiner and retailer Viva Energy Group added 1.5 percent on higher oil prices.

Building materials maker Boral tumbled 3.7 percent after it warned of a weaker fiscal 2020 first half. Mining heavyweight BHP gained 1.5 percent, tracking gains in copper and iron ore prices.

Seoul stocks hit a five-month high as investors remained upbeat over the prospect of an interim trade deal between Washington and Beijing. The benchmark Kospi ended marginally higher at 2,144.15.

State-run utility Korea Electric Power Corp. led the gainers to end up by 6.1 percent, while market bellwether Samsung Electronics rose 1.1 percent.

Europe

European stocks are have moved modestly higher on Wednesday as investors await more clarity on U.S-China trade talks.

Underlying sentiment turned cautious after reports suggested that Beijing wants Washington to lift punitive tariffs as part of a truce in their trade war.

While the U.K.'s FTSE 100 Index has crept up by 0.1 percent, the German DAX Index and the French CAC 40 Index are up by 0.3 percent and 0.4 percent, respectively.

Societe Generale has moved sharply higher. After reporting a drop in third-quarter earnings and revenue, the bank has set aside three-quarters of the cash needed to deliver a planned dividend payout this year.

Brenntag has also soared. The German chemical distribution company achieved stable results in the third quarter of 2019, despite difficult macroeconomic conditions.

Marks & Spencer shares have also jumped in London after the company said it is making up for lost time after a challenging first-half.

Mothercare shares have spiked. The baby products retailer is set to close all of its 79 U.K. stores and its online business with the potential loss of 2,800 jobs.

On the other hand, sportswear company Adidas has dropped after its third quarter net income attributable to shareholders decreased 1.8 percent.

Mall operator Intu Properties has also slumped after saying it is considering asset sales or an equity raise to tide over a prolonged weakness in the retail sector due to Brexit-driven uncertainty.

AstraZeneca has also declined after announcing plans to raise up to $1 billion for a new fund that would invest in Chinese health-care startups.

In economic news, data from Destatis revealed that German factory orders grew more than expected in September on rising domestic and foreign demand.

Factory orders grew 1.3 percent month-on-month, reversing a 0.4 percent drop in August. Orders were forecast to climb 0.5 percent.

The euro area private sector expanded slightly more than initially estimated in October but remained close to stagnation, final data from IHS Markit showed.

The final composite output index rose to 50.6 in October from 50.1 in September. The score was above the flash estimate of 50.2.

U.S. Economic Reports

Labor productivity in the U.S. unexpectedly edged lower in the third quarter, according to preliminary data released by the Labor Department.

The report said labor productivity dipped by 0.3 percent in the third quarter after spiking by an upwardly revised 2.5 percent in the second quarter.

The drop came as a surprise to economists, who had expected productivity to climb by 0.9 percent compared to the 2.3 percent jump originally reported for the previous month.

Meanwhile, the Labor Department said unit labor costs soared by 3.6 percent in the third quarter after surging up by a downwardly revised 2.4 percent in the second quarter.

Economists had expected unit labor costs to jump by 2.2 percent compared to the 2.6 percent spike originally reported for the previous month.

At 9:30 am ET, New York Federal Reserve President John Williams is due to speak in a moderated discussion on the future of the workforce at a Wall Street Journal event in New York.

The Energy Information Administration is scheduled to release its report on oil inventories in the week ended November 1st at 10:30 am ET.

Oil inventories are expected to rise by 2.7 million barrels after jumping by 5.7 million barrels in the previous week.

At 1 pm ET, the Treasury Department is due to announce the results of its auction of $27 billion worth of ten-year notes.

Philadelphia Fed President Patrick Harker is slated to speak about "Rethinking Workforce Investments" at Drexel University in Philadelphia, Pennsylvania, at 3:15 pm ET.

At 6:30 pm ET, Williams is due to give welcoming remarks at the New York Fed - GARP Global Risk Forum in New York.

Stocks In Focus

Shares of HP Inc. (HPQ) are moving sharply higher in pre-market trading after a report from the Wall Street Journal said Xerox (XRX) is considering a cash-and-stock offer to acquire the PC maker.

Oil and gas producer Devon Energy (DVN) is also likely to see initial strength after reporting third quarter results that exceeded analyst estimates.

On the other hand, shares of Diamondback Energy (FANG) may come under pressure after the oil and gas company reported weaker than expected third quarter results.

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