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Trade Talk Progress May Spark Renewed Buying Interest

The major U.S. index futures are pointing to a higher opening on Thursday, with stocks likely to move to the upside after showing a lack of direction over the two previous sessions.

Stocks are likely to resume their recent advance after a spokesman for the Chinese Commerce Ministry said the U.S. and China have agreed to lift existing tariffs in phases.

"The trade war started with tariffs and should end with the cancellation of tariffs," said ministry spokesman Gao Feng, who noted phase one of a trade deal must include both countries simultaneously canceling tariffs on each other's goods.

The U.S. has widely been expected to scrap tariffs on about $156 billion worth of Chinese imports currently set to take effect on December 15th as part of phase one.

"Both sides have agreed to cancel additional tariffs in different phases, as both sides make progress in their negotiations," Gao added without providing a timetable.

Stocks showed a lack of direction over the course of the trading session on Wednesday, extending the lackluster performance seen on Tuesday. The major averages once again spent the day bouncing back and forth across the unchanged line.

Eventually, the major averages ended the session mixed. While the S&P 500 inched up 2.16 points or 0.1 percent to 3,076.78, the Dow edged down 0.07 points or less than a tenth of a percent to 27,492.56 and the Nasdaq dipped 24.05 points or 0.3 percent to 8,410.63.

The choppy trading on Wall Street came as traders seemed 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.

Stocks moved to the downside after a report from Reuters said a meeting between President Donald Trump and Chinese President Xi Jinping could be delayed until December, although selling pressure waned shortly afterward.

A senior Trump administration official told Reuters discussions continue over terms of phase one of the trade deal and a venue for a meeting between Trump and Xi.

Sites in Europe and Asia have been suggested for the meeting, with Sweden and Switzerland among the possibilities, while Trump's suggestion of Iowa appears to have been ruled out, the official said.

The official said China's latest push for more tariff rollbacks was not expected to derail progress toward an interim deal but noted that it was still possible an agreement would not be reached.

On the U.S. economic front, preliminary data released by the Labor Department showed labor productivity in the U.S. unexpectedly edged lower in the third quarter.

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.

Most of the major sectors ended the day showing only modest moves, although energy stocks saw substantial weakness amid a significant pullback by the price of crude oil.

Reflecting the weakness in the energy sector, the NYSE Arca Natural Gas Index plunged by 3.1 percent, while the Philadelphia Oil Service Index and the NYSE Arca Oil Index tumbled by 2.9 percent and 2.7 percent, respectively.

Telecom stocks also saw considerable weakness on the day, dragging the NYSE Arca North American Telecom Index down by 1.8 percent. The index ended the session at its lowest closing level in ten months.

On the other hand, gold stocks showed a strong move to the upside, with the NYSE Arca Gold Bugs Index surging up by 1.6 percent. The strength among gold stocks came amid a rebound by the price of the precious metal.

Commodity, Currency Markets

Crude oil futures are jumping $0.95 to $57.30 a barrel after slumping $0.88 to $56.35 a barrel on Wednesday. Meanwhile, after climbing $9.40 to $1,493.10 an ounce in the previous session, gold futures are sliding $10.50 to $1,482.60 an ounce.

On the currency front, the U.S. dollar is trading at 109.14 yen compared to the 108.98 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.1070 compared to yesterday's $1.1066.

Asia

Asian stocks ended flat to slightly higher on Thursday as reports on a possible delay in the signing of a U.S.-China trade deal kept underlying sentiment cautious.

However, a senior Trump administration official reportedly said China's latest push for more tariff rollbacks would not derail progress toward an interim deal.

Chinese shares ended largely unchanged amid fresh uncertainty surrounding the U.S.-China trade deal. The benchmark Shanghai Composite Index finished marginally higher at 2,978.71, while Hong Kong's Hang Seng Index rose 0.6 percent to 27,847.23.

Japanese stocks recovered from a weak start to close slightly higher as heavyweight SoftBank Group posted its first quarterly loss in 14 years.

The Nikkei 225 Index inched up 26.50 points, or 0.1 percent, to 23,330.32, its highest closing level since early October last year. The broader Topix closed 0.2 percent higher at 1,698.13.

SoftBank Group shares fell 2.2 percent after the conglomerate reported a $6.5 billion quarterly loss, hit by a writedown on its investment through its giant Vision Fund.

Graphite electrode maker Tokai Carbon tumbled 4.7 percent on posting disappointing earnings, but Olympus soared 15.2 percent after its quarterly earnings topped forecasts.

Australian markets ended sharply higher, with banks and technology companies leading the surge. The benchmark S&P/ASX 200 Index jumped 66.40 points, or 1 percent, to 6,726.60, while the broader All Ordinaries Index ended up 63.70 points, or 0.9 percent, at 6,836.90.

National Australia Bank rallied 2.2 percent despite the lender reporting an 11 percent drop in annual cash earnings and cutting its dividend. The other three big banks rose between 0.4 percent and 1.3 percent.

Energy stocks such as Oil Search and Santos fell over 1 percent as oil held on to overnight losses after a much larger than expected build in U.S. crude inventories.

Mining heavyweight BHP shed 0.4 percent while Rio ended on a flat note. Gold miners Evolution and Newcrest rose around 2 percent as doubts about a U.S.-China trade breakthrough buoyed demand for the previous metal.

James Hardie Industries soared 7.8 percent after the world's largest fibre cement maker forecast higher earnings in fiscal 2020 amid an improving U.S. housing market.

Xero jumped 9.6 percent as the cloud accounting software firm reported a turnaround to profit in the first half of the year on a 32 percent surge in revenues. WiseTech Global and Altium ended up more than 3 percent each.

In economic news, Australia posted a seasonally adjusted merchandise trade surplus of A$7.180 billion in September, official data showed, handily exceeding forecasts for a surplus of A$5.050 billion.

Another report showed that the construction sector in Australia continued to contract in October, albeit at a slightly slower rate.

Seoul stocks recouped early losses to end on flat note. The benchmark Kospi inched up marginally to close at 2,144.29 on expectations that China's latest push for more tariff rollbacks won't derail progress toward the "phase one" agreement.

National flag carrier Korean Air Lines jumped 2.9 percent, while market bellwether Samsung Electronics gave up 0.8 percent

Europe

European stocks have gained ground on Thursday to hit over four-year highs after China and the United States reportedly agreed to cancel tariffs on each other's goods for both sides to reach a "phase one" trade deal.

The two sides have agreed in the past two weeks to cancel tariffs imposed during their months-long trade war in different phases, the Chinese commerce ministry said.

The proportion of tariffs cancelled must be the same, and how many tariffs should be cancelled can be negotiated, Gao Feng, spokesman at the commerce ministry, told reporters.

While the German DAX Index has climbed by 0.8 percent, the U.K.'s FTSE 100 Index is up by 0.5 percent and the French CAC 40 Index is up by 0.2 percent.

French food services and facilities management company Sodexo has moved sharply higher after reporting a rise in full-year revenue and profits.

J Sainsbury has also moved to the upside. After reporting a slump in pre-tax profits, the supermarket chain said it had achieved "positive momentum in grocery market share" in highly competitive times.

Homebuilder Persimmon has also rallied after the company said that trading over the summer weeks was in line with its expectations, with the Group seeing the usual pick-up in customer activity while moving into the autumn season.

Deutsche Lufthansa has also soared. The airline confirmed its full-year guidance after posting a 4 percent rise in third-quarter net result.

On other hand, Rolls Royce Holdings has declined. The luxury automobile maker said that despite improved trading since the first half of the year, it now expects full year operating profit and free cash flow outcome towards the lower end of its guidance ranges.

Telecom giant Deutsche Telekom has also come under pressure. The company cut its dividend after reporting a rise in third-quarter revenue and earnings.

In economic news, investors shrugged off weak data from Destatis showing that German industrial production fell 0.6 percent month-on-month in September, reversing a 0.4 percent rise in August. Economists had forecast a moderate drop of 0.3 percent.

U.K. house prices dropped at a slower pace in October, data from the Lloyds Bank subsidiary Halifax and IHS Markit showed. House prices fell 0.1 percent in October from the previous month, when prices were down 0.4 percent.

U.S. Economic Reports

First-time claims for U.S. unemployment benefits fell by more than expected in the week ended November 2nd, according to a report released by the Labor Department.

The report said initial jobless claims slid to 211,000, a decrease of 8,000 from the previous week's revised level of 219,000.

Economists had expected jobless claims to dip to 215,000 from the 218,000 originally reported for the previous week.

Meanwhile, the Labor Department said the less volatile four-week moving average crept up 215,250, an increase of 250 from the previous week's revised average of 215,000.

At 1 pm ET, the Treasury Department is scheduled to announce the results of its auction of $19 billion worth of thirty-year bonds.

Dallas Federal Reserve President Robert Kaplan is due to speak at the Dallas Regional Chamber of Commerce Year Ahead Summit in Dallas, Texas, at 1:05 pm ET.

AT 3 pm ET, the Federal Reserve is scheduled to release its report on consumer credit in the month of September. Consumer credit is expected to increase by $15.0 billion.

At 7:10 pm ET, Atlanta Fed President Raphael Bostic is due to speak about monetary policy to the Money Marketeers in New York.

Stocks In Focus

Shares of Qualcomm (QCOM) are showing a strong move to the upside in pre-market trading after the chipmaker reported fiscal fourth quarter results that exceeded analyst estimates on both the top and bottom lines.

Healthcare services company Cardinal Health (CAH) is also likely to see initial strength after reporting fiscal first quarter earnings that beat analyst estimates when excluding the impact of opioid litigation.

On the other hand, shares of Expedia (EXPE) are likely to come under pressure after the travel website operator reported weaker than expected third quarter earnings and lowered its full-year guidance.

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