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Looming Trump-Xi Meeting May Lead To Choppy Trading

(RTTNews) - The major U.S. index futures are pointing to a mixed on Thursday after the major averages ended the previous session on opposite sides of the unchanged line.

Uncertainty ahead of the highly anticipated G20 meeting between President Donald Trump and Chinese President Xi Jinping is likely to lead to choppy trading on Wall Street.

Trump and Xi are not expected to come out of the meeting with a finalized trade deal, but traders will be looking for signs of progress toward kick-starting the stalled negotiations between the two economic superpowers.

A report from the Wall Street Journal said Xi plans to present Trump with a set of terms the U.S. should meet before Beijing is ready to settle the trade dispute.

Lifting the ban on the sale of U.S. technology to Chinese telecom giant Huawei, removing all tariffs and dropping efforts to get China to buy more U.S. exports are reportedly among the preconditions.

However, Trump is not likely to appreciate Xi dictating terms and has repeatedly threatened to escalate the trade war with new tariffs on all remaining Chinese imports.

After failing to sustain an early move to the upside, stocks gave back ground over the course of the trading session on Wednesday. The major averages pulled back well off their highs of the session before closing on opposite sides of the unchanged line.

While the tech-heavy Nasdaq rose 25.25 points or 0.3 percent to 7,909.97, the Dow edged down 11.40 points or less than a tenth of a percent to 26,536.82 and the S&P 500 closed lower for the fourth straight session, dipping 3.60 points or 0.1 percent to 2,913.78.

The early strength on Wall Street came as comments from Treasury Secretary Steven Mnuchin generated optimism about a potential U.S.-China trade deal.

Ahead of the highly anticipated G20 meeting between President Donald Trump and Chinese President Xi Jinping, Mnuchin told CNBC the U.S. and China had nearly completed a deal before talks broke down last month.

"We were about 90 percent of the way there and I think there's a path to complete this," Mnuchin said in an interview with CNBC's Hadley Gamble but did not shed any light on the sticking points to achieving the final 10 percent.

Mnuchin refused to speculate on whether a deal would be completed but said he was "hopeful," noting "President Trump and President Xi have a very close working relationship."

Buying interest waned over the course of the morning, however, as traders seemed reluctant to make more significant moves as they waited for more concrete developments out of the talks.

The positive sentiment may also have been partly offset by a report from the Commerce Department unexpectedly showing another steep drop in durable goods orders in the month of May.

The Commerce Department said durable goods orders tumbled by 1.3 percent in May after plunging by 2.8 percent in April. The continued decrease surprised economists, who had expected durable goods orders to rise by 0.2 percent.

Meanwhile, excluding another nosedive in orders for transportation equipment, durable goods orders rose by 0.3 percent in May after edging down by 0.1 percent in April. Economists had expected a 0.1 percent uptick.

Despite the lackluster close by the broader markets, substantial strength remained visible among semiconductor stocks. The Philadelphia Semiconductor Index surged up by 3.2 percent to its best closing level in well over a month.

Micron Technology (MU) led the sector higher after the chipmaker reported better than expected fiscal third quarter results and forecast a rebound in DRAM demand.

Energy stocks also saw significant strength on the day, benefiting from a sharp increase by the price of crude oil. Crude oil prices spiked following the release of a report showing a weekly nosedive in crude oil inventories.

Reflecting the strength in the energy sector, the Philadelphia Oil Service Index, the NYSE Arca Oil Index and the NYSE Arca Natural Gas Index all jumped by 2.1 percent.

On the other hand, interest rate sensitive utilities and commercial real estate stocks came under pressure amid concerns a rate cut by the Federal Reserve may not be as imminent as hoped.

Tobacco stocks also showed a particularly steep drop on the day following the rally seen over the course of the previous session.

Commodity, Currency Markets

Crude oil futures are falling $0.38 to $59 a barrel after spiking $1.55 to $59.38 a barrel a barrel on Wednesday. Meanwhile, an ounce of gold is trading at $1,404.30, down $11.10 compared to the previous session's close of $1,415.40. On Wednesday, gold fell $3.30.

On the currency front, the U.S. dollar is trading at 107.87 yen compared to the 107.79 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.1370 compared to yesterday's $1.1369.

Asia

Asian stocks ended on a firm note on Thursday as comments from U.S. Treasury Secretary Steven Mnuchin generated optimism about a potential U.S.-China trade deal.

Mnuchin told CNBC the U.S. and China had nearly completed a deal before talks broke down last month but didn't shed any light on the sticking points to achieving the final 10 percent and refused to speculate on whether a deal would be completed.

Separately, U.S. President Donald Trump voiced optimism over the possibility of a trade agreement with China but said he is still considering imposing "very substantial" tariffs on all Chinese imports if the two countries are unable to reach a deal during the G20 meeting that starts Friday.

The South China Morning Post reported that the U.S. and China have agreed to a tentative truce in their trade dispute that would help avert the next round of tariffs on an additional $300 billion of Chinese imports.

Chinese shares rose as investors digested positive industrial profits data and signs of a truce in the U.S.-China trade war. China's Shanghai Composite Index ended up 20.51 points or 0.7 percent at 2,996.79, while Hong Kong's Hang Seng Index jumped 399.44 points or 1.4 percent to 28,621.42.

Japanese shares rose sharply and the dollar hit one-week highs against the yen as investors cheered signs of a truce in the U.S.-China trade war.

The Nikkei 225 Index surged up 251.58 points or 1.2 percent to 21,338.17, while the broader Topix closed 1.2 percent higher at 1,553.27.

China-exposed companies moved significantly higher, with Fanuc Corp rising 1.7 percent and Yaskawa Electric rallying 4.6 percent. Tokyo Electron, TDK Corp and Daikin Industries spiked 3-5 percent.

Japan Display shares soared 18.3 percent after reports that Apple is considering investing $100 million in the troubled display maker.

In economic news, retail sales in Japan rose a seasonally adjusted 0.3 percent month on month in May, official data showed - falling below expectations for a gain of 0.6 percent following the downwardly revised 0.1 percent drop in April.

Australian markets recovered from early losses to end modestly higher after data showed profits for China's industrial companies increased in May, bolstered by improving sales.

The benchmark S&P/ASX 200 Index rose 25.80 points or 0.4 percent to 6,666.30, while the broader All Ordinaries Index ended up 26.90 points or 0.4 percent at 6,743.

Robust commodity prices helped lift miners, with heavyweights BHP and Rio Tinto climbing 2-3 percent. Smaller rival Fortescue Metals Group jumped 5.5 percent. Higher oil prices also boosted energy stocks, with Origin Energy and Oil Search climbing more than 1 percent.

Lender Commonwealth Bank rose 1 percent after being forced to review to how it handles and stores customer data. The other three big banks gained between 0.2 percent and 0.8 percent.

Meanwhile, real estate stocks retreated after U.S. Treasury prices fell on Wednesday, pushing yields higher. Cromwell Property Group slumped 7.6 percent and Stockland Corp tumbled 4.5 percent.

Seoul stocks rose for a second straight session, led by gains in the technology sector after flash memory maker Micron Technology beat on earnings and issued guidance that was better than many feared.

The Kospi average climbed 12.47 points or 0.6 percent to 2,134.32. Samsung Electronics rallied 1.8 percent and SK Hynix added 1.9 percent.

Europe

European stocks have given up early gains to drift lower on Thursday as caution prevails ahead of this weekend's meeting between U.S. President Donald Trump and China President Xi Jinping at the G20 summit.

A breakthrough in the current stalemate is unlikely, although both sides may agree to continue talks over their escalating trade feud.

While the German DAX Index is up by 0.2 percent, the French CAC 40 Index is down by 0.2 percent and the U.K.'s FTSE 100 Index is down by 0.3 percent.

Swedish retailer Hennes & Mauritz AB has spiked after its June sales figures topped forecasts. The company also posted strong results for the second quarter.

German chemicals giant Bayer has also soared after saying it has hired an external lawyer and set up a committee to resolve a multi-billion dollar litigation issue.

Vodafone has advanced on reports it is set to secure EU antitrust approval for its $22 billion bid for Liberty Global's cable networks in central Europe.

Home improvement retailer Kingfisher has also moved to the upside after it appointed Thierry Garnier as new chief executive officer, succeeding VA©ronique Laury.

On the other hand, Danish food ingredients maker Chr Hansen has slumped after cutting its sales outlook for the year.

In economic news, Eurozone economic sentiment deteriorated more than expected in June, survey data from the European Commission showed.

The economic sentiment index dropped to 103.3 in June from 105.2 in May, while economists had expected the index to fall to 104.7.

U.S. Economic Reports

The Labor Department released a report showing first-time claims for U.S. unemployment benefits increased by more than expected in the week ended June 22nd.

The report said initial jobless claims rose to 227,000, an increase of 10,000 from the previous week's revised level of 217,000.

Economists had expected jobless claims to inch up to 220,000 from the 216,000 originally reported for the previous week.

A separate report released by the Commerce Department showed the pace of U.S. economic growth in the first quarter was unrevised from the previous estimate.

The Commerce Department said real gross domestic product increased at an annual rate of 3.1 percent in the first quarter, unrevised from the estimate released last month and in line with economist estimates.

The unrevised rate of GDP growth in the first quarter still reflects a significant acceleration from the 2.2 percent increase seen in the fourth quarter of 2018.

At 10 am ET, the National Association of Realtors is scheduled to release its report on pending home sales in the month of month of May. Pending home sales are expected to climb by 1.0 percent in May after slumping by 1.5 percent in April.

A pending home sale is one in which a contract was signed but not yet closed. Normally, it takes four to six weeks to close a contracted sale.

The Treasury Department is due to announce the results of its auction of $32 billion worth of seven-year notes at 1 pm ET.

Stocks In Focus

Shares of ConAgra (CAG) are moving sharply lower in pre-market trading after the food producer reported fiscal fourth quarter results that missed expectations on both the top and bottom lines.

Drugstore chain Rite Aid (RAD) may also come under pressure after reporting a wider than expected fiscal first quarter loss.

On the other hand, shares of Herman Miller (MLHR) are seeing significant pre-market strength after the office furniture maker reported better than expected fiscal fourth quarter results and provided upbeat guidance.

Consulting firm Accenture (ACN) is also likely to move to the upside after reporting fiscal third quarter results that beat estimates and raised its full-year forecast.
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