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US stocks gain amid trade optimism; pound hovers around $1.30

Pound was flat after crossing $1.30 for 1st time since May.

➤ Stocks rise as China signals progress in talks; Trump eyes phase one deal by mid-November.

➤ Bonds retreat.

➤ Canada heads to polls.

U.S. stocks rallied, alongside European stocks, amid trade optimism, while sterling slipped back, having climbed above $1.30 for the first time since May on hopes that a Brexit deal could be passed by U.K. lawmakers this week.

The S&P 500 rose 0.5% around 9:30 a.m. ET. Amazon.com Inc., Microsoft Corp. and Caterpillar Inc., among other companies, are due to report earnings this week.

Chinese Vice-Premier Liu He said Oct. 19 that China and the U.S. made "substantial progress" in trade talks, in his first public comments since the high-level talks ended in Washington Oct. 11. U.S. President Donald Trump said both camps may sign a phased agreement by mid-November.

In Europe, the FTSE 100 and France's CAC 40 gained 0.3% and 0.4%, respectively, and Germany's DAX jumped 1.1%.

Asian equities were largely muted, with Japan's Nikkei 225 up 0.3%, and Hong Kong's Hang Seng and the Shanghai SE Composite ending the session nearly flat.

The People's Bank of China left its new loan prime rates unchanged in a move that analysts say could probably heighten pressure on policymakers to ease further in the coming months.

In currencies, the pound was flat against the dollar at $1.2984, having climbed above $1.30 earlier in the day. Sterling added to its 5.2% gain from the past two weeks as traders shrugged off Johnson's failure to get the deal passed during a rare weekend parliamentary session on Oct. 19.

"This issue is far from being resolved, but a temporary relief is welcomed by investors," Margaret Yang Yan, market analyst at CMC Markets (Singapore), said.

Johnson plans to push on with plans to get the deal through Parliament this week as Foreign Secretary Dominic Raab told the BBC that the government "has the numbers" to get the deal over the line and the U.K. will still leave the EU by the end of the month.

Johnson sent a letter to the EU on Oct. 19 requesting an extension to the Oct. 31 Brexit deadline, according to a tweet from European Council President Donald Tusk, who said he would begin consultations with EU leaders on how to respond. The letter, however, wasn't signed by Johnson and was followed by second one saying that he believes a delay would be a mistake, according to numerous media reports.

"We would expect to see GBP into a new equilibrium range of 1.3000-1.3500 if parliament approves the deal," according to a report from MUFG Bank.

The euro and Japanese yen lost 0.1% each versus the U.S. dollar. The Canadian dollar rose 0.1% on Oct. 21, the election day in the country.

In the bond markets, U.K. Gilts sold off, with the yield on 10-year bonds rising more than 3 basis points to 0.745%. The yield on 10-year Treasurys added 3 basis points to 1.786%, while that on German Bunds with the same maturity gained 4 basis points to negative 0.345%.

Brent crude oil declined 1.7% to $58.44 per barrel on the ICE Futures Exchange. Gold was nearly flat.

More from S&P Global Market Intelligence:

Banks look to tech to help close $1.4 trillion-$1.6 trillion trade finance gap

As Gulf Coast LNG terminals increase draw on gas, outages could stress pipelines

Sovereign ratings wrap: Fitch keeps UK on negative watch; S&P affirms Vietnam

S&P 500 earnings report for week of Oct. 21: AT&T and Fifth-Third set to report

The day ahead:

11:40 a.m. ET — U.S. Fed's Michelle Bowman speaks