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US stock futures, European shares cheer trade news, Tories' win; dollar sheds

➤ Stocks at record high as Trump seen willing to delay tariff hike.

➤ Sterling hits 2.5-year peak as Johnson wins large majority in UK elections.

➤ Dollar sheds, Treasurys flat.

➤ German central bank cuts 2020 GDP growth forecast by half.

U.S. stock futures were set to extend their record-high gains from yesterday and European equities rallied as markets welcomed signs of progress in U.S.-China trade talks and the Tories' victory in the U.K. general elections.

Futures for the S&P 500 traded 0.4% higher around 6:30 a.m. ET.

U.S. President Donald Trump is willing to delay the next round of fresh tariffs on nearly $160 billion of Chinese goods, originally scheduled to take effect Dec. 15, after China pledged $50 billion in farm purchases next year, Bloomberg News and Reuters reported, citing sources.

The two sides are believed to have agreed to the terms for the "phase one" deal, as part of which the U.S. is also considering lowering existing tariffs, though legal text is yet to be finalized.

An official announcement is yet to be made, but Trump tweeted Dec. 12 that a pact was "very close."

While lowering tariffs in exchange for farm purchases may not resolve the trade dispute, the phase one deal could increase the possibility of a global economic rebound next year, wrote Jasper Lawler, Head of Research and Education at the London Capital Group.

In Europe, the wider Stoxx Europe 600 advanced 1.7%, surpassing April 2015's record-high closing level. The FTSE 100 added 1.8%, and Germany's DAX and France's CAC 40 gained 1.2% each.

The U.K. Conservative Party won their largest majority since 1987 in the Dec. 12 snap election, paving the way for Prime Minister Boris Johnson to get his Brexit deal ratified in Parliament and lead the U.K. out of the EU on Jan. 31, 2020.

Sky News, BBC News and Bloomberg put the number of seats won by the Tories at 364, with 1 seat yet to be declared.

While Brexit is almost certain, there is still a risk of a hard Brexit at the end of 2020 should the U.K. and EU fail to reach agreement on their future relationship, assuming the transition period is not extended, Kallum Pickering, senior economist at Berenberg, wrote Dec. 11.

An extension, coupled with better global activity and an improved jobs backdrop, is likely to persuade the Bank of England to resist interest rate cuts next year, wrote ING Research Developed Markets Economist James Smith and Global Head of Strategy and Head of EMEA and LATAM Research Chris Turner.

In Asia, Japan's Nikkei 225 jumped 2.6% to hit a 14-month high at close, with Hong Kong's Hang Seng also surging by a similar percentage. The Shanghai SE Composite climbed 1.8%.

In currencies, sterling gained 1.8% against the dollar, having previously touched a 2.5-year high in intraday trading. The euro appreciated 0.5%.

The Japanese yen lost 0.3% versus the greenback as Japan's Tankan survey showed business sentiment among large Japanese manufacturing enterprises declined to the lowest level since March 2013.

The dollar index dipped 0.6%.

In the debt market, yields on 10-year German Bunds added 3 basis points to negative 0.241% as Deutsche Bundesbank slashed next year's GDP growth forecast for Germany by half, compared to its previous projections, but raised its expectations for 2021.

Elsewhere, 10-year U.K. gilt yields gained 3 basis points while Treasurys with the same maturity were little changed.

Among commodities, Brent crude rose 1.5% to $65.19 per barrel on the ICE Futures Exchange. Gold edged up 0.3%.

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The day ahead:

8:30 a.m. ET — U.S. Retail Sales (Econoday consensus: 0.5% monthly)

8:30 a.m. ET — U.S. Import and Export Prices (Econoday consensus: 0.2% for imports, 0.1% for exports, monthly)

10 a.m. ET — U.S. Business Inventories

1 p.m. ET — U.S. Baker-Hughes Rig Count