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Stocks rise on trade optimism; dollar strengthens

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Stocks rise on trade optimism; dollar strengthens

➤ Stocks mostly higher as investors track trade talks.

➤ German industrial production unexpectedly falls.

➤ Gold drops as dollar gains against majors.

➤ Brent crude oil climbs amid OPEC cuts.

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Wall Street looks set to open higher as investors look for signs of progress in the second day of trade talks between the U.S. and China in Beijing.

The negotiations are not likely to yield a major breakthrough at this point, but both the parties will try to reach some common ground and set the stage for higher-level talks later in January, wrote Margaret Yang Yan, market analyst at CMC Markets Singapore, adding that talks can extend beyond the current 90-day truce period which ends in March.

U.S. Commerce Secretary Wilbur Ross expressed optimism that a trade deal between the two economies can be reached, telling CNBC yesterday that there was "a very good chance that we will get a reasonable settlement that China can live with."

Asian stock markets were mixed, with the Shanghai SE Composite down 0.26%, Hong Kong's Hang Seng index up 0.15% and Japan's Nikkei 225 index closing 0.82% higher.

Samsung Electronics Co. Ltd.'s shares dropped 1.68% in Seoul after the tech giant said it expects fourth-quarter 2018 earnings to decrease sharply compared with the prior quarter, citing weaker-than-expected demand for its memory chips unit and strong competition in the smartphone market. Other Asian tech companies also felt the heat of Samsung's profit warning, with shares in Taiwan Semiconductor Manufacturing Co. Ltd. and Hon Hai Precision Industry Co. Ltd. and closing about 1% lower in Taipei.

European equities edged higher, with the FTSE 100 up 0.92% as of 6:30 a.m. ET, Germany's DAX index up 0.69% and France's CAC 40 rising 1.29%. The eurozone blue-chip Stoxx 50 index rose 0.95%, while the pan-European Stoxx 600 gained 0.97%.

In currencies, the dollar index gained 0.19% to 95.85 following several days of weakness. The euro dropped 0.22% against the dollar as economic sentiment in the single-currency area dropped significantly last month and as German industrial production fell unexpectedly in November 2018.

The production data sparks concerns that Germany may have hit a technical recession in the second half of 2018, wrote Carsten Brzeski, chief economist for Germany at ING, in a note.

Sterling slipped 0.20% versus the dollar as Brexit continued to dominate the political landscape, with U.K. Brexit Secretary Stephen Barclay denying a report that the government was looking into a possible delay in Britain's expected exit from the EU on March 29.

Gold dropped 0.43% to $1,284.40 per ounce as the dollar strengthened. Brent crude oil climbed 1.62% to $58.26 per barrel on the ICE Futures Exchange, supported by output cuts previously agreed by the Organization of the Petroleum Exporting Countries and other major producers, including Russia.

Yields on 10-year Treasurys were little changed.

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The day ahead:

8:30 a.m. ET — U.S. international trade (Econoday consensus: $53.9 billion deficit)

8:30 a.m. ET — Canada merchandise trade (Econoday consensus: C$1.9 billion)

8:55 a.m. ET — U.S. redbook

10 a.m. ET — U.S. JOLTS

3 p.m. ET — U.S. consumer credit (Econoday consensus: $19.0 billion monthly)