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US stocks tumble amid trade uncertainty

Trade optimism fades as China said to be narrowing scope of talks.

➤ Fed rate cut bets remain high following US jobs data.

➤ UK PM seen willing to push through with his no-deal Brexit plans.

U.S. equities fell as trade optimism faded ahead of U.S.-China high-level talks in Washington.

The S&P 500 and Nasdaq 100 were down 0.3% each around 9:30 a.m. ET, having closed 1.4% and 1.5% higher, respectively, on Oct. 4.

Beijing is reportedly considering excluding negotiations on its industrial policy reforms and government subsidies, two key issues Washington wants China to address, thus narrowing the scope of upcoming face-to-face talks scheduled for Oct. 10-11.

"These issues are key red lines for the [U.S.] and reticence on the Chinese side to negotiate on these topics makes a trade deal less likely anytime soon," wrote Lee Hardman and Fritz Louw, currency analysts at MUFG Bank.

The U.S. jobs report on Friday showed nonfarm employment growth slowing in September, which could push the Federal Reserve to further cut interest rates at its October meeting.

The probability of an October rate cut stood at 74% on Oct. 7 from about 40% a week earlier, according to the CME Group's FedWatch tool.

Separately, a survey by the National Association for Business Economics showed that economists do not foresee a recession in the U.S. next year but expect real GDP growth to slow to 2.3% in 2019 from 2.9% a year ago, before decelerating further to 1.8% in 2020.

In Europe, Germany's DAX and France's CAC 40 gained 0.2% each and the FTSE 100 rose 0.4%.

In Asia, Japan's Nikkei 225 lost 0.2% as the country downgraded its assessment of the economy, measured by the coincident index, to "worsening." Chinese and Hong Kong markets were closed.

Among currencies, sterling dropped 0.1% versus the dollar. French President Emmanuel Macron has given U.K. Prime Minister Boris Johnson until Friday to revise his Brexit proposal to the EU, after which the bloc will make a decision.

News emerged that Johnson will approach the Supreme Court to avoid seeking an extension to the Oct. 31 Brexit deadline, as required by law. Previous reports said that Johnson will ask the European Union to postpone Brexit if no deal is reached by Oct. 19.

Elsewhere, the dollar spot index, which tracks the U.S. currency's performance against a basket of developed market peers, was little changed.

The euro ticked up 0.1% as German manufacturing orders dropped more than expected in August. The Japanese yen was little changed.

In bond markets, the yield on 10-year U.S. Treasurys rose 2 basis points to 1.546% and that on 10-year German Bunds was little changed.

In commodities, Brent crude rose nearly 1% to $58.92 per barrel on the ICE Futures Exchange, while gold declined 0.6%.

More from S&P Global Market Intelligence:

Sovereign ratings wrap: S&P affirms China; Fitch downgrades Saudi Arabia

For EU financial hubs, no Brexit winners as fragmentation harms all

Amid high expectations for October cut, Fed officials give few clues

Missing gig economy workers create policy blind spot for next downturn

Survey finds operational technology cybersecurity is the 'new risk frontier'

The day ahead:

10:20 a.m. ET – U.S. Fed's Neel Kashkari speaks

1 p.m. ET – U.S. Fed Chair Jerome Powell speaks

3 p.m. ET – U.S. consumer credit (Econoday consensus: $18.2 billion)

7:30 p.m. ET – Japan household spending (Econoday consensus: 2.8% monthly)