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US stocks rise as trade, growth fears fuel Fed rate cut hopes

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US stocks rise as trade, growth fears fuel Fed rate cut hopes

Trade and growth fears are back, and so are Fed rate cut bets.

➤ U.S. stocks tick up; U.K. FTSE 100 extends losses.

Crucial U.S. services data due later.

➤ Markets await official EU response to U.K. PM's new Brexit proposals.

Wall Street edged up as the U.S. reignited trade fears at a time when markets are concerned about the global growth outlook, fueling hopes that the Federal Reserve will cut rate this month.

Trade tensions took center stage after the U.S. said it will impose tariffs on aircraft, agricultural and industrial goods imported from the EU following a World Trade Organization ruling that authorized the U.S. to issue tariffs on roughly $7.5 billion worth of European goods in response to subsidies awarded to aircraft maker Airbus SE.

Markets are now pricing in a nearly 75% probability that the Fed will cut rates again toward the end of the month, compared with a 49% chance a week ago, according to the CME FedWatch Tool.

S&P 500 edged up 0.1% around 9:40 a.m. ET.

A slower pace of hiring in the U.S. private sector and disappointing U.S. manufacturing data raised growth worries earlier in the week. Investors await U.S. services sector data for evidence of any spillover effects of manufacturing weakness.

"Today's services data for September would appear to suggest that evidence of any trickledown effect from manufacturing at the moment is increasing slowly," said Michael Hewson, chief market analyst at CMC Markets U.K.

Analysts at ING Research expect the decline in the ISM nonmanufacturing index to be rather modest, which may "tame imminent concerns about a more meaningful U.S. slowdown."

The FTSE 100 fell 0.9% on Oct. 3, having declined more than 3% yesterday marking its worst one-day fall in three years. France's CAC 40 added 0.4%.

Airbus shares were up 4.3%.

Japan's Nikkei 225 slumped 2% as growth in the country's business activity slowed during September as the service sector began showing "some cracks," according to IHS Markit. Hong Kong's Hang Seng index was up 0.3%.

German and Chinese markets were closed Oct. 3.

In currencies, the euro was little changed against the dollar as business activity growth in the eurozone stalled in September, dragged by weakness in the manufacturing sector, as German output slipped into contraction territory for the first time since April 2013.

Sterling gained 0.5% as markets awaited an official EU response to U.K. Prime Minister Boris Johnson's new Brexit proposals, including replacing the Irish backstop solution with a new protocol that would keep Northern Ireland in the European single market for goods.

Johnson plans to ask the Queen to suspend Parliament from the evening of Oct. 8 until Oct. 14 in a bid to make way for his new legislative agenda.

Meanwhile, the U.K.'s services sector contracted in September amid Brexit uncertainty, with expectations for activity at their lowest in a little over three years, fueling hopes of a rate cut from the Bank of England. The U.K.'s manufacturing downturn also continued in September.

The Japanese yen was broadly stable against the dollar.

In the bond market, Treasurys edged higher as 10-year yields dropped 1 basis point to 1.586%. German Bunds also gained, with yields dropping 3 basis points.

Among commodities, Brent crude oil fell 1.1% to $57.04 per barrel on the ICE Futures Exchange. Gold slipped 0.2%.

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The day ahead:

9:45 a.m. ET — U.S. PMI services index (Econoday consensus: 50.9)

10 a.m. ET — U.S. factory orders (Econoday consensus: -0.6% monthly)

10 a.m. ET — U.S. ISM non-manufacturing index (Econoday consensus: 55.5)

10:30 a.m. ET — U.S. EIA natural gas report

11 a.m. ET — Global composite PMI

11 a.m. ET — Global services PMI

12:10 p.m. ET — U.S. Fed's Loretta Mester speaks

4:30 p.m. ET — U.S. Fed balance sheet and money supply

6:35 p.m. ET — U.S. Fed's Richard Clarida speaks