US pre-open: Stocks set to extend gains, Tiffany surges after takeover approach

Stocks in the US were set for a higher start on Monday even as traders waited on the next interest rate decision from the Federal Reserve in the middle of the week and the release of the October non-farm payrolls report on Friday.

Propping up sentiment, at the weekend, Chinese officials confirmed that Beijing and Washington were close to finalising the first phase of a trade deal, although some observers chose to highlight how many of the trade tariffs would remain in place, while sounding a skeptical note on the prospect of follow-up trade deals.

Against that backdrop, as of 1241 BST, futures on the S&P 500 were rising by 8.0 points to 3,028.25, alongside a gain of 90.0 points for those on the Dow Jones Industrials while Nasdaq-100 futures were up by 26.25 points at 8,062.

Strategists were divided on the outlook for stocks, with Morgan Stanley telling clients that shares were more likely to see rotation between sectors rather than "do well overall".

But their peers at JP Morgan believed that a de-escalation in trade tensions and continued policy easing by central banks would drive a recovery in comparny earnings.

"Tariffs have been the largest headwind for global growth and corporate profits, which, based on our estimates, reduced 2019 S&P 500 earnings growth potential by 7-8%," they said in a research reports sent to clients.

JP Morgan's mid-2020 target for the S&P 500 was 3,200 points, but "given improving trade rhetoric" it said that level might be reached sooner, at the end of 2019 or start of 2020.

"S&P 500 companies could see >25% cumulative EPS growth over two years if tariffs are unwound," JP Morgan analysts added.

In a research note sent to clients on 24 October, analysts at Bank of America-Merrill Lynch said they expected the S&P 500 to hit 3,333 by 3 March or 'Super Tuesday'.

On the corporate side of things, the market spotlight was on shares of Tiffany&Co. after the luxury jeweller announced it had received a takeover offer from France's LVMH valuing it at $120 a share.

Tellingly, stock in Tiffany was trading above the mooted acquisition price, rising by 31.91% to $130.08.

In another corner of the market, telecommuncations giant AT&T posted fourth quarter earnings per share of 94 cents (consensus: 93 cents) but on sales of only $44.6bn (consensus: $45.0bn).

Quarterly earnings reports were still due out from Alphabet, Allergan, Rambus, SanMina, and Transocean, among others.

A preliminary reading on America's foreign trade in goods in September was scheduled for 1330 BST, alongside figures on wholesale inventories.