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* S&P 500 set to open at record high
* Microsoft gains on Pentagon cloud contract win
* Tiffany surges on LVMH’s $14.5 bln bid
* Futures up: Dow 0.44%, S&P 500 0.36%, Nasdaq 0.43% (Adds comments, updates market action)
By Arjun Panchadar
Oct 28 (Reuters) - The S&P 500 index was set to open at a record high on Monday as hopes of a U.S.-China trade deal and rising bets on a rate cut by the Federal Reserve brightened investor sentiment.
The three main indexes could get a boost from Microsoft Corp , whose shares were up 2.6% in premarket trading after the technology giant won the Pentagon’s $10 billion cloud computing contract, beating Amazon.com Inc. Amazon shares slipped 0.7%.
At 8:49 a.m. ET, the S&P 500 e-minis rose 0.36% to hit a record high of 3,031.25.
The benchmark index had come within striking distance of its all-time high on Friday after the United States said it was “close to finalizing” some parts of a trade agreement with China. The other two major indexes are more than 1% below their record levels.
Beijing confirmed on Saturday that “technical consultations” on some parts of the agreement were basically completed.
“Markets seem convinced the first deal will get done and that negotiations are progressing on the next deal,” said Edward Moya, senior market analyst at Oanda.
The news comes as a relief to investors who have been grappling with the fallout from the trade war and its impact on the global economy.
Dismal domestic economic indicators since the beginning of October have raised the odds for a quarter percentage point cut in U.S. borrowing costs to 94% from 49% last month.
The Fed will announce its policy decision at the end of its two-day meeting on Wednesday.
“Stocks could also be supported on expectations that the Fed will deliver a third consecutive (rate cut) and remain data dependent if more are warranted,” Moya added.
The Dow e-minis were up 0.44% while the Nasdaq 100 e-minis gained 34.5 points, or 0.43%.
The third-quarter earnings season has managed to allay some of the concerns related to the impact of trade tensions on Corporate America, with over 78% of the 199 S&P 500 companies that have reported so far surpassing profit expectations.
All eyes will now be on earnings from heavyweights this week, including Apple Inc, Alphabet Inc and Merck & Co Inc.
Among other stocks, Tiffany & Co surged 31.2% after Louis Vuitton owner LVMH made a $120 per share offer to buy the U.S. luxury jeweler at a time when it grapples with the impact of tariffs on its exports to China.
AT&T Inc rose 1.6% after the U.S. wireless carrier said it would add two new board members and consider selling off up to $10 billion worth of non-core businesses next year, bowing to pressure from activist investor Elliott Management.
Spotify Technology SA gained 8.4% after the music streaming company posted a surprise quarterly profit and beat revenue estimates as it added more-than-expected paid subscribers for its premium service. (Reporting by Arjun Panchadar and Medha Singh in Bengaluru; Editing by Anil D’Silva)