NEW YORK, July 26 (Reuters) - Investors are hopeful a

potential trade deal between the U.S. and European Union could

bring more certainty to markets ahead of next Friday's tariffs

deadline.

European Commission President Ursula von der Leyen was set to

meet U.S. President Donald Trump on Sunday in Scotland after EU

officials and diplomats said they expected to reach a framework

deal this weekend. Trump on Friday said there was a 50-50 chance

or perhaps less that the U.S. would reach a trade agreement with

the EU.

Trade tensions between the U.S. and Europe may have provided

some investors with a rationale to be cautious, said Sameer

Samana, head of global equities and real assets at the Wells

Fargo Investment Institute.

"It's one of our largest trading relationships... So if that

last piece falls into place, then you've probably got at the

margin more people that have to get back in the markets," Samana

said. "It's been a source of uncertainty that will go away."

A deal would likely include a 15% baseline tariff on all EU

goods entering the U.S. and probably a 50% tariff on European

steel and aluminum, the officials and diplomats said.

Optimism over easing trade tensions broadly has helped push

U.S. stocks to record highs. Trump's April 2 "Liberation Day"

announcement of sweeping global tariffs sent stocks plunging in

the immediate aftermath, due to spiking fears about a recession

that have since faded.

Still, investors have been bracing for increased volatility

heading into August 1, which the U.S. has set as a deadline for

raising levies on a broad swath of trading partners.

The EU is facing U.S. tariffs on more than 70% of its

exports - 50% on steel and aluminum, 25% on cars and car parts

and a 10% levy on most other EU goods, which Trump has said he

would hike to 30% on August 1.

Hopes for a deal with Europe rose after Trump struck a trade

agreement with Japan earlier in the week.

"The deal with Japan and the likely one soon with the EU are

especially important given both are major U.S. trading partners,

together accounting for about a quarter of all goods imports,"

analysts at Capital Economics said in a note on Friday.

In the agreement with Japan, the country's auto sector,

which accounts for more than a quarter of its U.S. exports, will

see existing tariffs cut to 15% from levies totaling 27.5%

previously.

An agreement that also lowers EU auto tariffs to 15% "would

be no small deal" for the region as well, as about 10% of its

shipments to the U.S. are in the same category, Capital

Economics said.

Investors over the weekend were also watching for developments

on trade between the U.S. and China. Officials from the two

countries plan to meet in Stockholm next week to discuss

extending an August 12 deadline for negotiating a deal.