Stocks rallied along with copper and oil after signs that the US and China were nearing a trade deal triggered a cross-asset rally. Treasuries dropped across the curve and gold slid.
Asian shares rose 1.5% to a new intraday peak with stocks in Japan and South Korea jumping by more than 2%. Indexes in China and Hong Kong also gained at the open. Futures for the S&P 500 and the Nasdaq 100 advanced after both underlying indexes closed at a record high last week. Copper — a bellwether for global growth — surged, as did oil, with the potential US-China deal bolstering the outlook for global demand.
The Australian and New Zealand dollars, popular proxies for China exposure, edged higher, while the greenback was mixed against other major currencies. Treasuries dropped across the curve with the yield on the 10-year rising more than two basis points to 4.02%.
“This looks like a win on optics for both sides,” said Charu Chanana, chief investment strategist at Saxo Markets in Singapore. “Broader markets are likely to take this as a short-term risk-on cue. But the rally will need to be backed by fundamentals to sustain.”
Easing trade tensions between the world’s two largest economies are giving investors fresh impetus to extend the equity rally from April lows, when markets tumbled after President Donald Trump moved to rewrite global trade rules with new tariffs. That advance faces a key test this week, with the Federal Reserve poised to deliver its policy decision and earnings from major US technology firms offering clues on the durability of profit growth.
Monday’s moves suggested investors were set to cheer the potential trade accord between the US and China, coinciding with Trump’s visit to Asia for diplomatic talks.
Soybeans rallied as prospects of the deal lifted hopes for a revival in bilateral trade of the crop.
Top negotiators from the US and China said during the weekend they came to terms on a range of contentious points, setting the table for Trump and Chinese President Xi Jinping to finalize a deal and ease trade tensions that have rattled global markets.
The comments from both sides followed two days of talks in Malaysia that wrapped up on Sunday. A Chinese official said the countries had reached a preliminary consensus on topics including export controls, fentanyl and shipping levies.
“While sentiment appears optimistic, the ultimate market impact will depend on the Trump-Xi meeting,” said Dilin Wu, a strategist at Pepperstone Group.“ This event remains the most critical catalyst, determining whether any agreement can actually be implemented.”
The encouraging signals from both sides of the negotiations were a marked contrast from recent weeks, when Beijing’s announcement of new export restrictions and Trump’s reciprocal threat of staggering new tariffs threatened to plunge the world’s two largest economies back into an all-out trade war.
Traders will be looking ahead to a busy week of central bank announcements that includes rate decisions from the Fed, European Central Bank and the Bank of Japan.
The Fed is forecast to cut rates by 25 basis points. On Friday, Wall Street saw a relief rally as cooler-than-estimated inflation data reinforced trader conviction on rate cuts.
The slowest pace in three months for underlying inflation was welcomed by traders, who’ve been flying almost blind amid the dearth of data since the start of the government shutdown. The ECB and BOJ are expected to leave rates unchanged.
Apple Inc. and Microsoft Corp. are among megacap tech companies reporting earnings this week.
The next catalysts such as the Fed meeting “will quickly shift the market’s focus back to the economic fundamentals, testing how much of this optimism can truly translate into sustained growth momentum,” said Hebe Chen, an analyst at Vantage Markets in Melbourne.
Some of the main moves in markets:
Stocks
S&P 500 futures rose 0.7% as of 10:37 a.m. Tokyo time
Japan’s Topix rose 1.6%
Australia’s S&P/ASX 200 rose 0.5%
Hong Kong’s Hang Seng rose 0.9%
The Shanghai Composite rose 0.5%
Euro Stoxx 50 futures rose 0.4%
Currencies
The Bloomberg Dollar Spot Index fell 0.1%
The euro rose 0.1% to $1.1642
The Japanese yen was little changed at 152.77 per dollar
The offshore yuan rose 0.2% to 7.1122 per dollar
Cryptocurrencies
Bitcoin rose 1.7% to $115,250.37
Ether rose 3.4% to $4,201.64
Bonds
The yield on 10-year Treasuries advanced two basis points to 4.02%
Japan’s 10-year yield advanced one basis point to 1.665%
Australia’s 10-year yield advanced two basis points to 4.17%
Commodities
West Texas Intermediate crude rose 0.2% to $61.61 a barrel
Spot gold fell 0.8% to $4,082.18 an ounce
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