Stocks rise, safe-havens weaken on trade deal optimism
Global shares rose on Monday, while gold and safe-haven bonds weakened, as signs of easing trade tensions between China and the US encouraged investors, marking a good start to a week dominated by central bank meetings and megacap earnings.
Top Chinese and US economic officials on Sunday discussed the framework of a trade deal that US President Donald Trump and his Chinese counterpart Xi Jinping will decide on this weekend at a meeting in South Korea.
The trade deal would halt rising U.S. tariffs and China’s export controls on rare earth metals, helping ease concerns among investors that a trade truce between the world’s two largest economies may fail.
This made shares rise sharply in Asia, with indices in South Korea, Taiwan TWSE:TAIEX and Japan reaching record highs. The upbeat mood spread to Europe, where shares rose slightly overall, leaving the STOXX 600 up 0.1% around a record high.
US STOCK FUTURES SURGE
“Investors want to see confirmation that the trade truce will hold and that China’s stimulus and reform signals are translating into real growth momentum,” said Charu Chanana, chief investment strategist at Saxo.
U.S. stock futures jumped, with Nasdaq futures (.NQc1) up 1% and the S&P 500 up 0.7%.
George Boubouras, managing director of K2 Asset Management, said the market was satisfied with the US-China momentum in recent days. “Over the last few months the market has been weighing in on global tariff negotiations and understands that some of the comments could be a charade and noise.”
Reflecting some of that optimism was the Chinese yuan’s rise to its highest level in more than a month against the dollar on Monday at 7.1091.
Before the market opened, the People’s Bank of China set the official median rate at 7.0881 per dollar, the strongest since Oct. 15, 2024, above a Reuters estimate of 7.1146.
“If a deal is done based on the details reported today, the yuan has room for further gains,” said MUFG head of research Derek Halpenny.
“Improved risk conditions and some improvement in global growth expectations will result in a weakening US dollar as investors see better prospects in non-dollar currencies,” he said.
Safe-haven gold fell 1.3% to $4,058 an ounce, while US Treasury prices also fell, sending the benchmark 10-year bond yield up 3.1 basis points to 4.027%. Commodities, including soybeans, wheat and corn rose on the prospect of a trade deal.
WAITING FOR THE CENTRAL BANK MEETING
Investor focus this week is also on central bank meetings in Japan, Canada, Europe and the United States.
The Federal Reserve is expected to cut interest rates by 25 basis points after data showed US consumer prices rose slightly less than expected in September, but the government shutdown and its impact on the data remains a concern.
The dollar was slightly higher at 152.87 yen, near a two-week high. The euro was flat at $1.16277. The dollar index was flat at 98.92.
The European Central Bank and Central Bank of Japan are expected to hold interest rates steady at the end of this week.
The BOJ will likely debate whether conditions are right to resume rate hikes as fears of a tariff-induced recession ease, but political complications may see the BOJ hold off for now.
FOCUS ON MEGACAP INCOME
The busiest part of the US earnings season is just around the corner, with majors Microsoft, Apple, Alphabet, Amazon and Meta Platforms all due to report results this week.
Despite the gains in profits of the “Magnificent Seven” companies, whose large market capitalization means their shares dominate the equity index, but the overall index is narrowing, they are still expected to post stronger results in this period.
A number of megacap companies are also key players in the artificial intelligence industry, whose enthusiasm is a key driver of stock market performance.
Source: Reuters
