By Amanda Cooper
LONDON (Reuters) -Global stocks bounced on Monday, while safe-haven gold and bonds retreated, as signs of cooling trade tensions between China and the U.S. encouraged investors, marking a strong start to a week dominated by central bank meetings and megacap earnings.
Top Chinese and U.S. economic officials on Sunday hashed out the framework of a trade deal for U.S. President Donald Trump and his Chinese counterpart Xi Jinping to decide on later this week at a meeting in South Korea.
A trade deal would pause steeper U.S. tariffs and Chinese rare earths export controls, helping ease some concerns among investors that a trade truce between the world’s two largest economies might break down.
European shares rose modestly, leaving the STOXX 600 up 0.1% around record highs, taking their lead from stocks across Asia rallying sharply.
US STOCK FUTURES JUMP
“Investors will want to see confirmation that the trade truce holds and that China’s stimulus and reform signals translate into tangible growth momentum,” said Charu Chanana, chief investment strategist at Saxo.
U.S. stock futures pointed to a sharp rally at the open later, as Nasdaq futures rose 1.4% and those for the S&P 500 gained 0.9%.
George Boubouras, managing director of K2 Asset Management, said the market was content with the U.S.-China momentum in recent days: “Over the past few months, the market has been looking through global tariff negotiations understanding that some commentary can be a bit of theatre and noise.”
Reflecting some of that optimism was a rise in the Chinese yuan to a more than one-month high against the dollar on Monday of 7.1091.
Prior to the market open, the People’s Bank of China set the official midpoint rate at 7.0881 per dollar, its strongest since October 15, 2024, above a Reuters estimate of 7.1146.
“If a deal is done based on today’s reported details, the yuan has scope for further gains,” MUFG head of research Derek Halpenny said.
“Better risk conditions and some improvement in global growth expectations should result in the U.S. dollar weakening as investors look at better prospects for non-dollar currencies,” he said.
Safe-haven gold dropped 2% to $4,028 an ounce, while U.S. Treasury prices also eased, leaving the benchmark 10-year bond yield up 2.7 basis points at 4.024%. Commodities, including soybeans, wheat and corn rose on trade deal prospects.
CENTRAL BANK MEETINGS AWAIT
Investor focus this week will also be on central bank meetings in Japan, Canada, Europe and the United States.
The Federal Reserve is widely expected to cut interest rates by 25 basis points after data showed U.S. consumer prices increased slightly less than expected in September, but the government shutdown and its impact on data remain a concern.
The dollar was firm at 152.71 yen, hovering near a two-week high. The euro edged up 0.15% to $1.1644.
The European Central Bank and the Bank of Japan are both broadly expected to hold rates steady later this week.
The BOJ is likely to debate whether conditions are right to resume rate hikes as worries about a tariff-induced recession ease, but political complications may keep it on hold for now.
FOCUS ON MEGACAP EARNINGS
The busiest part of the U.S. earnings season is poised to begin, with megacaps Microsoft, Apple, Alphabet, Amazon and Meta Platforms all due to report results this week.
While the profit edge of “Magnificent Seven” companies – whose huge market capitalisations mean their shares dominate equity indexes – over the rest of the index is narrowing, they are still expected to post stronger results for this period.
A number of the megacap companies are also key players in the artificial intelligence industry, enthusiasm for which has been the main driver of stock market performance.
(Additional reporting by Ankur Banerjee in Singapore. Editing by Mark Potter and Bernadette Baum)
