Global markets kicked off the week on a high note as signs of easing trade tensions between the world’s two largest economies China and the United States ignited investor optimism. Top economic officials from both sides reportedly finalized the framework for a trade deal ahead of a planned meeting between President Donald Trump and President Xi Jinping in South Korea later this week.
The potential agreement would halt steeper U.S. tariffs and suspend China’s export controls on rare earths two key pain points in the escalating trade conflict. This breakthrough comes at a critical juncture as markets prepare for a series of central bank meetings and a packed U.S. corporate earnings week.
Why It Matters:
The U.S.-China trade dispute has been one of the biggest drags on global growth over the past two years, disrupting supply chains and dampening business sentiment. A truce would signal relief for investors and policymakers who have been grappling with inflation, weakening demand, and geopolitical uncertainty.
A confirmed deal could also restore some momentum to global trade and commodity markets, which surged on Monday in anticipation soybeans, wheat, and corn all climbed on the news.
Market Reaction:
Asian markets soared, with Japan’s Nikkei 225 breaching the 50,000 mark for the first time ever and South Korea’s KOSPI crossing 4,000 both rising over 2%. The MSCI Asia-Pacific Index (excluding Japan) gained 1.3%, reflecting a region-wide risk-on mood.
U.S. stock futures also jumped, led by Nasdaq futures up 0.88%, while European futures rose 0.5%. The Australian dollar often a barometer of China-related sentiment strengthened 0.42% to a two-week high at $0.6541.
Safe-haven assets retreated, with gold down 1% and U.S. Treasury yields ticking higher as investors rotated back into riskier holdings.
“Investors will want confirmation that this trade truce holds and that China’s stimulus and reform signals translate into tangible growth,” said Charu Chanana of Saxo Bank.
Central Banks in Focus:
Markets now turn their attention to this week’s central bank meetings in the U.S., Japan, Europe, and Canada. The Federal Reserve is widely expected to trim rates by 25 basis points, especially after U.S. inflation came in softer than expected in September.
Analysts believe the Fed may follow up with another cut in December if labor market data continues to show weakness. Meanwhile, the European Central Bank and Bank of Japan are both expected to hold steady amid political and economic caution.
What’s Next:
Attention now shifts to U.S. megacap earnings, with Apple, Microsoft, Alphabet, Amazon, and Meta all set to report this week. These firms central to the “Magnificent Seven” driving recent market gains will test whether optimism around artificial intelligence and tech profitability can withstand a slowing economy.
“The coming week will test whether sentiment can turn into durable conviction,” Chanana added, noting that strong guidance from Big Tech could determine whether the market rally holds or fizzles.
With information from Reuters.
