Stocks surge as trade tensions ease

U.S. stocks surged Monday as the Trump Administration sought to calm a potential trade dispute with China. The dollar surrendered earlier gains and turned lower, Treasuries steadied, and traditional havens such as the yen and gold tumbled.

Major equity gauges were higher from start to finish, with the Dow Jones Industrial Average adding around 300 points. The greenback rose in early trading but then retreated and turned lower, as investors assessed Treasury Secretary Steven Mnuchin’s comments on Sunday that the U.S. was “putting the trade war on hold” amid progress in talks with China. West Texas crude climbed to the highest since November 2014.

“There is much to gain from our country working with China and much to lose if we don’t, so any evidence of the administration working toward an amicable solution should be viewed positively,” Chris Zaccarelli, chief investment officer of Independent Advisor Alliance, wrote in a note Monday.

The euro rose following five days of declines after Italy’s two populist parties closed in on a pick for prime minister, while Ital- ian bonds extended their retreat. Media companies and retailers led advances in the Stoxx Europe 600 Index, though a number of countries are out for a holiday.

The easing protectionist tensions will offer some respite to traders as they grapple with the impact of rising U.S. interest rates and a stronger dollar.

“Everybody wants a deal, it’s just the unknown, or it’s really tough sanctions everybody is most concerned about,” said Tim Clift, chief investment strategist at Envestnet PMC. “But if it looks like it’s just going to be much more agreeable for both sides, and they’re pushing it out to hash it out instead of making too strict of tariffs, that’s certainly much better for the market.”

In addition, the week ahead is loaded with risk events, including releases of the latest meeting minutes from both the Federal Reserve and European Central Bank, a slew of debt sales from the U.S. and preliminary purchasing manager indexes from the euro zone. Meanwhile, geopolitical stress lingers, with South Korea President Moon Jae-in visiting Washington to discuss North Korea and Brexit negotiations ongoing.