Global markets experienced a notable surge at the beginning of the week as investors expressed optimism regarding a potential trade agreement between the U.S. and China. The pan-European Stoxx 600 index saw an increase of approximately 0.3% on Monday morning, buoyed by robust gains in Asian markets, where Japan’s Nikkei 225 index soared past the 50,000 mark for the first time, closing up by 2.46%. Meanwhile, South Korea’s Kospi index also saw significant movement, rising by 2.57%.
U.S. futures were positively influenced ahead of the opening bell, with the Dow Jones Industrial Average futures climbing 0.6%, the S&P 500 futures up by 0.8%, and the Nasdaq 100 futures gaining 1.2%. Despite more than half of Europe’s sectors showing negative performance in early trading, industrials, technology, and mining stocks—areas considered particularly vulnerable to global trade tensions—emerged as the largest gainers. The Stoxx Europe 600 Technology Index experienced a 1.4% rise, while the Stoxx Europe 600 Basic Resources and Industrial Goods & Services indices saw gains of 0.5% and 0.3%, respectively.
The prevailing optimism surrounding a potential trade truce was underscored by comments from Rupert Thompson, chief economist at IBOSS. He identified the recent trade news as the key factor driving the global rally and emphasized that it appears to bolster the prospects for a more sustainable truce that may ease tariff hostilities. “It certainly kicks out into the long grass a sort of big flare-up of trade tensions again,” Thompson stated during an interview on CNBC’s “Squawk Box Europe.” He expressed that, if an agreement moves forward, it could extend the truce beyond the typical three-month timeframe that has characterized previous arrangements.
However, Thompson advised caution, acknowledging the persistent underlying geopolitical tensions between the U.S. and China. He specifically referenced the recent announcement of 10% tariffs on Canada, which he noted took the markets by surprise, indicating that President Trump’s stance on trade issues remains unpredictable.
Christian Mueller-Glissmann, head of asset allocation research at Goldman Sachs, highlighted broader economic factors influencing growth prospects. He expressed uncertainty regarding whether this specific trade agreement will catalyze an uptick in economic activity. He framed the bank’s outlook for the upcoming year as “modestly pro-risk,” anticipating that the market may be characterized by a climate of increased optimism, largely due to enhanced liquidity. Mueller-Glissmann remarked that this “trapped” liquidity could pave the way for a late-cycle acceleration, although he cautioned that various risks still loom on the horizon.
