Stocks gain, gold sags on trade deal optimism

It’s been a strong start to a week dominated by central bank meetings and megacap earnings, as global stocks rebounded while safe-haven gold and bonds retreated as investors were encouraged by signs that trade tensions between China and the US are easing.

Top Chinese and US economic officials on Sunday laid out the framework for a trade deal for US President Donald Trump and his Chinese counterpart Xi Jinping to decide on when they meet in South Korea later this week.

A trade deal would pause tougher U.S. tariffs and China’s rare earth export controls, helping ease some concerns among investors that a trade truce between the world’s two largest economies could break down.

European stocks rose modestly on Monday, with the STOXX 600 rising 0.1 percent to record highs and maintaining its lead after a sharp rise in Asia.

“Investors will want to see confirmation that the trade truce is continuing and that China’s stimulus and reform signals are translating into tangible growth momentum,” said chief investment strategist at Saxo Charu Chanana.

US stock futures pointed to a sharp rise at the open, with Nasdaq futures rising 1.4 percent and S&P 500 futures rising 0.9 percent.

K2 Asset Management Managing Director George Boubouras said the market has been pleased with the US-China momentum in recent days.

“Over the last few months the market has been reviewing global tariff negotiations, understanding that some of the comments may be a bit theatrical and noise,” he said.

The Chinese yuan’s rise to 7.1091 against the dollar on Monday, its highest level in more than a month, also reflects some of this optimism.

Before the market opened, the People’s Bank of China set the official midpoint rate at 7.0881 per dollar, its strongest since Oct. 15, 2024, above a Reuters forecast of 7.1146.

“If a deal is made based on the details announced today, the yuan will have room to make further gains,” said Derek Halpenny, head of research at MUFG.

“Better risk conditions and some improvement in global growth prospects should result in a weakening of the US dollar as investors look to better prospects for non-dollar currencies,” he said.

Safe-haven gold fell 2.0 per cent to US$4,028 ($A6,165) an ounce, while US Treasury bond prices also fell, leaving the benchmark 10-year bond yield up 2.7 basis points at 4.024 per cent. Commodities including soybeans, wheat and corn rose on trade deal expectations.

This week, investors’ focus will be on central bank meetings in Japan, Canada, Europe and the United States.

The Fed 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 data continue to cause concern.

The dollar strengthened at 152.71 yen, hovering around its highest level in nearly two weeks. The euro rose 0.15 per cent to US$1.1644 ($A1.7822).

The European Central Bank and the Bank of Japan are expected to keep interest rates steady towards the end of this week.

Due to concerns that the tariff-induced recession will ease, the BOJ is likely to discuss whether the conditions are right to continue raising interest rates, but political issues may put this on hold for now.

The busiest part of the US earnings season is set to kick off with megacaps this week as Microsoft, Apple, Alphabet, Amazon and Meta Platforms report results.

While the profit advantage of the “Magnificent Seven” companies, whose shares dominate the stock indices due to their large market capitalization, narrows compared to the rest of the index, they are still expected to announce stronger results in this period.

Some of the megacap companies are also key players in the artificial intelligence industry, which is a key driver of stock market performance.

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