Wall Street stocks surged Monday amid increased optimism about trade negotiations while European equities retreated in part due to a strengthening euro.
The Dow jumped 2.8 percent, regaining its swagger after a two-day dive last week spurred by President Donald Trump’s announcement that he was imposing tariffs of up to $60 billion on Chinese imports.
Analysts were heartened by a Wall Street Journal report that said the two countries were actually in talks and that the US had provided specific demands for China that could help resolve the conflict.
Investors are trying to deduce how much of Trump’s rhetoric is realistic and how much is a ‘bargaining tactic,’ said Tom Cahill, portfolio strategist at Ventura Wealth Management.
‘Negotiations behind the scenes are positive for the market,’ he added.
Gains were broad-based, with technology giants like Apple and Intel winning 4.8 percent and 6.3 percent respectively. Big banks like JPMorgan Chase rose more than three percent, along with industrial giant Caterpillar.
Last week’s dramatic retreat in stocks reflected ‘worries about an escalation into a full-blown trade war,’ said Oxford Economics in a note over the weekend.
‘But on past form (notably steel/aluminum tariffs), the wedge between Trump’s initial announcement and actual policy can be large. We think this reality will dawn on the markets in the coming weeks.’
A quick end to ECB stimulus?
Equity markets in London, Paris and Frankfurt all fell following news that the United States and its European allies expelled dozens of Russian diplomats in a coordinated action against Moscow, which they accuse of poisoning an ex-spy in the English city of Salisbury.
All three were also penalized by the strength of the euro and pound against the dollar.
The euro was spurred higher by comments from German central bank chief Jens Weidmann that the European Central Bank should quickly wind down its crisis-fighting policies of ultra-low interest rates and massive bond purchases.
Asian stock markets kicked off the day with another drop, but bargain-buying saw some return to positive territory and others pare the losses – as it emerged that South Korea and the United States had reached an understanding on revising their free-trade agreement and on steel tariffs.
‘So far, the initial measures from Trump and China are relatively muted,’ said James Cheo, senior investment strategist at Bank of Singapore. 
‘The room for miscalculation seems to be high, both in terms of provoking Chinese retaliation or taking measures that end up hurting the US economy. The hope is that there is rationality from both parties.’
Key figures around 2100 GMT
New York – Dow: UP 2.8 percent at 24,202.60 (close)
New York – S&P 500: UP 2.7 percent at 2,658.55 (close)
New York – Nasdaq: UP 3.3 percent at 7,220.54 (close)
London – FTSE 100: DOWN 0.5 percent at 6,888.69 points (close)
Frankfurt – DAX 30: DOWN 0.8 percent at 11,787.26 (close)
Paris – CAC 40: DOWN 0.6 percent at 5,066.28 (close)
EURO STOXX 50: DOWN 0.7 percent at 3,274.14 (close)
Tokyo – Nikkei 225: UP 0.7 percent at 20,766.10 (close)
Hong Kong – Hang Seng: UP 0.8 percent at 30,548.77 (close)
Shanghai – Composite: DOWN 0.6 percent at 3,133.72 (close)
Dollar/yen: UP at 105.43 yen from 104.74 yen at 2100 GMT Friday
Euro/dollar: UP at $1.2500 from $1.2353
Pound/dollar: UP at $1.4230 from $1.4132
Oil – Brent North Sea: DOWN 33 cents at $70.12 per barrel
Oil – West Texas Intermediate: DOWN 33 cents at $65.55