Stocks in the United States, Japan and emerging markets rose on Monday, reflecting optimism that the United States and China are set to begin negotiations on trade.
MSCI`s world equity index, which tracks shares in 47 countries, touched its lowest level since Feb. 9 but was then buoyed to a 0.81 percent gain after a Wall Street Journal report that U.S. Treasury Secretary Steven Mnuchin was considering a visit to Beijing to begin negotiations.
Hope of a rapprochement between the countries abbreviated the markets` hangover about a trade war pitting the world`s two largest economies against one another.
The Dow Jones Industrial Average rose 302.37 points, or 1.28 percent, to 23,835.57, the S&P 500 gained 25.69 points, or 0.99 percent, to 2,613.95 and the Nasdaq Composite added 70.57 points, or 1.01 percent, to 7,063.23.
"This is a time to be adding risk, not reducing it. We are confident purchases at current prices will prove to be a very good entry point for an eventual move to new all time highs this summer," wrote Morgan Stanley & Co LLC equity strategists including Michael Wilson early on Monday.
"Friday`s action does not dissuade us."
The Dow sank more than 1,000 points over the two days ended Friday while the selloff pushed the S&P 500 to within a hair of its 200-day moving average, a key level watched by market tacticians.
Emerging market stocks rose 0.69 percent. MSCI`s broadest index of Asia-Pacific shares outside Japan closed 0.57 percent higher, while Japan`s Nikkei rose 0.72 percent to erase earlier losses.
Fears of a trade war mounted this month after Trump first slapped tariffs on steel and aluminium imports, and then on Thursday specifically targeted China by announcing plans for tariffs on up to $60 billion of Chinese goods.
Signs of potential compromise were also supported by news that South Korea would be exempt from U.S. steel tariffs in a revision of the bilateral trade pact between the two countries. South Korea`s benchmark share index rose 0.84 percent.SIGNS OF FEAR
Benchmark 10-year U.S. Treasury notes were little changed, but with yields rising at the front of the curve as the government planned to sell a record high $294 billion of debt this week in a test of investor appetite.
In a sign of fear still hovering in the market, yields on longer-dated Treasury debt were falling at the back end of the curve. Spot gold added 0.6 percent to $1,354.65 an ounce at two-month highs.
The dollar index fell 0.38 percent.
European markets were mixed, with concerns over the formation of a new anti-establishment government in Italy weighing on Southern European debt in particular on Monday, though this was counterbalanced to an extent by a ratings upgrade for Spain late on Friday.
Italian bonds underperformed, with 10-year yields rising as much as 0.055 percentage points on further signs that the anti-establishment 5-Star Movement and the anti-migrant League might explore an alliance to form a government.
The pan-European FTSEurofirst 300 index lost 0.81 percent. But the euro still moved up 0.7 percent to $1.2438.
In commodities, international Brent crude futures were last at $69.32, down 0.7 percent on the day. The possibility of a full-blown trade war had weighed on the energy complex on fears that it could harm oil demand.