Markets soar worldwide after US and China agree trade truce

World stock markets roared higher on Monday amid a wave of relief over a temporary truce in the trade war between the US and China.

The FTSE 100 had its biggest daily gain since April, rising more than 2%, or 145.60 points, to 7125.84, as hopes for stronger global growth drove heavyweight oil and mining stocks to the top of the blue-chip index.

Shares with strong exposure to Chinese markets — such as fashion brand Burberry and Asia-facing bank Standard Chartered — were also in demand, both rising 5%. Only four stocks were in negative territory.

US President Donald Trump and Chinese premier Xi Jinping struck a deal at the G20 summit in Argentina this week after months of growing tension on trade. Beijing has agreed to cut or scrap 40% tariffs on US-made cars and buy more agricultural goods from US farmers, and Trump has temporarily agreed to halt 25% tariffs on $200 billion (£156 billion) of Chinese goods, pending talks on cyber theft and intellectual property protection.

Although London’s blue-chip index is still 7% down on the year, CMC Markets analyst Michael Hewson said today’s rally bore similarities to the surge eight months ago, also inspired by better trade news. That inspired the Footsie all the way to its year-highs close to 7900 at the end of May. “It’s a classic risk-on relief rally,” he said.

Though Brexit uncertainty still hangs over UK markets, “the main pressure valve for that will be the currency”, Hewson added. Sterling gained nearly half a cent against the dollar today as investors moved out of the safe-haven greenback to invest in riskier assets. “The postponement of tariff hikes and the resumption of dialogue and negotiations are a positive, for the economy and asset markets alike,” Oxford Economics’ Louis Kuijs said.

Across Europe, markets also rose led by Germany’s Dax, which is most exposed to China and a trade war. The German benchmark flew 2.65% higher led by big gains for car-makers struggling with tariffs. Daimler and BMW both rose more than 7%. France’s CAC40 and Italy’s MIB indexes rose 2%.

Alongside cooling trade tensions, markets were also buoyed by signs of compromise between Italy’s anti- establishment government and the European Union in a long-running row over its budget plans for next year. That led to investors piling into Italian debt today and selling off German bunds.