The Ftse 100 opened higher on Monday morning, gaining 0.8 per cent as investors responded positively to news of progress in trade negotiations between the United States and China.
The blue-chip index started the week on an optimistic note, while sterling fell 0.3 per cent against the dollar to 1.33.
European markets also showed strength, with Germany's Dax index rising 1.3 per cent and France's CAC 40 gaining over one per cent..
US Treasury Secretary Scott Bessent and US Trade Representative Jamieson Greer told reporters on Sunday that significant headway had been made in the trade negotiations.
The Ftse has surged in response to the news of a potential deal
PA / YAHOO FINANCE
"I'm happy to report that we made substantial progress between the United States and China in these very important trade talks," Bessent said.
It should be noted that officials have not yet provided specific details about the contents of the expected trade agreement.
The announcement follows months of discussions between the two economic superpowers aimed at resolving ongoing trade tensions.
Markets are anticipating the formal unveiling of the deal later today, which could ease concerns about global trade restrictions.
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Markets have reacted positively to the US-China talks
ReutersRuss Mould, an investment director at AJ Bell, broke down why the stock market is reacting so positively to an easing of tensions between the superpowers.
He explained: "While the trade spat has only been dialled back for 90 days, it’s a major breakthrough as far as investors are concerned.
"The fact the two countries were talking was already a major win given they’ve been at each other’s throats during the first and second Trump presidential terms.
"Some people thought the best-case outcome from the weekend’s discussions would be an agreement to simply keep talks going.
"Therefore, to have reached an initial deal so quickly and one that rolls back tariffs by a large amount is a pleasant surprise. The UK-US trade deal last week made it perfectly clear that Trump wasn’t going to get rid of tariffs completely.
"If one of its greatest allies is forced to still have a 10 per cent base tariff, there is no way that tariffs on China would have disappeared completely upon a trade deal."
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US Treasury Secretary Scott Bessent is negotiating on behalf of the Trump administration
REUTERSSusannah Streeter, head of money and markets for Hargreaves Lansdown, added: "Hopes are high for significant deal between the US and China after fruitful weekend negotiations.
"Progress was made on key sticking points for both countries and talks were extended as trade dominoes fell into place.
"With more details about the outcome expected later, there’s optimism around that the spat between the world’s two largest economies won’t inflict as much damage globally as had been feared."
