Markets Start Week Strong as Trade Talks Ease Tensions – Hang Seng Gains 3%, USD Index Up 1%

U.S markets are setting up for some impressive gains to start the new week of trading, with the USD also regaining some strength this morning. The US Dollar Index (DXY) is up more than 1% in the early part of Monday's session, coming hot on the heels of U.S.-China trade discussions which have been described by President Donald Trump as showing “great progress.”

The talks, involving Treasury Secretary Scott Bessent and other Chinese officials in Geneva, focused on possible adjustments in trade tariffs, which markets are closely watching.

The QQQ ETF, tracking the Nasdaq 100, looks set to open up more than 3% this morning, with the SPY (tracking the S&P 500) also more than 2.5% in the green according to latest pricing. This marks a shift in sentiment from the last week of trading, where major indexes remain rangebound.

Despite the upward trajectory in futures amid trade talks, it's important to note that overnight actions often do not directly translate into the actual trading sessions.

Although there is anticipation over how the latest developments in US-China negotiations might impact trade, President Trump has suggested a potential tariff reduction on Chinese imports, dropping from the current 145% to a range of 50%-60%, which could signify a substantial improvement in US-China trade relations.

The leading Chinese index, the SSE Composite has added 0.82% on the day, whilst the Hang Seng Index has posted an impressive 3.04% gain. Major Chinese companies such as Alibaba and JD.com are due to report earnings this week, with the numbers expected to shed light on the implications of the Trump administration's tariffs on the Chinese economy, potentially providing further insights into the evolving trade landscape.

As the U.S. enters a potential new phase of its trade relationship with China, markets are keeping a keen eye on the developments that could have wide-ranging implications for global trade and economic growth. The implications were from comments released over the weekend that more transparency should be forthcoming as the day progresses. For the time being, markets seem to be somewhat settled by the idea that some middle ground may be found.