That the US and China were nearing a trade deal triggered a cross-asset rally, lifting stocks, oil and copper along with China-exposed currencies such as the Australian dollar. Treasuries and gold dropped.

Asian shares rose 0.8% with stocks in Japan and South Korea jumping by around 2%. Futures for the S&P 500 and the Nasdaq 100 advanced after both underlying indexes closed at a record high last week. Futures for US copper — a bellwether for global growth — surged, as did oil, with the potential US-China deal bolstering the outlook for global demand.

The Australian and New Zealand dollars, popular proxies for China exposure, edged higher, while the greenback was mixed against other major currencies. Treasuries dropped across the curve with the yield on the 10-year rising more than two basis points to 4.02%.

The cross-asset moves suggested investors were set to cheer a potential trade accord between the world's two largest economies, coinciding with President Donald Trump's regional visit for diplomatic talks. His trip begins a packed week, featuring central bank rate decisions and earnings from the biggest US technology firms.

"This looks like a win on optics for both sides," said Charu Chanana, chief investment strategist at Saxo Markets in Singapore. "Broader markets are likely to take this as a short-term risk-on cue. But the rally will need to be backed by fundamentals to sustain."  Top negotiators from the US and China said they came to terms on a range of contentious points, setting the table for Trump and Xi Jinping to finalize a deal and ease trade tensions that have rattled global markets. 

The comments from both sides followed two days of talks in Malaysia that wrapped up on Sunday. A Chinese official said the countries had reached a preliminary consensus on topics including export controls, fentanyl and shipping levies. 

Read more: US, China Tee Up Sweeping Trade Deal for Trump, Xi to Finish

"This looks like more of a de-escalation rather than a new dawn," Sean Keane, chief Asia Pacific strategist at JB Drax Honore Singapore Pte Ltd, wrote in a client note. Removing the threat of additional US tariffs on China that would have come in from Nov. 1 "simply avoids the ramp up that might have occurred otherwise, though few in the market seemingly believed it would end up being implemented," he said. The encouraging signals from both sides of the negotiations were a marked contrast from recent weeks, when Beijing's announcement of new export restrictions and Trump's reciprocal threat of staggering new tariffs threatened to plunge the world's two largest economies back into an all-out trade war.

Traders will be looking ahead to a busy week of central bank announcements that includes rate decisions from the Federal Reserve, European Central Bank and the Bank of Japan. 

The Fed is forecast to cut rates by 25 basis points, while the ECB and BOJ are expected to leave rates unchanged. 

Apple Inc. and Microsoft Corp. are among megacap tech companies reporting earnings this week.

"This week will put all three legs of the equity bull case — calmer tone on trade, solid earnings & looser policy backdrop — to the test," Michael Brown, a senior research strategist at Pepperstone Group Ltd. in London, said in a note. "If we come through unscathed, the market will likely continue along the path of least resistance to the upside printing new highs into year-end."

"These developments set the stage for heightened volatility as investors navigate central bank policy shifts, geopolitical trade easing, and corporate earnings signals—all factors that will shape market direction into year-end," said Ulrich Urbahn, head of multi-asset strategy and research at Berenberg.

Source: Bloomberg