US Stocks Surge To Records On Optimism Over Trade

Global stock markets rallied Monday, with major US indices surging to fresh records on optimism over international trade talks and continued positive momentum from solid economic data and earnings.

All three leading US indices ended at all-time highs, the Dow for the first time since July.

Analysts cited remarks from US Commerce Secretary Wilbur Ross that "phase one" of the trade agreement between Beijing and Washington was on track and hinting that the US may not impose tariffs on car imports from Europe and Japan.

European and Asian stocks also gained.

Alan Skrainka, chief investment officer at Cornerstone Wealth Management, said investors are heartened that the United States and China have pulled back from threats of new additional tariffs.

Liu He (C) hailed phone talks with US Trade Representative Robert Lighthizer (L) and Treasury Secretary Steven Mnuchin (R) GETTY IMAGES NORTH AMERICA / CHIP SOMODEVILLA

"The idea that it was going to get worse and worse was what investors were most worried about," Skrainka said. "And that is off the table."

The records also followed a strong US employment report released Friday and a large number of third-quarter earnings results in recent weeks that bested analyst expectations.

Positive momentum in stocks has created a "fear of missing out" among investors, said Briefing.com analyst Patrick O'Hare.

Phase one looks close

Progress on the discussions has provided support to equities for the past few weeks, with speculation that Donald Trump and Xi Jinping will meet this month to sign off on the mini pact.

While the agreement would only be the first part of an unspecified wider deal, it would be a major step after more than a year of a trade war that has undermined the world economy.

The Wall Street financial district. AFP / Johannes EISELE

However, National Australia Bank's Rodrigo Catril warned there were still important issues to address.

"As much as the US-China trade updates continue to point to a phase one deal looking like a certainty, the contentious issues on whether the US will cancel the planned December tariffs and remove some of the current tariffs in line with China's demands remains an unknown and if the issue is not resolved then a deal could easily collapse," he said in a note.

Among individual companies, McDonald's, dropped 2.7 percent after the fast-food chain over the weekend ousted CEO Steve Easterbrook over a "consensual relationship" with an employee that violated company policy.

And that was followed Monday by McDonald's saying its top human resources executive, David Fairhurst, also is exiting the fast food company.