LONDON: Asian and European markets mostly rose Monday after the US and China said they had agreed to hold off imposing tariffs, averting a damaging trade war, at least for now.
In late morning deals, London stocks rose 0.8 percent and Paris stocks were up 0.6 percent, while Frankfurt was shut for a public holiday.
The Milan stock market however dropped 0.3 percent, hit by concerns over Italy's new populist government after recent inconclusive elections.
In foreign exchange activity, the dollar extended gains against major rival currencies.
After high-level talks in Washington, economic superpowers China and the United States revealed a deal had been hammered out, ending months of tension that had sent financial markets into a frenzy.
Treasury Secretary Steven Mnuchin told Fox News on Sunday that "right now we have agreed to put the tariffs on hold" while Xinhua reported China's Vice Premier Liu He as saying "the two sides reached a consensus, will not fight a trade war, and will stop increasing tariffs on each other".
While short on detail, the announcements provided much relief to investors, who had been fearing the imposition of levies on billions of dollars of exports between the two sides.
"It would appear the US and China are going to avoid a trade war as talks have improved," said CMC Markets UK analyst David Madden.
"China has agreed to step up its purchases of US goods, and Washington DC has suspended its plans to impose tariffs on $150 billion (127 billion euros) worth of Chinese goods."
- Dollar rallies -
The positive news also lifted the greenback, which had faced some selling pressure after Donald Trump earlier in the year imposed tariffs on steel and aluminium imports.
The dollar was sitting at its highest level against the euro since December, while it was at a four-month peak against the yen.
"After the US-China agreement on backing off from imposing trade tariffs on each other, one risk-off factor was removed, which pushed the dollar up against the yen," Marito Ueda, senior dealer at FX Prime in Tokyo, told AFP.
Traders are awaiting the release on Wednesday of minutes from the Federal Reserve's last policy meeting, hoping for fresh clues about its plans for raising interest rates.
Continuing improvement in the US economy has fanned expectations the central bank will lift borrowing costs four times this year.
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