By Trevor Hunnicutt
NEW YORK (Reuters) - Stocks rose almost everywhere on Monday, reflecting optimism that the United States and China are set to begin negotiations on trade.
MSCI's world equity index, which tracks shares in 47 countries, touched its lowest level since Feb. 9 but was then buoyed to a 1.27 percent gain on expectations that U.S. Treasury Secretary Steven Mnuchin would try to reach an agreement with China.
Hope of a rapprochement between the countries abbreviated the markets' hangover about a trade war pitting the world's two largest economies against one another.
The Dow Jones Industrial Average rose 565.06 points, or 2.4 percent, to 24,098.26, the S&P 500 gained 56.86 points, or 2.20 percent, to 2,645.12 and the Nasdaq Composite added 179.67 points, or 2.57 percent, to 7,172.34.
The powerful rebound reflected the market's bears are not dead so much as in unseasonably late hibernation. During the day, a weakening U.S. dollar weighed on European stocks, which ended their trading day on weaker footing, while gold gained and oil languished.
"The overall health of the world economy is pretty darn good," said David Haviland, managing partner at Beaumont Financial Partners LLC and its Beaumont Capital Management division.
"What I'm concerned about are policy mistakes" by the U.S. Federal Reserve or the Trump administration, he added.
"It doesn't take a lot to tip a market over when it's this agitated."
Fears of a trade war mounted this month after Trump first slapped tariffs on steel and aluminium imports, and then on Thursday specifically targeted China by announcing plans for tariffs on up to $60 billion (£42.2 billion) of Chinese goods.
The Dow sank more than 1,000 points over the two days ended Friday, while the sell-off pushed the S&P 500 to within a hair of its 200-day moving average, a key level watched by market tacticians.
Signs of potential compromise were also supported by news that South Korea would be exempt from U.S. steel tariffs in a revision of the bilateral trade pact between the two countries. South Korea's benchmark share index rose 0.84 percent.
Emerging market stocks rose 0.94. MSCI's broadest index of Asia-Pacific shares outside Japan closed 0.79 percent higher, while Japan's Nikkei rose 0.72 percent after earlier losses.
Chicago soybean futures rose as concerns over trade tensions between China and the United States eased. A Sino-American trade split was seen disrupting soybean flows between the world's biggest producer and the world's largest importer of the oilseed.
SIGNS OF FEAR
Haviland said that while trade concerns may seem to have receded, in fact the issue has yet to play out. European policymakers, for instance, remain concerned that more of China's low-cost steel could be dumped in their markets.
European markets were mixed, with concerns over the formation of a new anti-establishment government in Italy weighing on Southern European debt in particular on Monday, though this was counterbalanced to an extent by a ratings upgrade for Spain late on Friday.
Italian bonds underperformed, with 10-year yields rising as much as 0.06 percentage points on further signs that the anti-establishment 5-Star Movement and the anti-migrant League might explore an alliance to form a government.
The U.S. dollar weakened 0.48 percent against its peers, potentially signalling a trade war by other means. The greenback's decline would make U.S. exports cheaper to foreign buyers.
But that decline helped perk up the euro 0.86 percent on a relative basis, hurting the continent's exporters. The pan-European FTSEurofirst 300 index lost 0.68 percent.
The eurozone's momentum has been losing pace, according to Citigroup's economic surprise index for the currency bloc, which is at a two-year low.
The CBOE Volatility Index, known as Wall Street's fear gauge and reflecting S&P 500 price swings anticipated by options traders, dropped 3.31 points to 21.56 during the day but nonetheless remained higher than its peak for all of 2017.
Spot gold added 0.6 percent to $1,354.39 an ounce at two-month highs.
International Brent crude futures were last at $69.53, down 0.4 percent on the day. The possibility of a trade war have weighed on the energy complex on fears that it could harm oil demand.
Benchmark 10-year notes last fell 5/32 in price to yield 2.8428 percent after a lacklustre $30 billion 2-year note auction by the U.S. government.
Graphic - World FX rates in 2018: http://tmsnrt.rs/2egbfVh
Graphic - Global assets in 2018: http://tmsnrt.rs/2jvdmXl
Graphic - Europe/U.S. economic surprises - http://reut.rs/2GbyRay
Graphic - MSCI All Country World Index Market Cap: http://tmsnrt.rs/2EmTD6j
Graphic - Emerging markets in 2018: http://tmsnrt.rs/2ihRugV