By Alexander Osipovich and Nathan Allen

U.S. stocks jumped Tuesday after President Donald Trump signaled that trade talks with China had taken a turn for the better.

The Dow Jones Industrial Average gained 397 points, or 1.5%, in early trading while the S&P 500 added 1.4% and the Nasdaq Composite rose 2%.

Stocks opened moderately higher but jumped after Mr. Trump tweeted that he and his Chinese counterpart Xi Jinping had a "very good telephone conversation." The threat of mounting trade conflict with China has weighed on U.S. economic data and prompted uncertainty among investors.

"It looks like the markets are getting excited about the potential for some sort of agreement between Trump and China," said Charlie Ripley, a strategist at Allianz Investment Management.

Technology and communications stocks were among the biggest gainers. Apple, which has significant Chinese exposure, jumped 2.6%. Facebook's shares rose 1.5% after the company formally announced a plan to launch its own cryptocurrency.

Investors have also been awaiting word from the Federal Reserve on whether it might cut interest rates. The Fed is set to make an announcement at the end of its two-day meeting on Wednesday.

Federal-funds futures indicated on Tuesday morning that investors saw a more than 90% chance of a rate cut in July, according to CME Group. But strategists at Goldman Sachs, JPMorgan Chase & Co. and other banks warned that expectations of a summer rate cut were overblown.

Earlier, European stocks posted strong gains after European Central Bank President Mario Draghi signaled the bank could roll out fresh stimulus as soon as its next policy meeting in July.

The yield on 10-year German bunds declined to a low of minus 0.309% after Mr. Draghi said additional monetary stimulus would be required if eurozone inflation doesn't improve. Yields move in the opposite direction to prices.

Bond yields fell in the U.S. after Draghi's comments but reversed course after Mr. Trump's China tweet. The yield on the benchmark 10-year Treasury was recently at 2.04%.

During his speech, the euro reversed course to trade 0.2% lower against the dollar. Mr. Trump tweeted to say Mr. Draghi's speech had weakened the euro, "making it unfairly easier for them to compete against USA."

The Stoxx Europe 600 rose 1.6% in recent trading.

Most Asian markets posted modest gains, with Hong Kong's Hang Seng Index rising 1% to extend Monday's rally. Korea's Kospi rose 0.4%, but Japan's Nikkei 225 fell 0.7%.

In commodities, U.S. oil futures jumped 2.7% to $53.32 a barrel, while gold rose 0.2% to $1344.90 a troy ounce.

The WSJ dollar index, which measures the currency against a basket of its peers, was flat.

Write to Alexander Osipovich at alexander.osipovich@dowjones.com

(END) Dow Jones Newswires

June 18, 2019 11:14 ET (15:14 GMT)

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