By Jon Sindreu 
   -- U.S. dollar, 10-year Treasury yields up 
 
   -- Oil prices rise 
 
   -- Some European markets closed for holiday 

Global stocks rose Monday as investors saw the U.S. and China stepping back from a large-scale trade war.

The Stoxx Europe 600 was up 0.3% in early European trade--even though markets in Germany and some other European countries were closed for a holiday--and futures pointed to a 0.5% opening rise for the S&P 500.

Asian stocks also powered ahead with Chinese all indexes notching gains, and Japan's Nikkei Stock Average closing up 0.3%.

Meanwhile, the WSJ Dollar Index, which measures the dollar against a basket of currencies, was up 0.4%.

Money managers believe discussions between the U.S. and China this weekend have helped to avoid an all-out trade war, a positive development in their view. The U.S. is "putting the trade war on hold," Treasury Secretary Steven Mnuchin said in a Fox News interview Sunday.

The U.S. is set to complete this week the procedural steps to apply tariffs on $50 billion of Chinese imports, and has threatened to apply levies to a further $100 billion. While China had pledged to retaliate, it has now agreed to purchase a larger amount of American goods to help close the U.S. trade deficit.

Investors had never expected the announced tariffs to significantly affect the world economy, but were concerned that further tensions could lead to more countries erecting larger gates on trade.

"It's not in anyone's interests to have severe escalation," said Caroline Simmons, deputy head of U.K. investment at UBS Wealth Management, who believes investors won't ultimately put too much weight on geopolitical spats. "It's noise; in the midterm, it's going to come down to what's being delivered growth-wise and earnings-wise."

The global economy remains robust and first-quarter earnings have been strong, but stock markets have mostly traded sideways this year because many investors have started to fear that the pace of the expansion has already peaked.

"The muted market reaction to earnings is indicating that the upside is priced in," said Witold Bahrke, senior macro strategist at Nordea Asset Management, who favors U.S. stocks because he believes equities overseas will be further dragged down by a stronger dollar, higher Treasury yields and weakening economic indicators in Europe.

"U.S. stocks are very liquid and they tend to be a good safety bet, and in relative terms U.S. growth dynamics are still looking kind of best-in-class," he said.

Later this week, money managers will pay close attention to the release of the minutes of the Federal Reserve's May policy meeting, which are expected to shed further light on how fast officials are likely to raise rates to react to higher inflation.

Yields on 10-year Treasurys rose to 3.072% Monday, from 3.067% Friday.

Five-year market expectations of inflation have moved up over the past month as oil prices rose to multiyear highs, but longer-term measures of inflation expectations remain contained, raising questions about how much the Fed will react to one-off price increases.

On Monday, Brent futures--the global crude benchmark--rose 0.5% to $78.92 a barrel.

Write to Jon Sindreu at jon.sindreu@wsj.com

(END) Dow Jones Newswires

May 21, 2018 04:08 ET (08:08 GMT)

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