US pre-open: Stocks to rally on Sino-US trade truce

US stocks looked set to kick off the week with strong gains as investors welcome a 90-day trade truce between the US and China.

At 1220 GMT, Dow Jones Industrial Average and S&P 500 futures were up 1.7% and 1.4%, respectively, while Nasdaq futures were 2.1% firmer.

At the G20 summit over the weekend, US President Trump and China's Xi Jinping said they would put off the introduction of any further tariffs for the time being as they attempt to settle their differences through talks.

The US said it will now hold fire on raising tariffs on $200bn worth of Chinese goods from 10% to 25% on 1 January. Meanwhile, China said it was willing to buy a "very substantial" amount of agriculture, energy and other goods from the US to reduce the trade imbalance.

Neil Wilson, chief market analyst Markets.com, said: "This positive rhetoric and mood music is likely to be sustained through December as the two sides seek a deal, which is likely to mean we see a decent Santa rally through December. With Dow futures regaining the 26k handle I would not be surprised to see the bull market asset itself again and for the Dow to end the year at 27k. As previously noted, in spite of the recent selloff in equities there looked to be just enough appetite for one last hurrah and we may be about to see it.

"The risks to this thesis are twofold. First, the Powell put may not survive this month’s FOMC meeting and we see a spike in yields again. We will wait to see whether the dots change meaningfully, although this is unlikely. Most likely is that we get a dovish hike from the Fed that keeps the market happy. The other is that Sino-US tensions flare up again. However given where we have come from and the fact that the deadline on the delay is some way off, neither seems especially likely in the near term."

Energy shares were likely to be on the rise as oil prices jumped on the back of improving Sino-US relations, with West Texas Intermediate up 3.7% to $52.89 a barrel and Brent crude 3.6% higher at $61.66.

In corporate news, shares in pharmaceutical company Tesaro Inc rocketed 57% in pre-market trade as it agreed to be bought by GlaxoSmithKline for around $5.1bn.

In other deal news, Texas-based Nexstar Media Group has agreed to buy Tribune Media for $4.6bn.

On the data front, Markit's manufacturing PMI for November is at 1445 GMT, while construction spending figures for October are at 1500 GMT.