Stock markets increased on Monday, supported by declining oil prices and optimistic signals from recent trade discussions between US and Chinese officials. Last week, stocks had faced pressure following the US Federal Reserve's interest rate hike aimed at combating inflation, which was partly fueled by rising energy costs during ongoing tensions with Iran. However, with oil prices dropping, Susannah Streeter, chief investment strategist at Wealth Club, remarked that the "pressure cooker of worry about inflation is giving off less steam" as crude prices fell amid growing hopes for a resolution in the Iran conflict.
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Oil prices fell over three percent on Monday after US President Donald Trump expressed willingness to meet with Iranian President Masoud Pezeshkian, who will attend the UN General Assembly in New York this week. Florian Ielpo from Lombard Odier bank noted that Saudi Arabia increased its oil exports to more than four million barrels per day in September, up from 2.4 million in August, with reports suggesting that part of the damaged East-West oil pipeline could reopen soon.
This decline in oil prices also provided a boost to sovereign bond markets, offering some relief to equity markets, according to Patrick O'Hare at Briefing.com. Wall Street opened higher, with the Dow gaining 0.7 percent. European markets also saw gains, with stock indices in London, Paris, and Frankfurt rising about one percent in afternoon trading.
Despite new political challenges for German Chancellor Friedrich Merz, whose center-right CDU party faced losses in two regional elections to far-right and far-left parties, investors remained focused on the larger economic picture. US and Chinese economic officials met on Sunday to discuss trade and artificial intelligence ahead of a summit scheduled for Thursday between Trump and Chinese President Xi Jinping in Washington. US Treasury Secretary Scott Bessent indicated that discussions included the creation of a channel called "US-China AI dialogue" to share information regarding technology and its associated risks.
In Asia, Hong Kong's main index rose 1.2 percent, shares in Shanghai increased by one percent, and South Korea's tech-heavy benchmark ended the day up by 1.7 percent. Tokyo's markets were closed for a public holiday. Thomas Mathews of Capital Economics noted that during the upcoming talks between Trump and Xi, potential Chinese cooperation on Iran could significantly influence market movements, given the recent volatility in oil and bond markets.