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  • US-China trade truce has likely put a strong bid under the equities.
  • S&P 500 futures are up 50 points.
  • The Shanghai Composite has gapped higher and is currently trading 3 percent higher on the day.

The risk assets are solidly bid Monday after the US President Trump and his Chinese counterpart agreed to pause the trade war for a period of 90 days.

As of writing, the S&P 500 futures are up 50 points or 2.9 percent and Dow Jones futures are up 400 points. Other Asian indices are also cheering US-China trade truce.

The dinner diplomacy between the US President Trump and its Chinese counterpart conducted over the weekend produced a highly anticipated agreement whereby the US would refrain from increasing tariffs on Chinese imports and in return China would buy “a substantial amount” of US goods.

The agreement will remain in place for 90 days during which both sides would negotiate on structural changes with respect to forced technology transfer and intellectual property rights.

Notably, the  trade war may  escalate if both parties fail to reach an agreement during the 90-day period. As of now, markets are not considering that possibility.