Financial markets around the world have rallied amid early signs of progress in the bitter trade standoff between the US and China, as hopes rise for a breakthrough in the dispute.

Wall Street shook off days of volatility to post broad gains in early trading after Donald Trump said that talks between Washington and Beijing were progressing, while reports suggested that China was on the brink of redrawing its economic plans to give foreign companies more access to its domestic market.

The Dow Jones Industrial Average was up by more than 400 points, or about 1.7%, at lunchtime but later surrendered some of the gain to close 157 points (0.64%0 higher. The gains were led by industrial firms that stand to benefit from a thawing in relations, as global markets reversed some of the losses recorded in the past month.

Markets rally as China 'rewrites economic plan'; pound jumps over $1.26 - as it happened Read more

Technology companies also rallied – the Nasdaq gained almost 1%, while big energy stocks rose on the back of a strengthening global oil price. The Chinese music streaming company Tencent Music also jumped 10% on its first day of trading after floating on the New York Stock Exchange.

The FTSE 100 closed up 73 points to 6,880, while markets across Europe also gained. The pound rallied against the dollar and the euro as City investors bet that Theresa May would survive the confidence vote against her.

In the latest twist in the US-China trade dispute, Trump told Reuters that he could use his power as president to intervene in the case of Meng Wanzhou, the senior Huawei executive detained in Canada on behalf of the US over alleged breaches of Iranian sanctions, if it would help to serve the interest of national security or close a trade deal with China.

“If I think it’s good for the country, if I think it’s good for what will be certainly the largest trade deal ever made – which is a very important thing – what’s good for national security, I would certainly intervene if I thought it was necessary,” he said.

In another sign of the thawing relations, the Wall Street Journal said Beijing was in the process of rewriting its “Made In China 2025” economic policy in response to Trump’s trade war threats. Beijing also told US officials that it would cut the tariff on US cars from 40% down to 15%. Such a step would take the levy back down to the levels seen before the trade war flared up this year.

Analysts cautioned that there could be legal considerations that could prevent Trump from intervening in Meng’s case. They also warned that progress in the trade war has seemingly been made in the past, before quickly unravelling at a later date.

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Although arguing that China could still see his comments as a sign of goodwill, Fiona Cincotta, a senior market analyst at the financial trading firm City Index, said: “Trump’s dulcet tones on China [have] lulled markets into a false peace.”

The latest signs of progress follow weeks of turbulent trading on global stock markets, prompted by doubts that a trade settlement could be agreed between the world’s two biggest economic superpowers.

Wall Street still remains well below the levels recorded earlier this month, when the Dow came close to breaching 26,000 points.

Investors had viewed the meeting earlier this month between Trump and the Chinese president, Xi Jinping, at the G20 in Argentina as a signal of progress, following a deal to delay the imposition of higher US import tariffs on Chinese goods for 90 days.