Stocks surge, dollar rallies as US and China pledge to slash tariffs

• U.S. and China reach deal to slash reciprocal tariffs
• Wall Street stock futures leap
• Dollar rallies against euro, yen
• Gold drops, government bonds under pressure

LONDON, May 12 (Reuters) - Wall Street stock futures surged, the dollar rallied and gold prices slumped on Monday as U.S. and Chinese officials pledged to slash reciprocal tariffs in a move that swept trade war fears out of global markets, at least for now.

Following weekend talks in Geneva, a joint U.S.-China statement on Monday said that both sides would drop trade levies imposed since U.S. President Donald Trump's April 2 tariff blitz.

Futures tracking Wall Street's S&P 500 index ESc1 were 2.6% higher and contracts following the Nasdaq 100 index jumped 3.8% NQc1, setting the tech-heavy U.S. stock index up for its best trading day in more than a month. Hong Kong tech stocks HSTECH rallied more than 6%.

An index tracking the dollar against other major currencies =USD rose further from last month's three-year trough, with a 0.9% gain. Japan's yen, typically seen as a safe haven, dropped 1.5% against the U.S. currency to 147.08 JPY=EBS and the euro fell 1.1% to $1.1131 EUR=EBS.

In early European trading, Germany's DAX share index .GDAXI rose 1.5% to a record high, the regional STOXX 600 .STOXX added 1.1% and Italy's FTSE MIB FTMIB gained more than 2% to its highest since 2007.

U.S. Treasury Secretary Scott Bessent told reporters the two sides had agreed on a 90 day pause on measures and that tariffs would come down by over 100 percentage points to 10%.

"The magnitude of this tariff reduction is larger than expected. This reflects both sides recognising the economic reality that tariffs will hit global growth and negotiation is a better option going forward," said Tai Hui, APAC chief market strategist at JPMorgan Asset Management in Hong Kong.

"The 90-day period may not be sufficient for the two sides to reach a detailed agreement, but it keeps the pressure on the negotiation process," Hui added.

World stock markets had already recovered back to levels where they traded ahead of Trump's April 2 tariff announcement before Monday's statement.

An easing in geopolitical tensions also boosted the mood, as a fragile ceasefire held between India and Pakistan and Ukrainian President Volodymyr Zelenskiy said he was ready to meet Vladimir Putin in Turkey on Thursday for talks.

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The spot gold price XAU= dropped 3%, while Brent crude oil futures were more than 3.3% higher at $64.14 a barrel and U.S. West Texas Intermediate (WTI) crude CLc1 futures gained 3.5% to $63.14.

Hong Kong's benchmark Hang Seng Index .HIS extended earlier gains to rise 3%, China's yuan CNY=CFXS strengthened to 7.2001 against the dollar to a six-month high and its offshore counterpart CNH=EBS rose more than 0.5%.

Data over the weekend showed Chinese factory-gate prices posted the steepest drop in six months in April and consumer prices fell for a third month as trade fears hit sentiment in the world's second largest economy.

Trump's erratic trade policies sparked fears for the U.S. economy, with investors looking to earnings due on Thursday from retail giant Walmart WMT.N to see if shelves had started to empty of Chinese goods.

The 10-year U.S. Treasury yield US10YT=RR hit a one-month high of 4.447%, up 7 basis points on the day, as demand for the safe-haven asset dropped.

Germany's equivalent Bund yield DE10YT=RR rose by the same amount to 2.622%, a fresh one-month high.