GLOBAL MARKETS-Stocks climb to record, dollar edges down on US-China trade optimism

By Chuck Mikolajczak

NEW YORK, Oct 27 (Reuters) - Global stocks rallied on Monday to a fresh intraday record while the dollar eased on optimism that a potential trade deal was on the horizon between China and the U.S., as investors awaited a slew of central bank policy announcements and earnings from several megacap companies.

Top Chinese and U.S. economic officials on Sunday hammered out the framework of a trade deal for U.S. President Donald Trump and Chinese counterpart Xi Jinping to decide on at a meeting in South Korea scheduled for Thursday.

Trump said he thought a deal would be reached with China and announced a flurry of deals on trade and critical minerals in Malaysia with four Southeast Asian nations during the first stop of a five-day Asia trip.

A trade deal would halt heavier U.S. tariffs and Chinese rare earths export controls, helping allay some recent worries among investors about relations between the world's two largest economies.

On Wall Street, U.S. stocks showed strong gains, led in part by gains in technology stocks, including a surge of more than 11% in Qualcomm QCOM.O shares after it unveiled two artificial intelligence chips for data centers, with commercial availability from next year.

"On Friday and over the weekend we heard there's going to be positive things coming out of the Trump and Xi meeting. The market's still up on that," said Scott Wren, senior global market strategist at Wells Fargo Investment Institute in St. Louis, Missouri.

"I don't think the market expects some complete deal out of this, but I think they expect some grain sales, some assurance that these rare earth elements are going to continue to be exported by China - just an easing of tensions to some extent."

Earnings are expected this week from "Magnificent Seven" heavyweights Microsoft MSFT.O, Alphabet GOOGL.O, Apple AAPL.O, Amazon AMZN.O and Meta Platforms META.O, and investors will closely eye the results to see if they justify heightened valuations.

The Dow Jones Industrial Average .DJI rose 337.47 points, or 0.71%, to 47,544.59, the S&P 500 .SPX rose 83.47 points, or 1.23%, to 6,875.16 and the Nasdaq Composite .IXIC rose 432.59 points, or 1.86%, to 23,637.46 as each of the three main indexes registered record closing levels.

MSCI's gauge of stocks across the globe .MIWD00000PUS climbed 11.35 points, or 1.13%, to 1,012.72 after hitting an intraday record of 1,012.90 and was on pace for its third straight session of gains, while the pan-European STOXX 600 .STOXX closed up 0.22% at a fresh record.

Argentina's Merval index .MERV shot up 454,827.09 points, or 21.9%, to 2,531,685.67 while its bonds and currency also surged after President Javier Milei's party won an overwhelming victory in a Sunday midterm election, a key requisite to keep economic reforms on track and a U.S. financial backstop in place.

The U.S. dollar weakened against the euro, Chinese yuan and Australian dollar on Monday as optimism over a possible U.S.-China trade deal boosted risk appetite and reduced demand for the greenback.

The dollar index =USD, which measures the greenback against a basket of currencies including the yen and the euro, shed 0.1% to 98.83, with the euro EUR= up 0.16% at $1.1644.

The Chinese yuan CNH= rose 0.26% against the greenback to 7.108 per dollar.

The yuan was also boosted by the People's Bank of China setting the official yuan midpoint rate higher than expected. Prior to the market open, it set the official yuan midpoint rate CNY=PBOC at 7.0881 per dollar, the strongest since October 15, 2024, and above a Reuters estimate CNY=RTRS of 7.1146.

Against the Japanese yen JPY=, the dollar ticked up 0.02% to 152.88 while sterling GBP= was up 0.16% to $1.333 against the greenback.

Investors will also grapple with major central bank meetings this week including those of Japan, Canada, Europe and the United States.

The Federal Reserve is widely anticipated to cut interest rates by 25 basis points after data showed U.S. consumer prices increased slightly less than expected in September, but the government shutdown and its impact on data remain a concern. Market expectations for a rate cut of 25 basis points stand at 97.8%, according to CME's FedWatch Tool.

The European Central Bank and the Bank of Japan are both broadly expected to hold rates steady later this week.

The BOJ is likely to debate whether conditions are right to resume rate hikes as worries about a tariff-induced recession ease, but political complications may keep it on hold for now.

Japan's new finance minister, Satsuki Katayama, said her meeting with U.S. Treasury Secretary Scott Bessent did not directly touch upon the Bank of Japan's monetary policy.

In Treasuries, the yield on benchmark U.S. 10-year notes US10YT=RR slipped 0.8 basis point to 3.989%, from 3.997% late on Friday.