Donald Trump and Xi Jinping

Stock markets have rallied after the US and China agreed to restart trade talks, easing fears over the escalation of a damaging dispute between the world’s two biggest economies.

The FTSE 100 was around 1% higher, taking the index above the 7,500-mark to its highest level since late April, while European bourses also made strong advances.

That followed gains for Asian markets overnight, after a meeting between Donald Trump and his Chinese counterpart Xi Jinping on the sidelines of the G20 meeting over the weekend.

Mr Trump offered concessions including not imposing any new trade tariffs and easing restrictions on Chinese tech company Huawei – which has recently been placed on a US blacklist.

China agreed to make unspecified new purchases of US farm products and to return to the negotiating table.

The developments helped the FTSE turn higher when trading resumed on Monday, led by industrial group Melrose – up by more than 3% – while Asia-focused financial powerhouses Prudential and HSBC also made gains.

An upturn in the oil price – with Brent crude rising 3% to nearly $67 a barrel – also lifted stocks.

The rise came after OPEC and other oil-producing countries looked set to extend supply cuts at a meeting in Vienna.

That helped boost UK-listed BP, up 2%, and Royal Dutch Shell, more than 1% higher.

In Germany – an exporting giant especially susceptible to global trade tensions – the Dax rose by 1.6% in early trading.

Ipek Ozkardeskaya, senior market analyst at London Capital Group, said: “Trump and Xi gave investors what they wanted at the G20 meeting in Osaka this Saturday: hope.

“A deal is not sealed just yet, but the two countries showed mutual willpower to end the deadlock and move on with the talks.”

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