U.S. investors got overexcited on Monday after Treasury Secretary, Steven Mnuchin, announced over the weekend that the trade war with China was “on hold.” The relief over trade concerns sent stocks sharply higher, particularly the heavyweight industrial stocks. Boeing, United Technologies, Caterpillar and General Electric were the best-performing stocks on the Dow Jones Industrial Average. The rally in the industrial sector pushed the Dow 298 points to trade above 25,000 for the first time since mid-March. Meanwhile, the S&P 500 and Nasdaq Composite gained 0.7% and 0.5%, respectively.

“China has agreed to buy massive amounts of ADDITIONAL Farm/Agricultural Products – would be one of the best things to happen to our farmers in many years!”Donald Trump

It seems the ceasefire is likely to remain on hold for some time. Trump’s political base will be severely damaged if Beijing imposes 25% tariffs on soybeans, especially as we get closer to November’s midterm elections, which the President won’t want to risk. This development will lead investors to shift their focus back to fundamentals.

Asian equities didn’t enjoy the same excitement in Wall Street as optimism over easing tensions faded, meaning that Asian investors are likely to become more worried about oil trading at $80. The first response to Nicolás Maduro’s victory in Sunday’s Venezuelan elections was a fresh round of U.S. sanctions. President Trump banned the purchase of debt issued by the country and state-run oil company PDVSA. Venezuela, literally running out of money, may see its oil production fall below 1 million barrels per day, and given the tight market conditions, energy prices likely to remain elevated.

In currency markets, the Dollar Index pulled back slightly from its 2018 highs. There were no key economic data releases nor big moves in fixed income instruments to take the cue from yesterday. Traders are waiting for Wednesday’s minutes from the latest FOMC meeting to see any fresh signals related to U.S. monetary policy.

The Euro continued to struggle over the political uncertainty unfolding in Italy and it remains unclear where the new populist party coalition will take the country. People voted for the Five Star and far-right League to reject the European consensus on policy, so keep an eye on how Italian bonds perform in the next couple of days, as they are the key barometer on what investors think about the third-largest Eurozone economy.

The Pound has fallen by approximately 1000 pips from April highs in less than five weeks. A combination of weak economic data, delay in rate hikes and the dollar strength contributed to the steep fall. Today’s testimony from BoE Governor, Mark Carney, on the latest inflation report may provide some guidance on when the BoE likely to raise rates. Any new signals on policy may lead to big swings in Sterling.