By Laila Kearney
NEW YORK (Reuters) - A truce in the U.S.-China trade war boosted global stocks to their highest in roughly three weeks on Monday, while triggering a dollar sell-off and pushing the Chinese yuan and several trade-dependent currencies higher.
The equities rally followed an agreement on Saturday between Washington and Beijing at the G20 summit in Argentina calling for a 90-day trade tariff truce. Oil prices jumped nearly 4 percent.
“Today is mostly about celebrating the fact that the U.S. and China have delayed what could have been the some of the worst-case scenarios regarding their trade relations,” said Michael Arone, chief investment strategist at State Street Global Advisors.
Still, major U.S. indexes closed below their highs from earlier in the session. Arone noted some "very sticky" issues remain unresolved between the world's two top economies.
The Dow Jones Industrial Average (.DJI) rose 287.97 points, or 1.13 percent, to 25,826.43, the S&P 500 (.SPX) gained 30.2 points, or 1.09 percent, to 2,790.37 and the Nasdaq Composite (.IXIC) added 110.98 points, or 1.51 percent, to 7,441.51.
The pan-European STOXX 600 index (.STOXX) rose 1.03 percent.
U.S. President Donald Trump said China has agreed to "reduce and remove" tariffs below the 40 percent level currently charged on U.S.-made vehicles. That helped boost shares of European automakers more than 3 percent (.SXAP).
The White House also said the existing 10 percent tariffs on $200 billion worth of Chinese goods would be increased to 25 percent if no deal was reached within 90 days.
MSCI's all-country world index <.MIWD00000PUS> climbed 0.25 percent, its sixth straight daily gain.
The U.S. dollar fell broadly as currencies battered by trade tensions staged a comeback. [nL1N1Y81FY] "The G20, the dinner in particular, has ignited quite a robust risk rally and that's coming at the dollar's expense," said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington.
China's offshore yuan (CNH=) gained about 1 percent to 6.8796. The Australian dollar, viewed as a barometer of Chinese growth, was 0.5 percent higher against the greenback.
The New Zealand dollar (NZD=) gained 0.6 percent, while the U.S. dollar lost 0.6 percent against the Canadian dollar (CAD=).
Sterling gave up early gains and dived to its lowest since the end of October as investors dumped the currency on growing concerns about British parliamentary approval for a Brexit deal.
"Until the British parliament votes on the deal next week we are going to see a steady drum beat of Brexit headlines, which is going to keep the pound weak," Danske Bank strategist Morten Helt said. Lawmakers are to vote Dec. 11 on Prime Minister Theresa May's agreement on leaving the European Union.
U.S. Treasury yields rose after the trade deal, but they reversed course as risk appetite faded and investors bought safe-haven U.S. debt.
Benchmark 10-year notes last rose 13/32 in price to yield 2.9679 percent, from 3.013 percent.
The 30-year bond last rose 37/32 in price to yield 3.2511 percent, from 3.311 percent.
Germany's 10-year government bond, the benchmark for the euro area, initially rose four basis points to 0.347 percent , then eased to 0.3 percent.
Yields on riskier southern European bonds were down across the board. Italian bond yields hit their lowest level in just over two months on reports that Rome was negotiating a lower budget deficit with the EU and on a new capital key from the European Central Bank.
Oil prices got an extra boost as Canada's Alberta province ordered a production cut, while OPEC and allied exporting countries looked set to reduce supply.
U.S. crude oil futures settled at $52.95 per barrel, up 3.97 percent. Brent crude futures settled at $61.69 per barrel, up 3.75 percent.
(Additional reporting by Lewis Krauskopf, Virginia Furness, Saikat Chatterjee, Saqib Iqbal Ahmed in New York, editing by David Gregorio and Bill Berkrot)