Capital flows are accelerating into global equity markets as progress toward a comprehensive trade accord between Washington and Beijing transforms investor sentiment, triggering historic rallies across Asian bourses and lifting risk assets worldwide.
Japan’s Nikkei 225 surged past 50,000 for the first time Monday, climbing over 2% as the benchmark index reached 50,329, while South Korea’s Kospi broke through the 4,000 barrier with an intraday high of 4,012 and closing above 4,030. Both represent unprecedented territory for their respective markets.
The rallies extended beyond Asia. US futures for the S&P 500 and Nasdaq Composite advanced around 0.8% and 1% respectively during Asian trading hours, building on record Friday closes on Wall Street.
Nigel Green, CEO of deVere Group, characterizes the shift as investors repositioning for a turning point in world trade as the two largest economies make progress in discussions. The financial markets are now anticipating something genuine, a gentle but real reopening of trade channels between the US and China, with implications that go far beyond headline-grabbing tariffs, he explains.
Capital that’s been parked on the sidelines through months of uncertainty is starting to move back into productive assets, Green notes. The shift in sentiment is immediate and global.
The moves come as President Donald Trump and Chinese President Xi Jinping reached a temporary framework trade agreement Sunday in Kuala Lumpur, with expectations the leaders will finalize details during their scheduled Thursday meeting in Seoul.
Manufacturing, logistics and materials sectors led Monday’s gains, reflecting investor conviction that physical trade volumes will expand again. When container ports, shipbuilders and commodity suppliers all rise together, it signals expectations for renewed cross-border activity, Green observes.
Technology stocks also benefited substantially. Semiconductors, automation and advanced manufacturing are regaining their footing as supply chain visibility improves and trade tensions ease, he says. In Japan, defense contractors surged, with Kawasaki Heavy Industries jumping 8.7% as newly installed Prime Minister Sanae Takaichi, who favors raising defense spending, enjoyed strong public support.
Commodity markets confirmed the growth narrative. Copper rallied, often considered the market’s growth gauge. Whenever copper, equities and oil rise in unison, it reflects confidence that the world economy is heading back into expansion mode, Green explains.
Currency markets showed nuanced but supportive patterns for risk assets. The Australian and New Zealand dollars are strengthening on trade optimism, while the yen has softened as Japan’s pro-stimulus policies turbocharge equities, he says. Investors are rotating toward growth-linked and commodity currencies, especially across Asia.
Bitcoin traded near $114,476 Monday, extending gains as digital assets benefited from returning risk appetite. Green characterizes the cryptocurrency’s strength as another barometer of the new mood. Digital assets thrive when risk appetite returns, he notes. Investors see them as a high play on liquidity and as protection against currency debasement. As institutions and sovereign funds continue to diversify reserves, momentum could persist.
The clearest beneficiaries appear concentrated in sectors directly exposed to trade flows and industrial production. Manufacturing, logistics and materials are leading the rally because they sit at the heart of renewed cross-border activity, Green says.
Yet Green cautions investors should treat this as opportunity with discipline, not unbridled euphoria. Markets are front running formal signatures, he explains. What’s being priced in is relief. Washington and Beijing are signaling continuity of trade rather than rupture, and that alone pulls capital back into exporters, commodities, high-end manufacturing and equity markets. This is where the early money is going.
The rally coincided with expectations that the Federal Reserve will cut rates again during a two-day policy meeting starting Tuesday, adding support to sentiment as cheaper money boosts market psychology.
Asian indices posted their strongest performances. Japan’s benchmark stock index is now up almost 30% over the past year, while South Korea’s Kospi has extended gains to approximately 60% year to date, making it the world’s best-performing major equity index this year.
The rotation into cyclical sectors marks a sharp reversal from recent defensive positioning. Investors are likely to move back into cyclicals including industrials, materials, logistics and tech hardware, Green says. The sentiment swing could also lift global growth forecasts for the first time this quarter.
Supply chain bottlenecks that contributed to persistent inflation pressures may begin to ease if the framework leads to reduced export restrictions. This isn’t just a trade story, it’s a monetary one, Green explains. If goods start moving more freely, inflation expectations will soften, and central banks will have more flexibility to sustain growth. The market could begin pricing in earlier rate stability.
However, Green emphasizes the strategic rivalry remains intact despite the improved atmosphere. No one should confuse this with peace, he says. The strategic rivalry is intact. Supply chains are still being rewired. Industrial policy is still national security policy.
But right now, the direction of travel is lower immediate tariff risk, delayed export controls on critical inputs, stronger demand indicators and weaker fear, he continues. That’s investable.
The framework’s durability remains to be tested. Trade Representative Jamieson Greer and Chinese trade negotiator Li Chenggang both acknowledged the intensity of weekend discussions, with both sides needing to proceed through internal approval processes before finalizing terms.
Green concludes by noting Monday’s open serves as the first real test of sentiment. The cycle of tariff escalation appears to be ending, he says. The world’s two largest economies are talking growth instead of retaliation. That’s enough to reawaken animal spirits globally.
Yet markets will scrutinize whether the preliminary consensus translates into lasting cooperation or merely provides temporary relief before tensions resurface. The trade relationship, worth approximately $660 billion annually, has weathered numerous disruptions over recent years, leaving investors cautious about declaring victory too soon.
