European stocks have opened higher, hitting their highest level since early December….

Optimism over the US-China trade talks have pushed commodity prices to their highest levels in months.

Investors are anticipating higher demand for steel and iron ore, if a breakthrough is found.

Reuters has the details:

The most traded iron ore on the Dalian Commodity Exchange gained 3.2% to close at 528 yuan ($78.01) a tonne, just below the day’s peak of 530 yuan, its highest since early March last year.

“The signs out of the recent trade talks in China are promising and have boosted market optimism, despite the lack of concrete outcomes,” ANZ Research said in a note.

Stocks jumped across the Asia-Pacific region overnight, following the WSJ’s report.

China’s benchmark Shanghai Composite rallied by almost 1.5%, with Japan gaining 1%.

Investors are hopeful that Steve Mnuchin could calm the trade war, says Adam Cole of Royal Bank of Canada:

Optimism of trade policy again dominates overnight price action, with a report in the Wall Street Journal that Treasury Secretary Mnuchin (a free trade proponent, in contrast to Lighthizer and Trump) has proposed easing tariffs on China to support markets.

The Treasury denied the report, but stock futures are still 0.3% higher.

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Investors are grabbing onto any straws of optimism in the US-China trade wars, as the clock ticks down.

Overnight, the Wall Street Journal has handed the markets fresh crumbs of comfort, reporting that US treasury secretary has discussed lifting some of the tariffs imposed on China.

Steven Mnuchin’s logic is that offering Beijing a carrot might help deliver a breakthrough in the ongoing trade war, ahead of fresh negotiations at the end of January.

As the Journal puts it:

U.S. officials are debating ratcheting back tariffs on Chinese imports as a way to calm markets and give Beijing an incentive to make deeper concessions in a trade battle that has rattled global economies.

A swath of Chinese products now incur hefty tariffs at the US border, from food and chemicals to machinery. These levies seem to be contributing to a sharp deceleration in China.

However, the Journal also reckons that Trade Representative Robert Lighthizer is resisting Mnuchin’s idea.

And overnight, the White House has poured cold water in the notion, saying:

“No new tariff decisions have been made.

We are focused on the current 90 day period and the expected high level visit by China Vice Premier Liu He at the end of this month.”

But still, hopes of a breakthrough lifted Wall Street last night, with the Dow closing 162 points higher at 24,370 – extending its 2019 rally.

It will push European stocks higher this morning too:

Also coming up today:

UK retail sales figures will show whether consumer spending held up over the crucial Christmas trading period.

Economists expect sales fell by around 0.8% month-on-month, as Black Friday dragged spending into November.

We also get new US consumer morale data, which may indicate if the government shutdown is hurting the economy.

The agenda:

• 9.30am GMT: UK retail sales for December
• 3pm GMT: University of Michigan survey of US consumer sentiment