They agreed to take down most of their tariffs that economists warned could start a recession and create shortages on US store shelves.

The S&P 500 was 2.7 per cent higher in early trading on Monday (late Monday and early Tuesday AEST).

The Dow Jones Industrial Average jumped 981 points, or 2.4 per cent, and the Nasdaq composite was 3.7 per cent higher.

Crude oil prices jumped because a global economy less weakened by tariffs would be hungrier for fuel.

It wasn’t just stocks surging following what one analyst called a “best case scenario” for US-China tariff talks.

Crude oil prices surged over 3 percent as a less tariff-affected global economy is expected to increase its demand for fuel. Meanwhile, the US dollar strengthened against currencies such as the euro, Japanese yen, and Swiss franc.

Additionally, US Treasury yields rose due to expectations that the Federal Reserve may not need to cut interest rates as much this year to safeguard the economy from the impact of tariffs.

However, the situation can shift rapidly, as seen frequently with the inconsistent implementation of tariffs by the Trump administration. Furthermore, the reduced tariffs between the US and China are set to last only for 90 days.

That’s to give the world’s two largest economies time for more talks followed last weekend’s negotiations in Geneva, Switzerland, that the U.S. side said had made “substantial progress”.

Until then, a joint statement said the United States will cut tariffs on Chinese goods to 30 per cent from as high as 145 per cent.

China said its tariffs on US goods would fall to 10 per cent from 125 per cent. That follows a deal the US announced last week with the United Kingdom that will bring down tariffs on many UK imports to 10 per cent.

Big challenges remain in the negotiations between China and the US, but the mood nevertheless was ebullient across Wall Street on Monday, and gains were widespread.