Broad gains in the US equity market boosted a measure of global stock markets on Tuesday after President Donald Trump said a "great deal" could be struck with China that would relieve fears of a growing trade war between the world's two largest economies.
MSCI's gauge of stocks across the globe gained 1 percent. Still, the index is down nearly 9 percent for the month.
Investors remained cautious despite the modest gains.
"At this point, nobody can say the equity market is bottoming out. Global investor sentiment remains shaky," said Yasuo Sakuma, chief investment officer at Libra Investments in Tokyo.
Market participants also kept their hopes in check regarding trade.
"We don't see the trade war being resolved any time soon," said Rabobank's senior macroeconomic strategist Teeuwe Mevissen. "And it comes at a time when we see all the sentiment indicators in the euro zone but also in the US, too, cooling down."
Trump said during an interview with Fox News late on Monday that he thought there could be an agreement with China on trade. But he also said he had billions of dollars worth of new tariffs ready to be imposed if a deal was not possible.
The Dow Jones Industrial Average rose 431.72 points, or 1.77 percent, to 24,874.64, the S&P 500 gained 41.38 points, or 1.57 percent, to 2,682.63 and the Nasdaq Composite added 111.36 points, or 1.58 percent, to 7,161.65.
The gains were broad, with all 11 sectors of the benchmark S&P index up for the day. The rally helped turn both the S&P 500 and the Dow Jones Industrial Average once again positive for the year, though each is up less than 1 percent since the beginning of January. Both were up over 7 percent for the year at the start of October.
“This is a continuation of the recovery we saw yesterday,” said Hugh Johnson, chief investment officer with Hugh Johnson Advisors in Albany, New York.
General Electric Co, however, fell nearly 9 percent. GE slashed its quarterly dividend to a penny a share, promised to restructure its power unit and said it faced a deeper accounting probe.
Meanwhile, data showed the Italian economy had ground to a halt in the third quarter as both domestic demand and trade flows failed to spur growth.
The flat reading was the weakest since the fourth quarter of 2014 and renewed pressure on Italy's government debt in the bond markets.
The pan-European STOXX 600 index rose 0.01 percent.
The chill around China and global trade left emerging- market stocks at an 18-month low, with MSCI's index down for a sixth day in a row.
The euro wallowed near a 10-week low of $1.1352 as the dollar climbed to a 2 1/2-month peak against a basket of the world's top six currencies.
Oil prices fell more than 1 percent in choppy trading on signs of rising supply and concern that global economic growth and demand for fuel would be hit by a deepening of the US-China trade dispute.
US crude fell 1.28 percent to $66.18 per barrel and Brent was last at $76.07, down 1.64 percent.
Benchmark 10-year US Treasury notes last fell 7/32 in price to yield 3.1132 percent, from 3.087 percent late on Monday.