South Korea has announced, following a delegation returning from the North, that the rogue state is willing to hold talks with the US on denuclearisation and will suspend nuclear tests while the talks progress.
Asked about the news on Tuesday morning, President Trump responded: “We will see what happens.”
After two days of turning to safe-havens such as gold and Japanese yen, investors poured into riskier assets.
Six of the 11 major S&P sectors were higher, led by gains in the information technology and energy.
The news helped the stock market recover from fears of a possible trade war breaking out following Trump’s announcement of a tariff on aluminium and steel.
Last week Mr Trump announced 25 percent tariff on imported steel and a 10 percent tariff on imported aluminium, with the aim of protecting the US industry.
This move infuriated the EU and amid fears of a global trade war, which could plunge the world into another recession.
Fiona Cincotta, senior market analyst at City Index in London, said: “When geopolitical environment is improving, there’s very much a risk-on sentiment.
“I would not say that trade war fears are completely erased … there are doubts that Trump will actually manage to push the trade tariffs through.”
Fears of a trade war has also been lessened after some investors suggested Trump’s proposed tariffs were seen as a negotiating tool.
On Monday, the President suggested the new tariffs could be used as leverage in trade negotiations with Mexico and Canada.
Still, Republican House Speaker Paul Ryan pleaded with Trump not to go ahead with the tariffs.
Peter Cardillo, chief market economist at First Standard Financial in New York said: “There’s also a lot of pressure regarding the tariff – not only GOP, trading partners but also many business leaders in the United States.”
Just last month, US payrolls showed wages were growing at their fastest pace in more than eight years. This stoked fears that both inflation and interest rates will rise faster than expected.
Investors are waiting for the February jobs data due to be released on Friday, which should help them read the strength of the labor market.
The Dow Jones is currently up by 32 points.