FILE PHOTO: U.S. President Donald Trump and China's President Xi Jinping shake hands in Beijing, China, November 9, 2017. REUTERS/Damir Sagolj/File Photo

A look at the day ahead in European and global markets from Ankur Banerjee

The mere prospect of a U.S.-China trade deal which looks more like a truce extension was enough to send stocks to record highs, weigh on gold prices and push up commodities including copper ahead of an action-packed week.

First things first: There is no agreed deal yet; perhaps just a concept of a deal, and that is what has sparked a risk-on rally on Monday which is set to continue in Europe.

U.S. and Chinese officials on Sunday hashed out the framework of a trade deal for U.S. President Donald Trump and Chinese President Xi Jinping to decide on later this week when they meet in South Korea.

An agreement could pause steep U.S. tariffs on Chinese goods as well as stringent Chinese rare earths export controls, calming investor nerves. A lot of the positive noise has come from U.S. officials while their Chinese counterparts have been a bit more circumspect.

Stocks, though, have galloped higher, with benchmark indices in Japan, Taiwan and South Korea all setting records after gaining 2%. Chinese stocks pushed up 0.86% while Nasdaq futures rose 1%.

A lot of what has been laid out so far is within market expectations so there could be disappointment if any "deal" manages to just kick the can down the road.

In the meantime, investor enthusiasm is likely to keep stocks aloft ahead of central bank meetings in Japan, Canada, Europe and the United States.

The U.S. Federal Reserve will take the limelight when it will likely lower its policy interest rate by 25 basis points. The focus will immediately shift to what comes next considering the U.S. government shutdown and resultant dearth of economic data leaves little from which to take cues.

The European Central Bank is widely expected to maintain its policy rate so investor attention will be more trained on the busiest week of this earnings season. Mega-cap earnings will yet again shape near-term sentiment.

Key developments that could influence markets on Monday:

* Ifo German business sentiment data for October

(By Ankur Banerjee in Singapore; Editing by Christopher Cushing)