Stock markets bounced back Monday as reports suggested US President Donald Trump's health had improved after being diagnosed with Covid-19, with traders also cheered by signs that lawmakers in Congress were edging towards agreeing on a new stimulus package.

Global equities had sunk Friday after the White House announced Trump's diagnosis, creating more uncertainty one month prior to the November 3 presidential election.

Oil prices also began recovering Monday after last week's heavy losses. West Texas Intermediate and Brent prices rose around six percent on optimism over Trump's health, improved appetite for risk and a strike at six offshore oil and gas fields in Norway.

The dollar traded mixed but the Dow finished the day 1.7 percent higher, mirroring gains seen in major European indices.

After spending the weekend in the hospital -- with conflicting reports about the severity of his condition -- Trump's medical team said he had "continued to improve."

On Monday, the president said he planned to return to the White House.

Craig Erlam, OANDA senior market analyst, took a cautious line, warning that "the downside risks aren't just consigned to the US either -- far from it (as) the UK is currently heading for a no-deal Brexit."

Optimism over the health of Trump "has encouraged traders to buy back into the market," said CMC Markets analyst David Madden.

Over the weekend, Trump waded into the tortuous negotiations over more stimulus for the US economy, tweeting at lawmakers to reach a deal: "OUR GREAT USA WANTS AND NEEDS A STIMULUS WORK TOGETHER AND GET IT DONE! Thank You!"

Analysts said that could help jolt congressional leaders to increase their efforts for a second economic rescue package, and on Monday, a top aide to House Speaker Nancy Pelosi said the lawmaker had spoken with Treasury Secretary Steven Mnuchin, continuing talks that had restarted last week.

However the Democrats' $2.2 trillion proposal remains around $600 billion more than what Republicans want.

If there is no pre-election stimulus agreement, ThinkMarkets analyst Fawad Razaqzada suggested that a win by Trump's Democratic challenger Joe Biden might mean "the Democrats could then pass their original $3.4 trillion stimulus in January."

"Although Trump is widely seen as business- and market-friendly, this may explain why investors do not appear to be too concerned about the rising probability of Biden winning the election, at least insofar as the short-term is concerned."

Polls show Biden ahead in key states, and observers said markets were largely pricing in a Biden victory and a clean sweep for Democrats in House and Senate polls, accounting for expected higher taxes and regulations.

The more positive outlook for Trump's health lifted riskier assets, with higher-yielding currencies up against the dollar, while key safe havens yen and gold retreated.

Donald Trump tweeted from hospital calling for US lawmakers to get a new stimulus deal done
Donald Trump tweeted from hospital calling for US lawmakers to get a new stimulus deal done The White House / Tia DUFOUR

New York - Dow Jones: UP 1.7 percent at 28,148.64 (close)

New York - S&P 500: UP 1.8 percent at 3,408.60 (close)

New York- Nasdaq: UP 2.3 percent at 11,332.49 (close)

London - FTSE 100: UP 0.7 percent at 5,942.94 points (close)

Frankfurt - DAX 30: UP 1.1 percent at 12,828.31 (close)

Paris - CAC 40: UP 1.0 percent at 4,871.87 (close)

EURO STOXX 50: UP 1.0 percent at 3,220.22 (close)

Tokyo - Nikkei 225: UP 1.2 percent at 23,312.14 (close)

Hong Kong - Hang Seng: UP 1.3 percent at 23,767.78 (close)

Shanghai - Composite: Closed for a holiday

Euro/dollar: UP at $1.1781 from $1.1716 at 2100 GMT

Dollar/yen: UP at 105.72 yen from 105.29 yen

Pound/dollar: UP at $1.2979 from $1.2935

Euro/pound: UP at 90.77 pence from 90.58 pence

West Texas Intermediate: UP 6.3 percent at $39.37 per barrel

Brent North Sea crude: UP 5.6 percent at $41.46