Stock markets rose on Monday boosted by hopes of a Washington stimulus package that helped to offset US-China tensions ahead of key trade talks this week.

In afternoon trading, stock prices in London and Paris were 0.5 percent higher, while Frankfurt was up 0.4 percent.

Wall Street opened higher, with the Dow also adding 0.4 percent.

Traders said investors are keeping a wary eye on the trade talks planned for the weekend, which come after the US administration imposed sanctions on several Hong Kong officials, further straining tensions between the superpowers.

However, President Donald "Trump has helped boost sentiment after signing an executive order to provide a fresh unemployment payment for those impacted by the coronavirus", noted IG analyst, Joshua Mahony.

Away from domestic policy, Washington has slapped sanctions on a group of Chinese and Hong Kong officials -- including the city's leader Carrie Lam -- in the latest salvo of a row linked to Beijing's decision to impose a security law on the city.

Hong Kong media mogul Jimmy Lai, one of the city's most vocal Beijing critics, was meanwhile arrested Monday under the security law, deepening a crackdown on democracy supporters.

Following his arrest, shares in his media group Next Digital rocketed 344 percent.

Analysts said the surge was fuelled by pro-democracy activists urging investors on social media to pile into the market to support the firm.

It comes after the White House set the clock ticking on forcing Chinese internet giants TikTok and WeChat to end all operations in the US, as part of a diplomatic-commercial offensive analysts fear will likely worsen leading into November's American presidential election.

China slammed the sanctions as "barbarous and rude".

US regulators have also recommended overseas firms listed in the US should be subject to local public audit reviews from 2022, which could cause Chinese firms to delist.

The White House has further angered China after Health Secretary Alex Azar met Taiwan's leader in the highest level visit from the United States since it switched diplomatic recognition from the island to China in 1979.

The developments have put the spotlight on Saturday's meeting of trade officials to review their "phase one" deal signed in January.

There is a concern that the pact could be torn up as China has failed to meet certain criteria owing to the impact of the virus, a move most experts say would be devastating to a global economy that is already teetering.

Still, National Australia Bank's Tapas Strickland said: "The running assumption in markets has been President Trump needed the phase one deal to succeed (as much as China) this side of the November elections to secure the midwest" farming belt.

Donald Trump signed executive orders at the weekend extending extra unemployment benefits, offering some protection from evictions, relief for student loans and a freeze in payroll taxes
Donald Trump signed executive orders at the weekend extending extra unemployment benefits, offering some protection from evictions, relief for student loans and a freeze in payroll taxes AFP / JIM WATSON

"At the same time President Trump is running a hard China line into the elections," he added.

Elsewhere, the stimulus stand-off in Washington continued with Democrats and Republicans still unable to bridge their differences to push through a new plan.

However, after Trump on Saturday signed measures including handing Americans up to $400 a week extra in their unemployment benefits and protection from evictions, observers said there was hope that politicians would work harder to reach a deal.

London - FTSE 100: UP 0.5 percent at 6,062.34 points

Frankfurt - DAX 30: UP 0.4 percent at 12,721.09

Paris - CAC 40: UP 0.5 percent at 4,914.94

EURO STOXX 50: UP 0.4 percent at 3,266.99

New York - Dow: UP 0.4 percent at 27,550.28

Hong Kong - Hang Seng: DOWN 0.6 percent at 24,377.43 (close)

Shanghai - Composite: UP 0.8 percent at 3,379.25 (close)

Tokyo - Nikkei 225: Closed for a holiday

Euro/dollar: DOWN at $1.1767 from $1.1786 Friday

Dollar/yen: DOWN at 105.92 yen from 105.94 yen

Pound/dollar: UP at $1.3076 from $1.3057

Euro/pound: DOWN at 90.00 pence from 90.24 pence

West Texas Intermediate: UP 1.9 percent at $41.99 per barrel

Brent North Sea crude: UP 1.4 percent at $45.03 a barrel