World stocks rose and the dollar retreated after a report that President-elect Donald Trump’s incoming economic team is considering a gradual ramp-up in trade tariffs in a strategy that could avert inflation spikes.

Europe’s Stoxx 600 index snapped a two-day losing streak to rise 0.5%, as Bloomberg News quoted people familiar with the matter as saying graduated tariff hikes of about 2% to 5% a month are under discussion, rather than aggressive one-time increases. French stocks outperformed, receiving an additional boost from the possibility of a political agreement that could prevent a government collapse.

The tariff report knocked the dollar index lower after five straight days of gains and offered respite to global bond markets, which have seen a sharp run-up in borrowing costs in recent days. Ten-year Treasury yields slipped two basis points after hitting October 2023 highs on Monday, a move driven by traders slashing their bets on Federal Reserve interest-rate cuts. Yields on UK gilts, hit hard by the recent selloff, retreated five basis points.

The idea of a more moderate approach to tariffs is stirring particular optimism in Asia, where the threat of levies of up to 60% on Chinese goods has loomed over markets. Chinese shares rose as much as 2.8%, their best showing in a month.

“The news of gradual tariff rollouts globally has created more positive sentiment for the tariff impact on China,” said Billy Leung, investment strategist at Global X ETFs.

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The latest word on tariffs comes at a time when markets are increasingly fearful of an inflation resurgence that prevents central banks, especially the Fed, from cutting rates as much as expected earlier. Policies espoused by Trump, including mass deportations and higher trade levies, have fanned such concerns.

That makes this week’s US inflation data all the more crucial, especially if it signals the disinflation trajectory had already stalled at the end of last year. Producer inflation is due later Tuesday, followed by a CPI report on Wednesday, and December retail sales numbers that could confirm robust holiday-season spending.

Focus will also turn this week to the US corporate earnings season, with banks including Citigroup Inc., JPMorgan Chase & Co. and Goldman Sachs Group Inc. reporting on Wednesday. Fourth-quarter earnings-per-share on the S&P 500 is expected to climb 7.3% from the year-earlier period, according to data compiled by Bloomberg Intelligence.

Recent losses on the S&P 500 have wiped out its 2025 gains, with sentiment also hurt by the prospect of sweeping new limits on the sale of advanced AI chips by Nvidia Corp. and its peers.