(For a Reuters live blog on U.S., UK and European stock

markets, click LIVE/ or type LIVE/ in a news window.)

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Futures advance: Dow 2.38%, S&P 500 3%, Nasdaq 3.93%

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US, China reach deal to cut tariffs

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U.S. drugmakers fall as Trump to cut drug prices

(Updates with Fed expectations, analyst comment, adds context)

By Shashwat Chauhan and Pranav Kashyap

May 12 (Reuters) - U.S. stock index futures jumped on

Monday after the United States and China reached a deal to

reduce tariffs, signaling a truce in a punishing trade war that

had kept markets on edge for weeks.

The United States will cut extra tariffs it imposed on

Chinese imports in April this year to 30% from 145% and Chinese

duties on U.S. imports will fall to 10% from 125%, the two

countries said on Monday. The new measures are effective for 90

days.

"This is a substantial de-escalation. However, the U.S.

still has much higher tariffs on China," said Mark Williams,

chief Asia economist at Capital Economics.

"There is no guarantee that the 90-day truce will give way

to a lasting ceasefire."

At 06:50 a.m. ET, Dow E-minis were up 983 points, or

2.38%, S&P 500 E-minis were up 170.5 points, or 3%, and

Nasdaq 100 E-minis were up 791.5 points, or 3.93%.

The CBOE Volatility Index, Wall Street's "fear

gauge", slipped below the 20-point threshold for the first time

since late March, levels last seen before U.S. President Donald

Trump announced reciprocal tariffs on most trading partners.

Most megacap and growth stocks firmed in premarket trading,

with Nvidia ( NVDA ) jumping 4.9% and Tesla adding

7.6%.

Apple ( AAPL ) shares extended gains after a report said the

company was considering raising the prices of its fall iPhone

lineup. It was last up 6.7%

Chip stocks Advanced Micro Devices ( AMD ) and Marvell

Technology ( MRVL ) climbed 7% and 8.4%, respectively.

Crude oil prices also surged more than 3% after the

U.S.-China announcement, lifting shares of top producers Chevron ( CVX )

and Exxon Mobil ( XOM ) over 2% each.

The deal between the United States and China comes days

after a U.S.-UK limited trade agreement, easing fears that

Trump's reciprocal tariffs announced on April 2 would roil

global trade and spark a worldwide recession.

As of Friday's market close, both the S&P 500 and

the blue-chip Dow had erased nearly all losses incurred

since April 2, while the tech-heavy Nasdaq had fully

recouped its earlier declines. Upbeat earnings reports and

Trump's softening tariff stance had helped drive the gains.

Bucking the day's wider trend, pharmaceutical stocks dropped

after Trump said he would cut prescription drug prices by 59%,

closer to the level paid by other high-income countries.

Pfizer ( PFE ) and Johnson & Johnson ( JNJ ) fell 2.8% each,

while Eli Lilly ( LLY ) lost 3.9%.

Retail giant Walmart ( WMT ), network equipment maker Cisco ( CSCO )

and farm equipment maker Deere are among the

prominent companies set to report results this week.

Retail inflation (CPI) data is due on Tuesday, while

producer prices and retail sales will follow two days later.

Several Federal Reserve officials, including Chair Jerome

Powell, are slated to make public remarks over the week.

Traders expect the Fed to deliver two 25-basis-point

rate cuts by the end of 2025, compared with three such cuts seen

at the start of May, according to data complied by LSEG.

Last week, the Fed left borrowing costs unchanged, but said

the risk of both higher inflation and unemployment had risen.