USA stock futures and Asian shares rose on Monday after the United States dropped its threat to impose tariffs on Mexico in a deal to combat illegal migration from Central America, and as weak U.S.jobs data raised hopes for US interest rate cuts.
The Mexican peso jumped about 2.0% in early Monday trade to 19.2285 on the dollar on news of the deal, while the Chinese yuan slipped to its lowest levels this year on weak Chinese imports data and as talks to end the Sino-U.S. dispute remained deadlocked.
"The deal with Mexico is boosting sentiment while expectations of USA rate cuts will be also supporting share prices", said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui DS Asset Management. -China trade war and slowing economic data.
"You've a bit of a euphoria after positive tweets from the president about the Mexico relationship and the delaying of tariffs", said Phil Blancato, CEO of Ladenburg Thalmann Asset Management in NY. Referring to weak May jobs data released on Friday, he added: "You can't deny the data". Some analysts said the US currency should rebound as investors realised their assessment of the path for Federal Reserve interest rate cuts was overly dovish.
The yuan extended its losses after the data, while expectations the Fed will cut rates kept the dollar on the defensive after a weak jobs report from the U.S. Labor Department.
US President Donald Trump had threatened to impose 5 per cent import tariffs on all Mexican goods starting on Monday if Mexico did not commit to do more to tighten its borders.
The Dow Jones Industrial Average rose 78.74 points, or 0.3%, to 26,062.68, the S&P 500 gained 13.39 points, or 0.47%, to 2,886.73 and the Nasdaq Composite added 81.07 points, or 1.05%, to 7,823.17.
Pan-region Euro Stoxx 50 futures rose 0.4pc, London's FTSE futures were up 0.5pc and German DAX futures gained 0.6pc.
"Still, with limited progress seen so far in US-China trade talks, the most important issue for markets, stock prices will be able to rise only so much", he added.
U.S. government bond yields rose as risk appetite was lifted by the U.S. -Mexico trade and migration deal signed on Friday.
Benchmark 10-year notes were last down 17/32 in price to yield 2.1414%, compared with 2.084% late on Friday.
Oil prices fell more than 1% on Monday as U.S. Tensions between the US and Mexico had also added to concerns about global economic growth that have seen traders amp up their bets on potential interest-rate cuts by the Federal Reserve and provided fuel for the flight to safety that last week drove 10-year Treasury yields down to a level unseen since 2017. US West Texas Intermediate (WTI) crude lost 73 cents, or 1.4 per cent, to end at US$53.26 a barrel.
The euro was down nearly 0.3pc against the dollar at $1.1301 near a 2-1/2-month high of $1.1347 touched on Friday.
The euro pulled back after sources said European Central Bank policymakers were open to cutting interest rates should economic growth weaken.
The U.S. -Mexico accord "is definitely a relief for the markets", said Nick Bennenbroek, head of currency strategy at Wells Fargo Securities, who expects the peso could reach 19 per dollar in the days ahead.