Global stocks are surging after Trump cancels Mexico tariffs

  • President Trump’s cancellation of planned tariffs on Mexican imports tempered fears of another trade war, sending Asian and European stocks and US futures higher on Monday.
  • “Whilst this is positive for risk assets, one should be cautious that this may only embolden Mr Trump to use tariffs as a policy tool for the pursuit of non-economic interests,” said one analyst.
  • Investors’ appetite for risk was also boosted by a weak US jobs report, which fuelled anticipation of cuts to interest rates by the Federal Reserve.
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President Trump’s cancellation of planned tariffs on Mexican imports tempered fears of another trade war, sparking a relief rally in Asian and European stocks and US futures on Monday, positioning Wall Street to build on its best week of the year to date.

The Trump administration planned to implement the tariffs on Monday, but relented after Mexico agreed to deploy its National Guard throughout the country and its southern border, and to cooperate with US efforts to keep asylum-seekers in Mexico while their cases were processed in US courts.

“Whilst this is positive for risk assets, one should be cautious that this may only embolden Mr Trump to use tariffs as a policy tool for the pursuit of non-economic interests,” said Neil Wilson, chief market analyst for Markets.com. “The EU could be next.”

Investors’ appetite for risk was also boosted by a weak jobs report on Friday, which fuelled anticipation of cuts to interest rates by the Federal Reserve. The US economy added 75,000 non-farm jobs in May, well below the 175,000 expected by analysts and the increase of 263,000 in April.

“The soft data came after the Fed Governor Jerome Powell said that the Fed could cut rates, if necessary, to give support to the US economy,” said Ipek Ozkardeskaya, senior market analyst at London Capital Group.

“Today, the markets clearly believe that a rate cut is necessary.”

Here’s the market roundup as of 9.03 a.m. (5.03 a.m. ET):

  • Asian stocks climbed with the Shanghai Composite up 0.9%, the SZSE Component up 1.5%, Japan’s Nikkei up 1.2%, and Hong Kong’s Hang Seng up 2.3%.
  • European equities rallied in morning trading with Germany’s DAX up 0.8%, Britain’s FTSE 100 up 0.6%, and the Euro Stoxx 50 up 1.2%.
  • US markets are set to open higher with futures underlying the Dow Jones Industrial Average, S&P 500, and Nasdaq all up 0.4%.
  • Oil has inched upward with West Texas Intermediate crude up 0.6% at $US54.30, and Brent crude up 0.5% at $US63.60.

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