Stocks advance, bonds slide following Mexico trade relief

Bloomberg

US equity futures advanced on Monday together with stocks in Europe and Asia after President Donald Trump suspended plans for punitive tariffs on Mexican imports. Sovereign bonds fell across the board, along with gold and the yen, as demand for havens ebbed.
Stock markets rose in much of Europe, though several exchanges including Germany’s closed for a holiday. Shares rallied across Asia and surged in emerging markets. Mexico’s peso jumped the most in almost a year after the country’s accord with the US. S&P 500, Dow Jones Industrial Average and Nasdaq 100 indexes futures all pointed to a jump at the New York open.
The dollar also extended gains during the European session, particularly versus the pound after weak economic data in the UK. The onshore yuan fell to its weakest level since December after China’s central bank governor hinted there was no line in the sand for the currency. The yen dropped amid the risk-on sentiment, and after Japan’s central bank governor said it can deliver more stimulus if necessary. Treasuries slumped with government bonds in Europe, where the 30-year bund yield headed for its biggest one-day drop in a year.
As the S&P 500 attempts a fifth session of gains, investors are looking towards the next developments in the US-China trade showdown.
While Treasury Secretary Steven Mnuchin has said the “main progress” may occur when presidents Trump and Xi Jinping meet at the G-20 summit later this month, G-20 finance chiefs over the weekend warned about escalating risks to growth from trade and geopolitical tensions.
“We remain a bit skeptical about the rally since last week, which is again due to expectations for easier monetary policy and easing trade tensions,” said Christian Mueller-Glissmann, managing director of portfolio strategy and asset allocation at Goldman Sachs in London.
Elsewhere, West Texas oil edged above $54 a barrel after US drilling activity slowed and Saudi Arabia and Russia agreed to try and keep global markets in balance amid weakening demand.
ECB President Mario Draghi speaks at a conference in Frankfurt on Wednesday. A key measure of US inflation, the consumer price index, is also due on Wednesday.
The race to succeed Theresa May heats up with the first Conservative Party leadership ballot on Thursday.
Euro-area finance ministers meet in Luxembourg on Thursday. On the agenda: financial penalties for Italy over its debt load, and the euro-area budget. China and the US release industrial production, retail sales data on Friday.
Futures on the S&P 500 Index jumped 0.5 percent in New York, headed towards their fifth straight advance. The UK’s FTSE 100 Index climbed 0.6 percent, reaching the highest in more than five weeks. France’s CAC 40 Index gained 0.3 percent to the highest in almost three weeks. The MSCI Emerging Market Index surged 1.1 percent, the biggest jump in 10 weeks.
The Bloomberg Dollar Spot Index advanced 0.2 percent. The Japanese yen sank 0.4 percent to 108.65 per dollar. The offshore yuan declined 0.1 percent to 6.9523 per dollar, hitting the weakest in seven months with its fifth straight decline. The euro declined
0.3 percent to $1.13, the biggest drop in almost two weeks. The British pound sank 0.6 percent to $1.2661, the weakest in more than a week on the largest decrease in more than two months.
The yield on two-year Treasuries advanced four basis points to 1.89 percent. The yield on 10-year Treasuries climbed six basis points to 2.14 percent. Germany’s 10-year yield climbed four basis points to -0.22 percent, the first advance in a week and the biggest increase in almost two months.
West Texas Intermediate crude advanced 0.6 percent to $54.34 a barrel. Gold sank
1.1 percent to $1,325.71 an ounce and the biggest tumble in two months.