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Stocks gain, bonds slide after Mexico trade relief

Jun 10 2019 16:38
Brendan Walsh, Bloomberg

US stocks joined a global rally in equities after President Donald Trump suspended plans for tariffs on Mexico. Sovereign bonds fell across the board, along with gold and the yen, as demand for havens ebbed.

The S&P 500 Index advanced for a fifth straight session, led by chipmakers and auto companies.

Emerging-market shares headed to their biggest increase since January as Mexico’s peso strengthened the most in almost a year after the accord with the US late Friday. The dollar climbed, particularly versus the pound after weak economic data in the UK. The onshore yuan fell to its weakest level since November after China’s central bank governor hinted there was no line in the sand for the currency. Treasuries slumped.

US stocks got an additional boost from large takeover deals, but investors were also looking toward the next developments in the U.S.-China trade showdown and the outlook for Federal Reserve policy. Treasury Secretary Steven Mnuchin has said the " main progress" on trade may occur when presidents Trump and Xi Jinping meet at the G-20 summit later this month, while finance chiefs over the weekend warned about escalating risks from 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.

"Equity valuations remain high and global growth is still weak, which suggests draw-down risk remains elevated. As a result, we are reluctant to 'buy the dip'."

Here are some key events coming up:

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 Wednesday. The race to succeed Theresa May heats up with the first Conservative Party leadership ballot Thursday.

Euro-area finance ministers meet in Luxembourg 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 Friday.

And these are the main moves in markets:

Stocks

The S&P 500 Index added 0.6% as of 09:49 New York time. The Stoxx Europe 600 rose 0.2%. The UK’s FTSE 100 Index climbed 0.5%, reaching the highest in more than five weeks. The MSCI Emerging Market Index surged 1.3%, the biggest jump since January.

Currencies

The Bloomberg Dollar Spot Index advanced 0.1%. The Japanese yen sank 0.3% to 108.55 per dollar. The onshore yuan declined 0.3% to 6.9317 per dollar. The euro declined 0.2% to $1.1308. The British pound sank 0.5% to $1.2677.

Bonds

The yield on two-year Treasuries increased three basis points to 1.88%. The yield on 10-year Treasuries climbed five basis points to 2.13%. Germany’s 10-year yield climbed four basis points to -0.22%, the first increase in a week.

Commodities

West Texas Intermediate crude fell 0.2% to $53.89 a barrel. Gold sank 0.9% to $1 328.88 an ounce on the biggest tumble in two months.

 

us  |  mexico  |  markets  |  stocks  |  equities
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