Monday June 10th

10-06-2019

Dow futures point to 140-point gain after the US and Mexico reach a deal to avoid tariffs

U.S. stock index futures pointed to a rally on Monday after the U.S. reached an agreement with Mexico on tariffs, easing some of the trade concerns which have weighed on the market since early May. Dow Jones Industrial Average futures indicated a positive open of about 142 points. Futures on S&P 500 and Nasdaq both pointed to gains on Monday. President Donald Trump announced Sunday that proposed tariffs on Mexican imports would be suspended indefinitely. Trump said in a Twitter post that he has “full confidence” that Mexico will crack down on migration from Central America, after the two neighbors reached a consensus. Shares of GM and Ford, two companies that had a lot to lose in a trade battle with Mexico because of their production their, jumped in premarket trading. “The avoidance of Mexican tariffs is a positive but this wasn’t entirely unexpected and it doesn’t by any means erase the enormous risks inherent in Trump’s trade policies,” Adam Crisafulli, a J.P. Morgan managing director, said in a note on Monday. Meanwhile, investors are closely monitoring the development in the U.S.-China trade war. Trump told CNBC on Monday that he believes China will make a deal with the U.S. “because they’re going to have to.” “Right now, China is getting absolutely decimated by companies that are leaving China, going to other countries, including our own, because they don’t want to pay the tariffs,” Trump said. Trump and Chinese leader Xi Jinping are set to meet at the G-20 Summit later this month after both countries slapped tariffs and made tit-for-tat threats. Trump said Monday if Xi skips the meeting, more China tariffs will go into effect immediately.  The White House acting budget chief is reportedly seeking to delay the restrictions on Chinese telecom giant Huawei, which would halt its ability to purchase U.S.-made chips. Chipmakers jumped in trading on hopes trade tensions would ease further. Nvidia and Advanced Micro Devices gained. Adding to the bullish sentiment on Monday was a blockbuster deal in the aerospace industry. Raytheon and United Technologies agreed to an all-stock merger that would create a combined company with $74 billion in annual sales. Both shares surged in premarket trading. Salesforce.com announced its acquisition of big data company Tableau Software on Monday. The $15.3 billion all-stock deal marks the biggest purchase in the company’s history. Tableau’s stock surged 35% in premarket on Monday. Speaking to CNBC over the weekend, France’s Bruno Le Maire said that a U.S.-China trade escalation would lead to an economic crisis all over the world. Outside of trade war, investors continue to remain worried about weak data from the U.S. Data on Friday showed, the U.S. economy added 75,000 jobs in May, marking the second time in four months that jobs growth totaled less than 100,000. Economists polled by Dow Jones expected an increase of 180,000 jobs. Wage growth also slowed. The major indexes are looking to build on last week’s big gains on rate-cut hopes.The Dow snapped a six-week losing streak last week, jumping 4.7%, its biggest weekly gain since November. The S&P 500 and Nasdaq were up 4.4% and 3.9% last week, respectively. Stocks in Asia traded higher on Monday afternoon after U.S. President Donald Trump’s announcement last week that tariffs would not be slapped on Mexican goods. Mainland Chinese stocks were higher by the afternoon, with the Shenzhen component jumping 1.61% and the Shenzhen composite rising 1.473%. The Shanghai composite also gained 0.98%. Over in Hong Kong, the Hang Seng index surged 2.03%. Japan’s Nikkei 225 jumped 1.03% in afternoon trade, while the Topix index gained 1.19%. South Korea’s Kospi also rose 0.92%. Oil prices were steady on Monday as U.S.-China trade tensions continued to threaten demand for oil, but tight crude supply and the swift end to a trade dispute between Mexico and the United States offered support. Front-month Brent crude futures, the international benchmark for oil prices, were at $63.42 at 0850 GMT, 13 cents, or 0.21%, above Friday’s close. U.S. West Texas Intermediate (WTI) crude futures were at at $54.19 per barrel, up 20 cents, or 0.37%. Gold fell 1% on Monday, retreating from a 14-month peak hit in the previous session after a deal between the United States and Mexico to avert a tariff war prompted investors to ditch the safe-haven metal for riskier assets. Spot gold was down 0.9% at $1,328.41 per ounce. In the previous session, it hit its highest since April last year at $1,348.08 an ounce. U.S. gold futures fell 1.1% to $1,331.9 an ounce.