Investing.com - Wall Street pointed to a higher open on Monday after U.S. President Donald Trump announced he would refrain from placing tariffs on Mexico thanks to a deal for more cooperation on controlling illegal immigration across the border.
The blue-chip Dow futures gained 107 points, or 0.4% by 6:32 AM ET (10:32 GMT), the S&P 500 futures rose 10 points, or 0.4%, while the tech-heavy Nasdaq 100 futures traded up 27 points, or 0.4%.
Trump cancelled the planned implementation of 5% tariffs on all Mexican goods that was due to go in effect Monday as he touted that “there is now going to be great cooperation between Mexico and the USA”.
“Now with our new deal, Mexico is doing more for the USA on illegal immigration than the Democrats,” Trump tweeted early Monday.
The fact the president was willing to reach an agreement with Mexico and remove tariffs caused some speculation that a similar deal could be made with China.
“The assumption here is that this move demonstrates the pragmatic nature of US trade policy and raises expectations that Presidents Trump and Xi could find some room for accommodation when they meet at the G20 summit on June 28-29,” Chris Turner, global head of strategy at ING, said.
“However, Mexico is not China and investors will want to see some clear signs of improvement in U.S.-China relations before increasing exposure to risk assets,” he added.
G20 finance leaders who met over the weekend warned that intensifying trade and geopolitical tensions were still the biggest risk to the stabilization of global growth, while U.S. Treasury Secretary Steven Mnuchin made clear that Trump will decide on the next move with China after the G20 summit.
Mnuchin stated that the president was “perfectly happy” to hit Beijing with new tariffs if the meeting doesn’t go well.
On the economic front, China’s exports unexpectedly returned to growth, although some analysts suspect that manufacturers may have increased shipments to avoid the most recent round of U.S. tariffs on $300 billion of Chinese goods. Chinese imports, however, registered their largest decline in nearly three years, providing another sign of weak domestic demand.
In the U.S., the Job Openings and Labor Turnover Survey (JOLTs) for April will be released at 10:00 AM ET (14:00 GMT), providing further information on the state of the American labor market.
A worst-than-expected reading of job creation in last Friday’s employment report, coupled with easing wage inflation, was seen as “good news” for stocks as it spurred speculation that the Federal Reserve will be forced to ease policy this year. Wall Street registered its strongest weekly performance this year as fed fund futures price in a rate cut as soon as the July meeting.
In company news, United Technologies (NYSE:UTX) and Raytheon (NYSE:RTN) agreed to a merger that would create an aerospace and defense giant worth around $121 billion, the sector’s largest deal ever.
The auto sector also received a boost from a Reuters’ report that Fiat Chrysler (NYSE:FCAU) and Renault (PA:RENA) had renewed discussions over a possible merger as they searched for ways to secure the approval of Nissan (T:7201) for the deal. That may include a reduction of the French carmaker’s stake in the Japanese company, according to sources cited.
Outside of equities, the U.S. dollar index, which measures the greenback against six rival currencies, rose 0.3% to 96.74 by 6:36 AM ET (10:36 GMT), while the yield on the 10-year Treasury jumped 5.9 basis points to 2.14%.
In commodities, gold futures slid $13.95, or 1.0%, at $1,332.15 a troy ounce, while crude oil traded up 9 cents, or 0.2%, to $54.08 a barrel.