Commodity prices are also rallying this morning, after the US stepped back from hitting Mexico with new tariffs.
The copper price has gained 0.6% to $5,831 per tonne, having fallen for the last eight weeks in a row. Nickel (1.3%) and lead (+1.2%) are also higher this morning.
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
It’s tipping it down in London this morning, but that’s not dampening the optimistic mood in the City, and across the global markets.
Shares have jumped in Asia today after the US stepped back from launching a trade war with Mexico.
Donald Trump’s surprise change of heart means Mexican imports won’t face 5% tariffs from today, a move that would have further escalated America’s trade dispute with other economies.
Trump’s threat to use economic tariffs to tackle a political problems (migration at the US border) had worried the markets — what other issues could the US try to solve by threatening trade war?
Under the agreement, Mexico will immediately expand a border program that sends migrants seeking asylum in the US back to Mexico while they await adjudication, deploy more security officers to contain the flow of migrants headed to the US, and crack down on human smuggling, the declaration said.
There’s obvious relief that a deal’s been reached — even though several of Mexico’s “concessions” on asylum seekers were apparently agreed months ago.
As Elsa Lignos of RBC Capital Markets puts it:
The biggest weekend news was Trump’s Friday night tweet (and a formal joint US-MX statement) announcing an agreement which suspends Trump’s tariffs threat on Mexico for now.
Reading through the details, Mexico basically re-committed to existing promises (and maintained its own red line of rejecting safe third-country status) – aka Trump blinked. The reaction in Asia has been positive.
Talk of blinking won’t please the president, though – he wants more credit!
Investors aren’t bothered about the president’s legacy though. Japan’s Nikkei index has jumped 1.2%, as a wave of buying swept Asian trading floors. China’s CSI 300 index has gained 1%, with similar gains in Australia and South Korea too.
The big question, though, is whether Trump is also prepared to cut a deal with Beijing, so he can notch up another ‘win’ ahead of next year’s reelection race.
Hopes of a breakthrough at this month’s G20 leader’s meeting could push European shares higher today. The FTSE 100 index is expected to jump 40 points to 7368, adding to Friday’s rally.
Hopes of an early US interest rate cut following Friday’s weak US jobs report are also keeping traders optimistic (although, if we get a trade war deal, there’s less need to cut borrowing costs to support the economy….)
Also coming up today
The latest GDP figures will show how Britain’s economy performed in April, after the threat of a disorderly exit from the EU was delayed until October. Economists fear a small contraction (-0.1%), as the boost from Brexit stockpiling faded.
We also get new UK trade data.
- 9.30am BST: UK GDP for April
- 9.30am BST: Industrial production for April
- 9.30am BST: UK trade balance for April