AFP – Global stocks cheered Monday after US President Donald Trump dropped a plan to impose tariffs on all Mexican goods after Mexico agreed to additional measures to counter illegal immigration.
Wall Street continued last week’s strong performance, with banking and technology shares enjoying especially big gains as Trump backed off the plan.
Bourses in Europe and Asia also advanced, while the dollar bounced slightly and oil prices dipped.
"The quick deal on border security with Mexico boosted risk assets across the board, with equities, in particular, gaining ground globally," said Gorilla Trades strategist Ken Berman.
Trump announced the reprieve Friday night. Under the deal, Mexico acknowledged and agreed to expand its policy of taking back migrants from violence-riven Guatemala, Honduras and El Salvador while the United States processes their asylum claims.
Still the situation remained somewhat tenuous and Trump said the tariff plan would be revived if Mexico’s performance under the agreement is unsatisfactory.
Trump has alluded to mysterious secret provisions in the deal that he said had to be approved by the Mexican Congress. "If for any reason the approval is not forthcoming, Tariffs will be reinstated!" he said on Twitter Monday.
The unsettled situation bothered observers, who note that there are no clear benchmark for what constitutes satisfactory compliance with the agreement, despite 45- and 90-day timelines for review.
"Tensions between the US and Mexico are likely to intensify as the US presidential campaign ramps up," warned Eurasia Group in a note.
"The lack of clarity on how the issue was resolved and what the resolution entails is a signal that the White House’s criteria for success here are more political than substantive," the note said. "This leaves open the possibility that Trump could again threaten tariffs on Mexico in the run-up to next year’s election."
The US is also still embroiled in difficult trade negotiations with China and Trump told CNBC on Monday he still expects to talk with his Chinese counterpart, Xi Jinping, at the upcoming G20 summit. But he warned he will impose new tariffs if there is no meeting to resolve the dispute.
In other markets, the US dollar advanced against other major currencies, rallying after Friday’s weak US jobs report boosted talk of lower Federal Reserve interest rates.
The greenback picked up momentum following Trump’s Mexico decision "because next to Mexico, the threat to the US economy or corporate earnings was the greatest risk," said BK Asset Management’s Kathy Lien.
But oil prices retreated amid uncertainty over an agreement of major producers to limit output and angst that the US-China trade war will crimp global growth.
– Key figures around 2040 GMT –
New York – Dow: UP 0.3 percent at 26,062.68 (close)
New York – S&P 500: UP 0.5 percent at 2,886.73 (close)
New York – Nasdaq: UP 1.1 percent at 7,823.17 (close)
London – FTSE 100: UP 0.6 percent at 7,375.54 (close)
Frankfurt – Closed for German holiday
Paris – CAC 40: UP 0.3 percent at 5,382.50 (close)
EURO STOXX 50: UP 0.2 percent at 3,386.45 (close)
Tokyo – Nikkei 225: UP 1.2 percent at 21,134.42 (close)
Hong Kong – Hang Seng: UP 2.3 percent at 27,578.64 (close)
Shanghai – Composite: UP 0.9 percent at 2,852.13 (close)
Euro/dollar: DOWN at $1.1316 from $1.1334 at 2100 GMT Friday
Pound/dollar: DOWN at $1.2686 from $1.2737
Dollar/yen: UP at 108.49 yen from 108.19
Oil – Brent Crude: DOWN $1.00 at $62.29 per barrel
Oil – West Texas Intermediate: DOWN 73 cents at $53.26 per barrel