Nikkei surges, automakers rise as U.S. calls off tariffs on Mexico

* Automakers rise as investors unwind short positions -
analyst
* Banks, insurers underperform after U.S. yields drop
* Mobile carries weak after report government to require
carries
to cut contract cancellation fees

By Ayai Tomisawa
TOKYO, June 10 (Reuters) - Japan's Nikkei surged to near
two-week highs on Monday morning led by automakers in reaction
to U.S. President Donald Trump withdrawing his threat to impose
tariffs on Mexican imports, after Mexico agreed to strengthen
immigration enforcement.
The Nikkei share average .N225 rose 1% to 21,090.38, after
earlier hitting as high as 21,150.47, its highest since May 28.
U.S. equity futures rose when trading resumed on Sunday
after the United States and Mexico struck a deal late Friday to
avert a tariff war, with Mexico agreeing to meet U.S. demands to
stem the flow of illegal Central American migrants. Trump had threatened to impose 5% import tariffs on all
Mexican goods starting on Monday if Mexico did not commit to do
more to tighten its borders.
Automakers soared, with Toyota Motor Corp 7203.T rising
1.2%, Honda Motor Co 7267.T advancing 1% and Mazda Motor Corp
7261.T surging 1.2%. Japanese automakers have long built
vehicles in Mexico, taking advantage of the country's cheap
labour, trade deals and proximity to the United States, the
world's largest auto market after China. "Investors are unwinding their short positions as risk
sentiment shot up," said Nobuhiko Kuramochi, a strategist at
Mizuho Securities. "Receding concerns about U.S.-Mexican trade
issues and hopes for loose monetary policy are raising
investors' risk appetite."
On Friday, U.S. shares rose on hopes that the U.S. Federal
Reserve would move to cut rates after job numbers came in weaker
than expected.
Conversely, U.S. Treasury yields tumbled, with 10-year
yields hitting their lowest since September 2017. That pulled down Japanese financials firms, which hunt for
higher yields, with Mitsubishi UFJ Financial Group 8306.T and
Mizuho Financial Group 8411.T dropping 0.5%, while T&D
Holdings 8795.T and Dai-ichi Life Holdings 8750.T sliding
1%.
"U.S. short-term yields would stay pressured for a while,
but hopes that the Fed would cut rates as a preventive measure
before the economy enters a recession are cheering investors,"
Kuramochi said.
Mobile carriers bucked the strength and were sold after the
Nikkei business daily reported that in order to make it easier
for customers to switch mobile phone contracts and increase
competition among carries, the government will require major
carries to slash the penalty fees from 9,500 yen to below 1,000
yen, when customers cancel their contracts within two years.
NTT Docomo 9437.T and SoftBank Corp 9434.T both dropped
1.5%, while KDDI Corp 9433.T shed 2%.
The broader Topix .TOPX rose 1.1% to 1,548.73.