GLOBAL MARKETS-Stocks gain as Mexico tariffs averted, yuan falls to 2019 lows

* Weak U.S. payrolls data bolster Fed rate cut expectations
* U.S. money market futures price in 2 rate cuts this year
* Yuan falls to lows last seen in late 2018
* Asian stock markets: https://tmsnrt.rs/2zpUAr4

By Hideyuki Sano
TOKYO, June 10 (Reuters) - U.S. stock futures and Asian
shares rose on Monday after the United States dropped its threat
to impose tariffs on Mexico in a deal to combat illegal
migration from Central America, and as weak U.S. jobs data
raised hopes for U.S. interest rate cuts.
The Mexican peso jumped about 2.0% in early Monday trade to
19.2285 on the dollar MXN= on news of the deal, while the
Chinese yuan slipped to its lowest levels this year on weak
Chinese imports data and as talks to end the Sino-U.S. dispute
remained deadlocked. S&P500 mini futures ESv1 rose as much as 0.8% and was last
up 0.4%. The 10-year U.S. Treasuries yield jumped back 3.5
basis points to 2.119 percent US10YT=RR , after hitting a
21-month low of 2.053 percent on Friday on soft U.S. jobs data.
Global investors had feared that opening up another trade
conflict, while still battling with China, could tip the United
States and other economies into recession.
Tokyo's Nikkei .N225 gained 1.1% while MSCI's index of
Asia-Pacific shares outside Japan .MIAPJ0000PUS rose 0.7%, led
by strong gains in Hong Kong .HSI and Indonesia .JKSE .
The improved risk sentiment also helped lift the dollar
against the yen 0.15% to 108.38 yen JPY= .
"The deal with Mexico is boosting sentiment while
expectations of U.S. rate cuts will be also supporting share
prices," said Masahiro Ichikawa, senior strategist at Sumitomo
Mitsui DS Asset Management.
"Still, with limited progress seen so far in U.S-China trade
talks, the most important issue for markets, stock prices will
be able to rise only so much," he added.
That cautionary note was driven home by Chinese data on
Monday morning showing imports contracted 8.5% in May from a
year-earlier, a much worse than expected outcome that signalled
weak domestic consumption.
Exports, however, unexpectedly rose 1.1% last month, though
many suspect the uptick is linked to front-loading of shipments
by firms to avoid higher U.S. tariffs.
The yuan extended its losses after the data, while
expectations the Fed will cut rates kept the dollar on the
defensive after a weak jobs report from the U.S. Labor
Department.
Nonfarm payrolls increased by 75,000 jobs last month, much
smaller than the 185,000 additions estimated by economists in a
Reuters poll. Wage growth, closely watched for its impact on inflation,
cooled to 3.1 percent from a year earlier, the slowest annual
increase since September. Just three months earlier, wages had
been rising at their fastest rate in a decade.
Although Fed funds rate futures prices dropped on Monday
after the Mexico deal, they are still pricing in more than two
25-basis point rate cuts by the end of this year, with one
almost fully priced in by July.
"I would expect optimism to rule markets until the next
Fed's meeting," said Naoya Oshikubo, senior economist at
Sumitomo Mitsui Trust Asset Management.
The Federal Reserve's next policy meeting is set for next
week, on June 18-19.
The euro was little changed at $1.1329 EUR= near a
2-1/2-month high of $1.1348 touched on Friday.
Gold slipped 0.8% XAU= , having hit a 14-month high of
$1,348.1 per ounce on Friday, near a major resistance around
$1,350.
The Chinese yuan was soft after China's central bank chief
said late last week there was no one specific "numerical number"
that was more important than another when asked if there is a
red line for Beijing.
"Recent comments from current and former central bank
governors suggest a consensus is building among Chinese
policymakers that they do not attach much significance to
defending the seven per dollar level," said Ei Kaku, currency
strategist at Nomura Securities.
The yuan fell about 0.35% to as low as 6.9366 per dollar
CNY=CFXS , its lowest since early December, in the onshore
trade. The offshore yuan traded at 6.9385 yuan per dollar
CNH=D4 , having hit a seven-month low of 6.9616 on Friday.
"The yuan would weaken further should there be no summit
meetings between the two countries at an upcoming G20 meeting in
Osaka," Nomura's Kaku said.
Many investors are still clinging to hopes that Trump will
meet Chinese President Xi Jinping on the sideline of Group of 20
leaders' meeting late this month to seek compromise on trade and
other economic issues.
Ahead of the summit, G20 finance leaders on Sunday said that
trade and geopolitical tensions have "intensified", raising
risks to improving global growth, but they stopped short of
calling for a resolution of the deepening U.S.-China trade
conflict. Oil prices extended gains after Saudi Arabia said on Friday
OPEC and non-member Russia were close to agreeing to extend an
output production cut beyond June and as Wall Street rallied.
Brent futures LCoc1 rose 0.25% to $63.45 per barrel while
U.S. crude futures CLc1 gained 0.57% to $54.30.