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* Shares climb after Trump scraps Mexico tariffs
* European markets move higher, U.S. stocks futures up
* Weak U.S. payrolls data bolsters Fed rate cut expectations
* Yuan at late-2018 lows; China's May imports disappoint
* Asian stock markets: https://tmsnrt.rs/2zpUAr4
By Tom Arnold
LONDON, June 10 (Reuters) - European shares followed Asian
stocks higher on Monday after the United States shelved plans to
impose tariffs on Mexico and as investors anticipated lower U.S.
interest rates when the Federal Reserve meets next week on the
back of poor jobs data.
Investors had fretted that opening up another trade
conflict, while still battling with China, could push the United
States and other major economies into recession. The Mexican
peso MXN= rallied as much as more than 2% on Monday.
But in China, the yuan slipped to its weakest this year
after the country's imports fell the most in nearly three years
and as talks to end the Sino-U.S. dispute remained deadlocked.
The pan-European STOXX 600 .STOXX gained 0.1% in early
trade, with Britain's FTSE 100 .FTSE up 0.5%, while S&P500
mini futures ESv1 were up 0.4% after rising as much as 0.8%.
Liquidity was lower than usual with markets in Germany,
Switzerland, Sweden, Norway, Denmark and Iceland shut for
national holidays.
The 10-year U.S. Treasuries yield was at 2.1431 percent
US10YT=RR , after hitting a 21-month low of 2.053 percent on
Friday on soft U.S. jobs data.
In Asia, Tokyo's Nikkei .N225 closed up 1.2%, while MSCI's
index of Asia-Pacific shares outside Japan .MIAPJ0000PUS rose
as much as 1%.
"Markets are blowing small celebratory bubbles," said
Deutsche Bank strategist Jim Reid.
"There will be relief that the Mexican tariffs have been
avoided and perhaps some might believe it shows Trump's
propensity to strike deals after brinkmanship. As such there may
be those thinking that a similar thing might happen with the
China trade situation."
CARS MOVE AHEAD
The European auto sector was boosted by signs that Fiat
Chrysler Automobiles NV FCHA.MI and Renault SA RENA.PA were
looking for ways to revive their collapsed merger plan and
secure the approval of Nissan Motor Co 7201.T . Fiat Chrysler
was up 1.9%, while Renault's shares were up 2.5%.
In London, Thomas Cook's shares TCG.L rose as much 20%
after a report that Hong Kong-listed Fosun Tourism was in talks
to buy its tour operating business as the British group faces
breakup after issuing three profit warnings in the past year.
Investors were also digesting Chinese data showing imports
in May contracted 8.5% 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.
"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. Before then the market is
left focusing on poor Chinese import figures for May.....as
speculation builds over whether the PBOC [the People's Bank of
China] allows yuan to trade through 7 per dollar," said Chris
Turner head of FX strategy at ING Bank.
With the Mexico spat seemingly resolved, investors will now
focus on whether U.S. President Donald Trump can reach a similar
deal with China.
"With Trump looking to win votes to secure a second term, an
agreement with China will go some way to smoothing the path and
he'll be focusing on that," said Peter Lowman, chief investment
officer at Investment Quorum. "There'll be a lot of fudging and
sabre-rattling but when that happens there'll be an aggressive
spike-up in stocks."
EYES ON THE FED
In the United States, expectations the Federal Reserve 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. Fed funds rate futures prices, down on Monday after the
Mexico deal, were 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. FEDWATCH
The Federal Reserve's next policy meeting is set for next
week, on June 18-19.
The euro pulled back from 2-1/2 month highs as the dollar
strengthened and after sources said European Central Bank
policymakers were open to cutting the ECB's policy rate should
economic growth worsen. The euro fell 0.2% to $1.1306 EUR=EBS after hitting
$1.1348 last week, its highest since March.
Euro zone government bond yields remained close to all-time
lows. Core bond yields in the bloc were still at all-time lows,
despite the two basis point move higher in the German bund in
early trade to -0.24% DE10YT=RR , as expectations of easier
monetary policy fuel bond buying. The euro was down almost 0.3% against the dollar at $1.1301
EUR= near a 2-1/2-month high of $1.1347 touched on Friday.
China's yuan CNY=CFXS touched its lowest since late
November after weak import data reignited worries about slowing
domestic demand. The offshore rate CNH=EBS was slightly lower
at 6.9532 yuan per dollar but held above Friday's 2019 low.
Gold slipped almost 1% XAU= , having hit a 14-month high of
$1,348.1 per ounce on Friday, near a major resistance around
$1,350.
Many investors are still clinging to hopes that Trump will
meet his Chinese counterpart Xi on the sidelines of the Group of
20 leaders' meeting late this month to seek a compromise on
trade and other economic issues.
Oil prices rose on Monday after Saudi Arabia said producer
club OPEC and Russia should restrict supplies to current levels,
with front-month Brent crude futures LCOc1 at $63.39, 0.2%,
above Friday's close.