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Nikkei Markets

Asian equities surge on Fed rate cut bets, US-Mexico trade deal

Hyundai Motor and Kia Motors advance

HONG KONG (Nikkei Markets) -- Asian shares outside of Japan jumped Monday, buoyed by U.S. Federal Reserve rate cut bets and the suspension of U.S. tariffs on Mexico.

The Nikkei Asia300 Index of companies outside Japan advanced 1.6% to 1,276.09. Kia Motors rose 4.5% and Hyundai Motor climbed 2.1%, boosted by the U.S.-Mexico trade deal. When the U.S. raised the prospect of levying tariffs on Mexican goods, analysts had expressed fears that it would potentially affect sales of Asian automakers that manufactured cars in Mexico. Chow Tai Fook Jewellery Group jumped 13% after reporting an 11.8% increase in full year profit.

The appetite for Asian equities was boosted after disappointing U.S. jobs data made it more likely that the Fed would cut interest rates. On Friday, data showed that the U.S. economy added 75,000 jobs last month, less than the 185,000 expected by economists polled by Reuters. Average earnings growth too missed forecasts and job additions in the prior two months were revised lower.

Morgan Stanley said that for Fed policymakers, the payrolls report will add to evidence "that global economic uncertainty stemming from trade policy is increasingly adding to domestic business sector uncertainty and weighing on growth prospects." It pointed out that following the data, traders are pricing in a 25% chance of a 25 basis-points rate cut in June and nearly a 100% chance of a 25 basis points reduction in July.

The Fed's July meeting is on 30-31 and prior to that, the U.S. central bank will meet on June 18-19.

Further supporting regional risk assets on Monday were developments on U.S.-Mexico trade. The nations reached an agreement that avoided Washington imposing tariffs on imports from Mexico.

President Donald Trump had said last month that he would levy a 5% tariff on Mexico, scheduled to come into effect on Monday. Trump said on Friday on Twitter that the tariffs were now "indefinitely suspended."

Chinese companies were among the top performers on the A300 Index on Monday. The Hang Seng China Enterprises Index, a gauge of mainland companies listed in Hong Kong, climbed 1.9%. The People's Bank of China's head Yi Gang said he is willing to ease policy to protect the economy from the fallout of the Sino-American trade war, according to Bloomberg.

China Overseas Land & Investment added 2.9% following a 24.5% increase in May contracted sales, year-on-year.

CNOOC advanced 4.9%. The Chinese offshore oil producer said its unit agreed to buy a 10% equity interest in a Russian natural gas firm. Financial terms of the deal were not disclosed.

City Developments rallied 5.9%. The Singaporean company is set to privatize U.K.'s Millennium & Copthorne Hotels after it raised its offer for the rest of the British company to 6.85 pounds per share. The offer is an increase of 0.65 pound from that made in December 2017, which lapsed after CDL failed to get the support of some M&C shareholders.

Singapore Exchange edged 0.1% higher after the bourse operator said that total securities market turnover by value was up 5% month-on-month in May.

Heavyweights Tencent Holdings and Taiwan Semiconductor Manufacturing Co. climbed at least 3.4% each.

--Nimesh Vora

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