Updated June 07, 2019 11:29:10

Photo: Investors believe Donald Trump may delay imposing tariffs on Mexican goods. (Chairman of the Joint Chiefs of Staff/flickr.com/CC BY 2.0)

US President Donald Trump said he could impose tariffs on Mexican imports as early as next week.

"Immigration discussions at the White House with representatives of Mexico have ended for the day," the President tweeted.

"Progress is being made, but not nearly enough!"

"Further, talks with Mexico will resume tomorrow with the understanding that, if no agreement is reached, Tariffs at the 5 per cent level will begin on Monday, with monthly increases as per schedule."

Despite that, optimistic investors continued to pile into US stocks after Bloomberg reported that Mr Trump could delay the tariffs he had threatened to levy on Mexican goods, citing unidentified sources.

The Washington Post reported that under a possible immigration deal, Mexico would deploy 6,000 troops to the Guatemalan border.

Market recovery

Despite the uncertainty over the US trade disputes with China and Mexico, Wall Street continued to rebound from last month's massive sell-off.

The Dow Jones index closed 181 points higher, up 0.7 per cent to 25,721.

The broader S&P 500 rose 0.6 per cent, while the tech-heavy Nasdaq added 0.5 per cent.

But strategists urged caution until a final US-Mexico deal is reached and followed by a US-China trade deal.

"You have to take all of this with a huge grain of salt," said Sameer Samana, senior global market strategist at Wells Fargo Investment Institute.

He said that, even if the Mexico report were true, "it would be a short-term positive".

"It's not giving that long-term clarity businesses and investors and consumers need to make decisions."

Hopes of an interest rate cut from the Federal Reserve have also helped to support the US market, amid the trade tensions and mixed economic data that has rekindled worries about a slowing global economy.

European rates on hold

Meanwhile, European markets finished mixed, with London's FTSE gaining 0.6 per cent, and Frankfurt down 0.2 per cent.

On Thursday (local time), the European Central Bank decided to keep interest rates on hold.

The euro jumped 0.5 per cent against the greenback — and 0.3 per cent against the Australian dollar — following the ECB rates decision.

The central bank ruled out raising interest rates until at the least mid-2020, and even opened the door to cutting them or buying more bonds as risk factors such as global trade war and Brexit drag the euro zone economy down.

Hoping to maintain the flow of credit to the economy, the ECB also offered to effectively pay banks to borrow from it and lend that money on to the real economy.

With the bloc's inflation prospects diminishing rapidly, ECB President Mario Draghi sought to reassure investors that the central bank was ready to act if needed — to support an economy hurt by weaker global trade and that it could even resort to once-taboo measures.

He said policymakers had started to discuss options such as cuts to the ECB's already record-low rates, further pushing out the timing of any hike or resuming a 2.6 trillion euro ($4.2 trillion) bond-buying programme that only ended in December 2018.

"Several members raised the possibility of further rate cuts," Mr Draghi said.

"Other members raised the possibility of restarting the asset purchase programme or further extensions in the forward guidance."

ABC/Reuters

Topics: business-economics-and-finance, markets, stockmarket, currency, australia

First posted June 07, 2019 08:03:53