US stock futures jump, Asia markets cautious after Mnuchin says trade war 'on hold'

US Treasury Secretary Steve Mnuchin holding a press conference during a meeting in Washington, DC, on April 21, 2018. PHOTO: AFP

TOKYO (REUTERS) - US stock futures jumped on Monday as US Treasury Secretary Steven Mnuchin said the US trade war with China is "on hold" after the world's two largest economic powers agreed to drop their tariff threats while they work on a wider trade agreement.

S&P mini futures rose 0.6 per cent in early Asian trade on Monday.

Investors trading Asian stocks were cautious. Japan's Nikkei ticked up 0.1 per cent while MSCI's broadest index of Asia-Pacific shares outside Japan was off 0.1 per cent in early trade.

Mnuchin and US President Donald Trump's top economic adviser, Larry Kudlow, said the agreement reached by Chinese and American negotiators on Saturday set up a framework for addressing trade imbalances in the future.

"The weekend talk appears to have made progress. While they still need to work out details of a wider trade deal, it is positive for markets that they struck a truce," said Hirokazu Kabeya, chief global strategist at Daiwa Securities.

US bond yields rose as safe-haven demand for debt fell, with the 10-year Treasuries yield rising 1.5 basis points to 3.082 per cent, near a seven-year high of 3.128 per cent hit on Friday.

"Recent data suggests the US economy is very strong, hardly slowing down in Jan-Mar. The world economy slowed in that quarter but it appears to be rebounding. And recent rises in oil prices are likely to lift inflation expectations further," said Tomoaki Shishido, senior fixed income analyst at Nomura Securities.

"We expect more selling until the next Fed's meeting in June," he said.

In the currency market, higher US yields helped to strengthen the dollar against a wide range of currencies.

The euro dipped 0.1 per cent to US$1.1756, hovering above Friday's five-month low of US$1.1750.

The common currency was also hit after two anti-establishment parties pledged to increase spending in a deal to form a new coalition government.

The dollar maintained an uptrend against the yen, rising 0.25 per cent to fetch 111.01 yen,, close to Friday's four-month high of 111.085.

Oil prices held firm near 3½-year highs after Venezuelan leader Nicolas Maduro appeared to be set for re-election, an outcome that could trigger additional sanctions from the United States and more censure from the European Union and Latin America.

Oil prices have been supported by plummeting Venezuelan production, in addition to a solid global demand and supply concerns stemming from tensions in the Middle East.

US crude futures rose 0.6 per cent to US$71.69 per barrel, near last week's 3½-year high of US$72.30 while Brent crude futures notched up 0.6 per cent to US$78.95 per barrel. It had risen to US$80.50 last week, its highest since November 2014.

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