New York: US stocks added to all-time highs, and Mexico’s peso rallied versus the dollar as the Trump administration closed a bilateral trade deal with America’s southern neighbour. Treasuries fell.
The S&P 500 Index rose as President Donald Trump unveiled details of the agreement that he says will replace the North American Free Trade Agreement (Nafta), a pact that also includes Canada. An agreement could ease concerns about an escalation in global trade tensions.
Shares of carmakers and parts producers in the equity benchmark surged more than 3 per cent. The peso rallied, and Canada’s dollar strengthened.
The breakthrough on trade with Mexico captured investor attention amid yet another failure for US and China trade talks. American stocks added to records amid strong earnings and domestic expansion, while Federal Reserve Chairman Jerome Powell’s indication the US will continue to follow a path of gradual tightening was interpreted as having a dovish tone.
The news enabled investors to look past a host of other macro events, including President Donald Trump’s ongoing legal woes, fresh Russian sanctions, a war of words over Syria and faltering efforts to denuclearise North Korea. While Asian shares rallied on the back of the yuan’s stabilisation, the PBOC’s moves to steady the currency threaten to be an unwelcome step backward in the longer term.
An index of major world stock markets rose to its highest level in more than five months on Monday following signs of progress on a US-Mexico trade deal and reassuring comments from the US Federal Reserve chief.
MSCI’s gauge of stocks in 47 countries across the globe gained 0.91 per cent, helped by gains in developed markets from the United States to Europe and Asia. The broad index was at its highest level since March 15.
The benchmark S&P 500 and the Nasdaq indexes hit a record, bond prices fell and prices for oil and copper rose as US and Mexican trade negotiators were seen as close to reaching a common position on Nafta.
Major currencies gained against the US dollar, which has been a safe haven from months of trade tensions.
“The [Nafta] talks add to the sense that while the US is still bogged down in its trade conflict with China, it is perhaps more willing to compromise elsewhere such as with Mexico and the EU,” said Ulrich Leuchtmann, head of FX and emerging market research at Commerzbank in Frankfurt. “It’s decreasing the risk of a global trade war.”
The Dow Jones Industrial Average rose 221.18 points, or 0.86 per cent, to 26,011.53, the S&P 500 gained 20.7 points, or 0.72 per cent, to 2,895.39 and the Nasdaq Composite added 69.67 points, or 0.88 per cent, to 8,015.65.
The S&P and Nasdaq indexes both hit record highs, continuing a run that followed Fed chief Jerome Powell’s speech at the Jackson Hole symposium on Friday. Powell affirmed that the US central bank was sticking with its strategy of gradual rate hikes. The gains on Friday cemented the S&P’s longest-running bull market.
A stronger-than-expected German business sentiment survey added to the upbeat mood in Europe. The pan-European FTSEurofirst 300 index rose 0.56 per cent while British markets are closed for a public holiday.
“We have low volumes today, but the biggest risks the market were discounting were trade wars, so any reduction in trade war risk such as Nafta talks or even Trump trying to find bilateral deals with everyone, has pushed US shares to new records and will support markets,” said Angelo Meda, head of equities and a portfolio manager at Banor SIM in Italy.
“The global economy is on track, there’s less trade war risk, the only cloud on the horizon is Italy,” Meda added, referring to upcoming budget talks in the weeks ahead.
Benchmark 10-year notes last fell 4/32 in price to yield 2.8405 per cent, from 2.826 per cent late on Friday.
In currency markets, the dollar steadied after weeks of gains in the face of aggressive Fed rate hikes and trade disputes. The dollar index fell 0.2 per cent.
China’s yuan hit a near-4-week high to the dollar after the central bank revived a “counter-cyclical factor” in its daily fixing to support the currency, giving hopes that Beijing might halt a record 10-week slide that rattled global markets.
The yuan traded offshore rose to a high of 6.7818, its strongest since July 31, but later pared gains.
Commodity markets showed signs of cheerfulness about global economic growth prospects. US crude rose 0.2 per cent to $68.86 per barrel and Brent was last at $76.11, up 0.38 per cent on the day. Copper rose 1.38 per cent to $6,069.00 a tonne.
