Global stocks edged up Tuesday as the U.S. and Mexico neared a deal to revise the North American Free Trade Agreement, but investors remained cautious because of the possibility of Canada being excluded from the trade bloc.
The threat of what are seen as U.S. protectionist policies has dampened global market sentiment through most of this year. The outcome of the Nafta deal is seen by some investors as a bellwether for President Trump’s future dealings with China.
The Stoxx Europe 600 gained 0.1% in early European trade. In the U.S., futures pointed to 0.1% and 0.2% opening gains for the S&P 500 and the
The technology-heavy Nasdaq went above 8000 for the first time Monday, after an earnings season in which some of the sector’s behemoths, like
beat analysts’ expectations. The S&P 500 has also been hitting record highs.
The WSJ Dollar Index, which tracks the U.S. dollar against a basket of currencies, was unchanged from the previous day. The Mexican peso, which initially rallied on news of the deal, and the Canadian dollar, were flat against the dollar Tuesday.
Most stock indexes in Asia-Pacific gained Tuesday. Japan’s Nikkei Stock Average closed up 0.1%, Australia’s S&P ASX 200 rose 0.6% and Hong Kong’s Hang Seng gained 0.3%.
The prospect of Mr. Trump successfully negotiating new trade deals is likely to be taken by investors as a hopeful sign that a major trade war will be avoided, analysts said. However, some money managers remained unconvinced after Mr. Trump said Monday that Canada would be severed from the North American trade area if necessary.
senior market strategist at Dutch lender Rabobank, told clients in a note that “today’s announcement does make a new Nafta agreement more likely,” but it “also increases the risk that an agreement will not be reached with Canada and we eventually see a move to bilateral agreements.”
By contrast, Mohammed Kazmi, a fund manager at UBP, believes risks of a trade spat are fading.
“We can see a Canadian deal coming through soon,” he said. “What it really shows is Trump trying to get some quick wins ahead of the next election. He is trying to distract the market showing he can make deals and support equity markets.”
Many investors and analysts believe that it is equity markets outside of the U.S. that would reap most of the gains of Mr. Trump’s more conciliatory attitude toward trade deals. This summer, aggressive U.S. foreign policy has pushed investors into the relative safety of U.S. stocks and bonds, while hampering foreign bourses.
Because economic growth and earnings there are stronger, “the U.S. is best-in-class and there’s no way to avoid U.S. assets,” said Witold Bahrke, senior macro strategist at Nordea Asset Management. “And on top of that you have these trade issues, which increase the divergence between the U.S. and the rest of the world.”
In August, the U.S. became the top equity region for international fund managers for the first time in five years, according to a monthly survey by Bank of America Merrill Lynch.
In Turkey, the lira dropped 1.5% against the U.S. dollar, after large falls the previous day. Many investors said that the country’s currency crisis is far from over.
In commodities, Brent crude gained 0.6% to $76.67 a barrel, and gold rose 0.3% to $1,219.70 an ounce.
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