US stocks hit record highs as Nafta replacement deal unveiled
The S&P 500 Index closed in on 2,900 as president Donald Trump unveiled details of the agreement
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.
The S&P 500 Index closed in on 2,900 as president Donald Trump unveiled details of the agreement that he says will replace Nafta. Shares of carmakers and parts producers in the equity benchmark surged more than 3 percent. The peso rallied, and Canada’s dollar strengthened.
European shares advanced, though a British holiday depressed volume. The strongest moves were in Asia after recent efforts by the Chinese central bank to shore up the yuan. That currency was largely stable in the offshore market as the dollar turned lower. The euro reversed a drop after a jump in German business confidence.
“The stock market is confident that the trade war is closer to the end than the beginning,” Chris Rupkey, chief financial economist at MUFG Union Bank in New York, said in an email. “One by one the trade war dominos are starting to fall backwards and are off the table for risks that threaten the global economy.”
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 Mr 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.
Elsewhere, European bonds followed Treasuries lower. Turkey’s lira dropped as the country’s markets reopened following a holiday. Emerging-market stocks rallied. Oil was little changed.
Updated: August 27, 2018 10:26 PM