Stocks gain after US-Mexico trade breakthrough

Tuesday 21.45 BST

What you need to know

  • Wall Street extends record-breaking run as US-Mexico trade deal buoys sentiment
  • European bourses rise after gains across much of Asia
  • Italy misses out on wider rally as budget talks stoke political uncertainty
  • Dollar hovers at 4-week low
  • Brent crude trades just below 7-week high

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Wall Street eked out a gain on Tuesday to give the S&P 500 a fresh closing high as sentiment received a boost from a revived US-Mexico trade deal agreed on Monday.

European stocks were mixed, after gains over much of Asia.

The S&P 500 benchmark index seesawed through the session, but ended up 0.03 per cent for a new closing record of 2,897.52. The Nasdaq Composite delivered a similar performance to set a high of 8,030.039, up 0.2 per cent.

The dollar index is 0.1 per cent weaker and down at levels last seen in early August. The Mexican peso pulled back 1.7 per cent to 19.0951 a dollar, after rallying on news of the trade deal.

The trading pattern follows a breakthrough over the Nafta trade agreement between the two countries, but it remains unclear if Canada, Nafta’s third partner, would join the deal, which US president Donald Trump said would be renamed the US-Mexico trade agreement.

The two countries agreed stricter rules for Mexican car exports to the US with measures designed to discourage manufacturers from moving factories to lower-wage Mexico, while tariff-free trade for farm products was maintained.

Robert Carnell, ING’s chief economist and head of research for Asia Pacific, said the deal should be viewed as a result of “sheer negotiating muscle” rather than a “more reasonable attitude to trade” and that the agreement offered no hope for a US-China trade deal.

“There is, right now, no visible interest from the US administration in pursuing talks with China over trade, and there will probably not be either unless China proposes some far-reaching changes to issues such as intellectual property protection and forced technology transfer,” he said.

Equities

London’s FTSE 100 rose is up 0.5 per cent, Frankfurt’s Xetra Dax fell 0.1 per cent lower, while the Europe-wide Stoxx 600 gave up earlier gains and closed a fraction lower.

Italian assets are underperforming in line with political uncertainty relating to negotiations between the country’s populist coalition partners ahead of the government’s first finance bill. Milan’s FTSE MIB fell 0.9 per cent, led by banks but off closed above earlier session lows.

Hong Kong’s Hang Seng index added 0.3 per cent to its highest level since August 10. Japan’s Topix gained 0.8 per cent to an almost three-week high.

That positive mood failed to translate to China’s domestic markets, with the CSI 300 down 0.2 per cent.

Australia’s S&P/ASX 200 added 0.6 per cent, with the financials and basic materials stocks up in tandem.

Forex

The euro is up 0.1 per cent at $1.1694, with the pound off 0.2 per cent at $1.2869. The yen is 0.1 per cent weaker at ¥111.18 a dollar.

Fixed income

The yield on 10-year US Treasuries, which moves inversely to price, was up 3 basis points at 2.88 per cent. The yield on 10-year German Bunds was flat at 0.378 per cent.

Commodities

Brent crude fell 0.3 per cent to $76 a barrel — after hitting a seven-week high.

Gold is down 0.9 per cent at $1,200.61 an ounce.

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