U.S. stocks hit records, Peso rises on Nafta deal

-A +A

(Aug 27): U.S. stocks added to all-time highs, and Mexico’s peso rallied versus the dollar as the Trump administration closed in on a Nafta trade deal. Treasuries fell.

The S&P 500 Index rose a second day after closing Friday at a record for the first time since January. The peso rallied amid reports the U.S. is close to a new trade deal with Mexico. 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.

Macro developments continue to blur the narrative for financial markets, with reports of a potential breakthrough on Nafta offset by yet another failure for U.S. and China trade talks. American stocks are trading at a record off the back of strong earnings and domestic expansion, but President Donald Trump’s ongoing legal woes, fresh Russian sanctions, a war of words over Syria and faltering efforts to denuclearize North Korea all threaten to act as a drag on risk appetite.

Investors seem unlikely to find many clues on the outlook in Monday’s depressed trading. While Asian shares rallied on the back of the yuan’s stabilization, the PBOC’s moves to steady the currency threaten to be an unwelcome step backward in the longer term. Federal Reserve Chairman Jerome Powell’s indication the U.S. will continue to follow a path of gradual tightening was interpreted as having a dovish tone by some, further complicating the macro picture.

Elsewhere, European bonds followed Treasuries lower. The Mexican peso climbed after people familiar with discussions said a Nafta deal with the U.S. could come as soon as Monday. Turkey’s lira dropped as the country’s markets reopened following a holiday. Emerging-market stocks rallied. Oil was little changed.

Reporters discuss the week in markets on the Terminal Conditions podcast.

Here are some key events coming up this week:

Earnings are due from companies including Canada’s largest banks and China Construction Bank Corp., ICBC, Pernod Ricard and Dollar General. China’s official factory PMI are due Friday. The U.S. economy probably grew in the second quarter at a slightly slower pace, economists predict ahead of Wednesday’s report. The Bank of Korea sets policy on Friday. Weak jobs growth has cooled speculation of an interest-rate increase.

These are the main moves in markets:

Stocks

The S&P 500 increased 0.7% as of 10:24 a.m. in New York to the highest on record. The Stoxx Europe 600 Index gained 0.4% to the highest in almost two weeks. 

Germany’s DAX Index rose 0.7% to the highest in two weeks. The MSCI Asia Pacific Index increased 1.2% to the highest in two weeks on the biggest climb in more than 11 weeks. The MSCI Emerging Market Index gained 1.3% to the highest in two weeks on the largest rise in more than six weeks.

Currencies

The Bloomberg Dollar Spot Index declined 0.2% to 1,178.53. The euro increased 0.1% to the strongest in more than three weeks. The British pound climbed 0.2% to US$1.2877. The Japanese yen rose 0.2% to 111.03 per dollar.

Bonds

The yield on 10-year Treasuries rose two basis points to 2.83%, the biggest advance in more than two weeks. Germany’s 10-year yield rose two basis points to 0.37%, the highest in two weeks. The spread of Italy’s 10-year bonds over Germany’s dipped one basis point to 2.7988 percentage points.

Commodities

West Texas Intermediate crude gained less than 0.05% to US$68.75 a barrel, the highest in more than three weeks. Gold dipped less than 0.05% to US$1,205.79 an ounce.