US-Mexico trade bargain sends Wall Street soaring

In this file photo taken on May 25, 2010, people pose for pictures beside the Wall Street Bull, a bronze bull statue that symbolizes a ‘bull market’ in New York City. Wall Street stocks surged to new heights on Tuesday, August 21, 2018, amid renewed optimism the US is working towards defusing the spiraling trade confrontations.  AFP FILE

NEW YORK, United States – The United States and Mexico announced a breakthrough deal on trade on Monday, sparking a Wall Street rally that pushed major indices to fresh record closes.

Canada’s dollar and Mexico’s peso both strengthened against the US dollar, which in turn weakened against a basket of other currencies.

In Europe, trading was thin with London closed for a public holiday.

US President Donald Trump and outgoing Mexican President Enrique Pena Nieto hailed the new trade agreement, which raises hopes the North American Free Trade Agreement can be salvaged after Canada rejoins the talks on Tuesday.

The deal tightens local content requirements for autos, as well as updating provisions on labor rights, e-commerce and financial services, among other things.

“It’s a big day for trade. It’s a really good deal for both countries,” President Donald Trump said in announcing the agreement from the Oval Office, with Mexico’s President Enrique Pena Nieto participating by telephone.

In New York, the benchmark Dow Jones Industrial Average pushed past the 26,000 mark for the first time since January, closing up one percent.

The broad-based S&P 500 and Nasdaq both finished at records, with the Nasdaq closing above 8,000 points for the first time.

Maris Ogg of Tower Bridge Associates told AFP that markets were banking on a successful outcome with Canada.

“Hopefully that will be the case but you just don’t know,” she said.

“Once you start to sweep some of the uncertainties away, the market feels a little more confident. That is what is happening.”

The United States and Mexico had been holding bilateral talks for the past five weeks on updating the 1994 trade pact, while Canada had taken a pause from the negotiations.

Europe quiet

The bank holiday in London was “keeping trading in Europe pretty thin,” said London Capital Group analyst, Jasper Lawler.

Share prices in Frankfurt closed 1.2 percent higher after a widely watched survey showed business confidence in the German economy bouncing back as US trade war fears eased.

The widely-watched Ifo barometer of business confidence rose to its highest level since February as concerns about a trade war between the US and the EU were put on the back burner.

“Today’s Ifo index strongly suggests that the growth party will continue,” said ING economist Carsten Brzeski.

French stock prices rose 0.9 percent.

In Asia, Tokyo ended 0.9 percent higher, Hong Kong jumped more than two percent, Shanghai added 1.9 percent and Singapore put on 0.7 percent.

Seoul gained 0.3 percent and Sydney added 0.4 percent while there were also gains in Wellington, Taipei and Jakarta. /cbb