FTSE tracks US stocks higher as trade deal lifts mood

After an early dip the FTSE turned the corner helped by new enthusiasm in the US stock markets.

FTSE tracks US stocks higher as trade deal lifts mood

After an early dip the FTSE turned the corner helped by new enthusiasm in the US stock markets.

Positive reactions generated by Monday’s trade deal between the US and Mexico also lifted the Dow Jones Industrial Average and the S&P 500 close to their record highs.

The deal raised hope that the months of the global tariff tit-for-tat may be nearing a resolution, particularly as the US is now due to sit down at the negotiating table with Canada, the third partner in the US, Mexico, Canada North America Free Trade Agreement.

The dollar nudged higher against the pound and the yen during the day but failed to make more progress than that because of comments from Federal Reserve Chairman Jerome Powell which indicated that the Fed is slightly cautious about future rate hikes despite the relatively good state of the US economy.

Carney asked to steer BoE for another year

Bank of England governor Mark Carney has reportedly been asked to remain in his post for another year during a period which promises to be tumultuous for the UK and for the British economy. 

Carney took on his current post in 2013 with the intention of staying for five years but then extended his run at the helm of the bank until June 2019. UK daily politics is doing little to calm the nerves of the forex markets and Carney remaining in his current post would provide some stability for sterling, particularly in light of an increasingly likely no-deal Brexit.

The pound slipped against the dollar 0.02% and traded 0.4% lower against the euro.

More trade talks ahead

The new US-Mexico agreement is part of Donald Trump’s bigger campaign promise to renegotiate NAFTA, a deal signed during the Clinton administration 25 years ago. Trump has introduced trade tariffs on imports of steel and aluminium from both Canada and Mexico this year and Mexico retaliated with tariffs on imports of US agricultural products which ended up hurting American farmers. 

The second leg of the NAFTA negotiations, the deal between Canada and the US is starting off on an acrimonious note as Canadian negotiators have been excluded from NAFTA talks since the G7 summit in July when Donald Trump and Canada’s Prime Minister Justin Trudeau ended up in a war of words.

This week will make clear if the trade tariffs are just a form of threat used as a precursor to the Canada trade talks or if they were really put in place to protect the US metals industry. 

In the best case scenario a deal could be reached before the end of the week. If that fails the US has already threatened to put tariffs on Canadian car imports and will most likely not stop there.

Join our live webinars for the latest analysis and trading ideas. Register now

GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.