NAFTA rally short lived

The relief following the new NAFTA deal did not last long. A day after Canada and US finally clinched a trade deal European and some Asian markets are back in negative territory.

The relief following the new NAFTA deal did not last long. A day after Canada and US finally clinched a trade deal European and some Asian markets are back in negative territory.

Expectations that the agreement would somehow translate into the easing of trade tensions with China proved wishful thinking – President Trump poured cold water over those with a sobering comment. Unlike the markets, US officials believe that Trump’s approach will eventually wear China down by stifling foreign investment and discouraging companies to use China as part of their production chain, such as in the case of Apple and its iPhones, and forcing the country to agree to the concessions asked by the US. The currency markets also swung in the opposite direction from yesterday and the Canadian dollar, which rallied in the aftermath of the new NAFTA deal, lost yesterday's gains to the greenback. The dollar firmed against the pound and the euro but notched lower against the yen.

Oil in a frenzy ahead of sanctions

Oil is trading at almost $85 as the market is talking itself into a frenzy ahead of Iran sanctions at the beginning of November. Iran exported slightly less oil in September but in the case of previous sanctions there was a last minute burst of higher exports just before the restrictions kicked in, a pattern that could be repeated over the next month. More expensive oil combined with higher metal prices generated moderate gains for big oils and miners and they are leading the FTSE gainers this morning.

Pound holds against euro

The currency market is keeping a keen eye on the annual Conservative Party gathering in Birmingham which is more loaded than usual given plans by a small number of MPs to challenge PM Theresa May’s leadership. She fended off her attackers on Tuesday saying she expects to keep her position for the long term. But a day is long time in politics and with two more days of conference to go all outcomes are possible. The sterling/euro pair has been fairly steady overnight, trading nearly flat.

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