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FTSE stronger as US reaches Mexico deal

Article By: ,  Senior Market Analyst
August 28, 2018 5:28 AM

The FTSE continues to build on a rally in US markets Monday and in Asia overnight - boosted by news that the US is about to sign a trade deal with Mexico.  

The deal is seen as the first step in the easing of tensions between the US and its major trade partners although some comments by Trump indicate that he is giving Canada, the third partner in the NAFTA trade agreement, the cold shoulder.

It may be too early to make any conclusions as to whether the Mexico deal is a sign of a goodwill that will spread as far as China, although the markets are taking it as a positive sign, particularly given that the US is now pushing the European Union to speed up tariff talks.

The FTSE is trading up 0.67%. In Europe the DAX and the CAC are beginning to head lower despite a positive open.

Lack of trade talk breakthrough sees China stocks slide

Asian markets were also mixed early with the Nikkei trading up, helped by the fact that the dollar is trading close to its lowest level in a month, but with Chinese markets continuing to slide.

The Sino-US trade talks held in Washington last week didn’t yield any breakthroughs and have left the negotiators in a limbo. A lack of resolution between the US and China will continue to hamper any progress in the stock markets because of fears that a prolonged trade war between the countries could cause the global economy to slide into recession.

Dollar still to recover from Jackson Hole

Last week’s gathering of central bankers in Jackson Hole poured a bucket of cold water on the dollar. Federal Reserve Chairman Jerome Powell indicated that the Fed is being cautious about further rate hikes despite an upbeat assessment of the US economy. The speech caused the dollar to slump to a one-month low Monday and the currency continued to nudge lower early Tuesday, trading 0.08% lower against the pound and 0.05% against the euro.

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