Aug 28, 2018, by Lorcan Roche Kelly
President Donald Trump said the U.S. is pursuing a trade accord with Mexico to replace the North American Free Trade Agreement. For his part, Mexican President Enrique Pena Nieto said he’s “quite hopeful” Canada would soon be incorporated in the new arrangement. Whatever branding is put on a new deal, markets will see it as a welcome de-escalation of the trade standoff in North America. However, Trump dimmed hopes for an easing of tensions with China when he said “it’s just not the right time to talk right now” about a trade deal with Beijing.
Not the end of the world
British Prime Minister Theresa May, who is on a five-day trip to Africa, said that a no-deal Brexit would not be the end of the world, reiterating her comments that no deal would be better than a bad deal for the U.K. The pound dipped against the dollar following her comments, and extended its decline against the euro to a fifth day. May’s remarks are in contrast to those of her own Chancellor of the Exchequer, Philip Hammond, who last week warned of a potential 80 billion-pound ($103 billion) dent in the country’s finances in the event of no deal.
A Bloomberg Economics gauge aggregating the earliest indicators on business conditions and market sentiment show that the pace of China’s expansion may have slowed again in August. With U.S. tariffs hitting Chinese exports, pressure on policy makers in Beijing to push through pro-growth policies will increase. The first official data for the month will be published on Friday when the purchasing managers index for manufacturing and non-manufacturing sectors will be released, with both expected to decline slightly.
Markets are having another quiet session. Overnight, the MSCI Asia Pacific Index rose 0.4 percent while Japan’s Topix index closed 0.2 percent higher. In Europe, the Stoxx 600 Index was 0.1 percent higher at 5:45 a.m. Eastern Time in a subdued trading session, with Italian markets underperforming. S&P 500 futures pointed to gain at the open, the 10-year Treasury yield was at 2.851 percent and gold was higher.
Saudi Arabia has granted Aramco a 40-year concession to exploit the kingdom’s hydrocarbon reserves, with an option to extend that for a further 20-years, as the country formalizes the company’s licence as preparations continue for a potential IPO. In the oil market this morning, a barrel of West Texas Intermediate for October delivery was trading at $68.99 as crude rose following progress on North American trade talks.