Asian Stocks Mixed As US, Canada Reach NAFTA Deal, CAD Gains

ASIAN STOCKS TALKING POINTS:

• Regional stocks were mixed but most bourses managed gains on Monday
• The US and Canada just made a US-imposed deadline on NAFTA overhaul
• Chinese and Japanese data pointed to slowing momentum

Asian markets traded mixed on Monday and continued to do so following news that the US and Canada had reached a deal to replace the troubled North American Free Trade Agreement (NAFTA).

The new deal will be called the United States Mexico Canada Agreement, or USMCA, and it was signed as negotiators from Canada and the US managed to meet a US-imposed September 30 deadline, but only just.

The deal is being touted as a long needed overhaul of NAFTA, but will still need to pass the legislatures of the US, Canada and Mexico before becoming trade law. Discussions with Canada around steel and aluminum tariffs appear to be continuing on a separate track.

Still, Asian markets were broadly stronger after the news with shares in Tokyo, Shanghai and Hong Kong all in the green, if not by much. Seoul and Sydney lagged with their mainboards both slightly lower.

Regional economic data were also mixed. China’s manufacturing Purchasing Managers Index was released on Sunday. It showed clear signs of waning momentum although it did stay above the key 50 point which separates expansion from contraction. Japan’s ‘tankan’ business survey showed a surprise fall in confidence among major manufacturers, while Australian inflation remained as docile as ever according to a private survey.

In the foreign exchange space the Canadian Dollar got a lift against its US cousin from the trade agreement news, while the Japanese Yen remained under its customary duress, with USD/JPY trying new 10.5-month lows. USD/CAD’s retreat from the 2018 highs made in June continues.

Further acceleration of that downtrend could see the lows of late April back in play.

Gold prices still seem to be taking a hit from the prognosis of further Federal Reserve interest rate hikes, while sanctions on Iran keep crude oil prices underpinned, despite worries about global demand levels.

The day’s major remaining data releases are the US employment and manufacturing snapshots from the Institute for Supply Management, Canada’s manufacturing Purchasing Managers Index. UK consumer credit numbers are also coming up.


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