Nasdaq passes 8000 as stocks rally on Trump's Mexican trade deal
Wall Street rallied after President Donald Trump announced a trade deal with Mexico that effectively scraps the former Nafta three-country agreement with Canada.
The tech-heavy Nasdaq Composite passed through the 8000 mark for the first time.
It took 164 trading days to rise 1000 points from 7000 and is the second 1000-point advance in 2018. This has not happened since 1999.
Mr Trump said the new US Mexico Free Trade Agreement would replace Nafta, which had “bad connotations” for the US.
The pressure is now on Canada, with Mr Trump saying “we’ll see” if it will remain part of an agreement.
Separate negotiations with Canada will resume soon. The US wants tariffs on car imports from Canada, among other measures.
The deal with Mexico overhauls the rules for building cars to ensure more locally produced steel is used. Wages and conditions for Mexican workers will also be raised to reduce the labour-cost gap.
Other provisions beef up regional content requirements for chemicals, steel-intensive products and other industrial materials. Rules governing supply chains in the textile and apparel industries are also strengthened.
Bonds sold off
Stocks rallied as investors flocked to riskier assets and sold government bonds.
“That eliminates one trade risk that’s been lingering in the background,” USB Global Wealth Management head of asset allocation Jason Draho says.
The Dow Jones Industrial Average climbed 259.56 points, or 1.0%, to 26,049.78. The S&P 500 gained 0.8% to 2896.69 and the Nasdaq Composite jumped 0.9%,to 8017.90. It has soared 16.1% this year, outpacing the S&P 500’s gain.
Auto stocks soared on the Mexico deal. Ford rose 3.1% and General Motors gained 4.7%.
However, Tesla shares fell 2.2% after chief executive Elon Musk confirmed he would not proceed with a buyout.
In further auto-related news, Toyota is set to invest about $US500 million in Uber Technologies as part of an agreement to work jointly on driverless-vehicle development, the Wall Street Journal reported.
The deal values Uber at about $US72 billion. Toyota shares rose 2.9% in Tokyo.
Financial stocks in the S&P 500 added 1.6% as treasury yields rose, pushing bond prices down. The 10-year US government bond rose to 2.848% from 2.826% on Friday.
Oil prices steady
Oil prices were steady as traders waited for fresh supply signals after last week’s rally.
Prices climbed more than 5% on a larger-than-expected drop in US inventories, though they are still about 7% below their multiyear peak from earlier in the year.
US crude for October delivery was unchanged at $US68.77 a barrel, while Brent crude, the global benchmark, was up 0.2% at $US75.98.
In Asia, stocks rose after the People’s Bank of China decided to stabilise sharp moves in the yuan, giving it more control over the currency. The yuan hit its highest level against the dollar in about a month.
The Shanghai Composite added 1.9%, Hong Kong’s Hang Seng jumped 2.2% and Japan’s Nikkei index rose 0.9%.
The Stoxx Europe rose 0.5%. France’s CAC 40 advanced 0.9%, Germany’s DAX surged 1.2% and the UK’s FTSE 100 gained 0.2%.