Asia stocks slip as NAFTA lift fades
Asian stocks fell on Tuesday as the lift from an agreement that saved the North American free trade deal faded, with cautious views on the global economy curbing risk sentiment.
MSCI's broadest index of Asia-Pacific shares outside Japan fell 1.3 percent after a steady start.
Australian stocks lost 0.7 percent and South Korea's KOSPI fell 0.9 percent.
Bucking the overall trend, Japan's Nikkei added 0.1 percent, after rising as much as 0.8 percent to a new 27-year intra-day high of 24,448.07.
Spreadbetters expected a weaker tone in European equities, forecasting a lower open for Britain's FTSE, Germany's DAX and France's CAC.
China's financial markets are closed for the week of Oct. 1-5 for national holidays.
Hong Kong's Hang Seng, which did not trade on Monday due to a holiday, dropped 1.9 percent in reaction to signs of weakness in the Chinese manufacturing sector shown in purchasing managers' index (PMI) numbers released on Sunday.
"While news that the U.S. and Canada had struck a new NAFTA trade deal gave the S&P 500 a lift overnight, dark clouds are gathering," strategists at OCBC Bank wrote in a note.
"With some signs of weakness in the European and Asian manufacturing PMIs Asian, markets may trade with a slightly more cautious tone."
IHS Markit purchasing managers' indices released on Monday showed manufacturing growth in the euro zone slowed to a two-year low at the end of the third quarter.
European shares rose cautiously early on Monday as optimism on the trade war front was lifted by a new U.S.-Mexico-Canada agreement, which is helping world markets enter the fourth quarter on a positive footing.At 0720 GMT, the euro zone benchmark was up 0.2 percent with most European bourses and sectors trading in positive territory."News overnight of a late agreement between the U.S. and Canada to salvage the NAFTA trade agreement should give a boost to global risk appetite at the start of the fourth quarter," wrote Peel Hunt strategist Ian Williams, adding the deal "may offer encouragement that the other global trade disputes can settled satisfactorily."Ryanair was the worst performer, down 7.5 percent after it cut its forecast for full-year profit and said there could be worse to come if recent coordinated strikes across Europe continue to hit traffic and bookings.The low cost carrier's fall weighed on the wider sector which was one of the only ones in the red, down 0.6 percent.Germany's Linde posted the highest rise after it received approval for its proposed $83 billion merger with Praxair PX.N from the Chinese antitrust authorities.Italian banks were down 0.3 percent after Italian daily La Repubblica reported that the European Commission was set to reject Italy's budget plans in November and open a procedure against the country's public accounts. Canadian dollar hits four-month high as US, Canada reach NAFTA dealIn Trump win, Canada, US deal saves NAFTA as trilateral pact
European shares rise as Nafta deal hopes lift sentiment
The United States and Canada forged a last-minute deal on Sunday to salvage NAFTA as a trilateral pact with Mexico, rescuing a $1.2 trillion open-trade zone that had been about to collapse after nearly a quarter century in operation.
The Dow rose 0.73 percent and the S&P 500 gained 0.36 percent on Monday after the deal to preserve NAFTA helped ease trade worries.
"There were concerns that the resulting confusion would exceed that of the U.S.-China trade row if NAFTA was scrapped. While it appears like Canada and Mexico caved in to the United States, the outcome is positive for global trade and the economy," said Yoshihisa Maruyama, chief market economist at SMBC Nikko Securities in Tokyo.
The Canadian dollar traded at C$1.2815 per dollar after rallying to a four-month high of C$1.2782 overnight following the trilateral trade pact.
The euro was little changed at $1.1543 after slipping 0.25 percent on Monday on renewed concerns about heavily-indebted Italy's budget.
The single currency has been hurt by concerns that a significant increase in the Italian budget will deepen Italy's debt and deficit problems.
The dollar was at 113.845 yen after scaling an 11-month high of 114.06 yen on Monday, as improving investor risk sentiment weighed on the Japanese currency.
The yen is usually seen as a safe haven at times of turmoil but recedes when risk appetite returns.
The dollar index against a basket of six major currencies rose 0.2 percent to 95.462, its highest since Sept. 10.
The greenback drew support from an uptick in U.S. Treasury yields as Wall Street gains curbed demand for safe-haven debt.
In commodities, U.S. crude futures were up 0.4 percent at $75.60 a barrel.
Crude contracts surged nearly 3 percent to $75.77 a barrel on Monday, their highest since November 2014, as the deal to salvage NAFTA stoked economic growth expectations, with impending U.S. sanctions on Iran seen raising prices.
Brent crude edged up 0.1 percent to $85.07 a barrel after rallying 2.7 percent the previous day to a $85.45, highest since November 2014.
Optimism about a reconstituted free trade agreement among the United States, Canada and Mexico and what it could mean for trade relations elsewhere helped world markets kick off the fourth quarter of the year in a positive vein.The United States and Canada salvaged NAFTA as a trilateral pact with Mexico, rescuing a $1.2 trillion open-trade zone that had been about to collapse after nearly a quarter century .Japan's Nikkei rose 0.5 percent to a 27-year high, followed by gains in European stocks markets, with Italian shares in particular clawing back some of last week's losses and U.S. stock futures indicating a sharply higher open on Wall Street.The Canadian dollar was up 0.85 percent against the dollar to a four-month high and the Mexican peso hit its highest in over seven weeks, up nearly a percent on the day."The trade deal is helping risk appetite across the board, especially the Canadian dollar, and that will likely lift appetite for emerging-market currencies across the board," said Manuel Oliveri, a currency strategist at Credit Agricole in London.A pan-European index of shares was up 0.3 percent, led by Italian stocks, which were up as much as 1.2 percent on the day, bouncing off a two-week low hit last week.On Friday, Italian stocks, bonds and the euro had all sold off on worries over a budget proposal from Italy's new anti-establishment government, particularly after a report said the European Union was set to reject the plan.But such were the scale of the losses that some analysts believed the market had gone too far."The math just does not justify the price action we saw on Friday. Not even close!" Unicredit economist Erik Nielsen wrote in a note on Sunday.It wasn't unalloyed optimism on Italy, however, with short-dated bonds selling off with two- and five-year yields higher 7-9 basis points, though there was some demand for longer-dated debt.The closely watched spread between Italian and German 10-year bond yields was at 268 basis points, about 30 bps wider than this time last week, but comfortably below Friday's high of 278 bps."It is quite clear that the European Commission will not like (the budget proposal)," said Commerzbank rates strategist Michael Leister. "Brussels will give its opinion, which we think won't be positive and ... the ratings agencies will opt for a similar stance. A downgrade is our base case."The euro was also intially hit by worries about a rise in Italy's fiscal deficit, dropping below the $1.16 mark, but it recovered as the session progressed to trade slightly higher at $1.1612.Also casting a shadow on markets were two surveys on Sunday that showed growth in Chinese manufacturing sputtered in September as domestic and export demand softened.As a result, MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.25 percent. China's financial markets were closed for a holiday, as was Hong Kong's stock exchange."The escalation of trade tensions between the U.S. and China recently has likely weighed on purchasing managers' sentiment as reflected by softer readings in trade-related sub-indices," economists at Bank of America Merrill Lynch said in a note.Oil prices strengthened with international benchmark Brent hitting a four-year high, as U.S. sanctions on Tehran squeezed Iranian crude exports, tightening supply even as other key exporters increased production.Brent crude futures rose 0.6 percent to as high as $83.25 per barrel, the highest since November 2014, before trading at $82.98, still comfortably higher on the day.
Canadian dollar, stocks rise as NAFTA salvaged