Weekly Market Update


US trade deals were again in the spotlight, powering US equities to new highs. The US and Mexico finally signed a revised free trade agreement potentially ending an acrimonious impasse in relations between the countries since Donald Trump became president. The two sides agreed to stricter rules for Mexican car exports to the US, while the deal maintains tariff-free trade for farm products, but with new measures on labelling and health standards.

Meanwhile international trade relations remain extremely fraught, with the US poised to impose a further $200bn in tariffs on Chinese products as early as next month, after the latest round of negotiations between Beijing and Washington ended without much progress.

Meanwhile there are traditional disputes between Russia, China and the west that go well beyond arguments over tariffs. There are continuing trade sanctions against Russia for past misconduct, and western concerns about some of the ways China is flexing her new-found power. These also have an impact on world trade and markets. For now, Trump has claimed a win with Mexico and it may be that he sees no urgency to do the same with China.

Elsewhere, recent action by Argentina’s central bank failed to halt a plunge in the peso. The central bank ratcheted up interest rates to 60 per cent, aimed at arresting a currency collapse. It comes amid mounting concerns across multiple emerging markets, as a strengthening dollar buoyed by a fast-growing US economy and a Federal Reserve committed to a series of rate increases has raised questions over whether companies and governments in the developing world will be able to pay off their dollar-denominated debt.

The Turkish lira has been the other hardest-hit emerging market currency. Turkey’s inflation rate climbed to almost 18 per cent last month with rapid price gains reported across a wide swath of categories, marking the latest sign of mounting imbalances in the economy.

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