The Canadian dollar rises thanks to NAFTA, Nikkei reaches its highest level in 27 years

TOKYO (Reuters) – The Canadian dollar and the Mexican peso have risen, and Japanese equities have reached their highest level in 27 years on Monday, after the United States and Canada reached a master agreement to update the US dollar. North American Free Trade Agreement.

A Canadian source confirmed that the two countries had reached an agreement, with Canada having agreed to an accompanying letter arrangement to limit auto exports to the United States.

Japan's Nikkei .N225 was up 0.8%, slightly above the 27-year high on Friday, and closed the morning session by 0.6%.

US ESc1 equity futures also rose 0.5%.

Norihiro Fujito, chief investment strategist at Mitsubishi's UFJ Morgan Stanley Securities, said that NAFTA was Washington's second most important trade problem after China.

"Investors will probably look at the final deal in a positive way, a sign that trade disputes are weakening outside of China. speak, he says.

The broadest MSCI index of Asia Pacific ex Japan shares .MIAPJ0000PUS was lower, falling 0.15%. Regional volumes are expected to be light due to holidays in China, including Hong Kong.

In Asia, two surveys showed Sunday that China's manufacturing sector growth deteriorated in September as domestic demand and export demand softened.

The PMI (Purchasing Managers) Index for the private Caixin / Markit plant fell to 50.0, its lowest level since May 2017, reiterating that trade disputes are starting to have real consequences for the economy.

"The escalating trade tensions between the United States and China have recently weighed on the sentiment of purchasing managers, as evidenced by declining results in trade-related sub-indices," wrote Bank of Canada economists. America Merrill Lynch.

"The deterioration of the PMI in September is in line with our expectation that coincident growth indicators will worsen before they improve. As the trade conflict between the US and China intensifies, we expect Chinese policymakers to intensify monetary and fiscal easing to mitigate the effects of rising foreign exchange rates. customs duties, "they added.

In Japan, the Bank of Japan's fuel cell survey revealed that the confidence of major Japanese manufacturers deteriorated three months in a row in September – for the first time since 2008-2009.

Global equity markets rallied in September in the hope that the two countries will reach a trade deal, but the end-of-month talks failed after both sides increased their trading rights. customs.

MSCI's largest share of global shares covering 47 markets .MIWD00000PUS rose for the third consecutive month in September.

In the currency market, the Canadian dollar rose more than 0.5% to its highest level in four months, or 1.2814 Canadian dollar, against the US dollar, CAD = D4.

The Mexican peso also gained more than 0.6% to 18.54 for a dollar MXN = D2, its highest level since early August.

As risk appetite improved, the JPY yen softened 0.2% to $ 113.96 for the dollar, its lowest level since mid-November of the year. last.

The euro is worried about Italy's rising budget deficit after the Italian government decided to set a higher-than-expected budget deficit target, which could put Rome on a conflictual trajectory compared to Brussels.

The common currency is trading at EUR 1.1608 = after losing 1.2% last week and a high of USD 1.18155 reached a week ago.

Oil prices have risen, Brent, an international benchmark, has reached its highest level in four years, while US sanctions against Tehran have reduced Iranian crude oil exports, thus reducing supply then that other key exporters were increasing their production.

The Brent Brut LCoC1 futures contract rose 0.6% to $ 83.25 per barrel, the highest level since November 2014.