October 1, 2018 / 11:15 AM / 18 days ago

US STOCKS-Futures point to gains on deal to replace NAFTA

* Futures up: Dow 0.77 pct, S&P 0.59 pct, Nasdaq 0.72 pct

By Medha Singh

Oct 1 (Reuters) - U.S. stock futures pointed to a rise on Monday after the United States and Canada clinched a last minute deal to save NAFTA as a trilateral pact with Mexico, boosting hopes for progress in talks with other countries at the start of the fourth quarter.

The relief lifted world markets and sent the Mexican peso and the Canadian dollar to new peaks after the new United States-Mexico-Canada Agreement (USMCA) rescued a $1.2 trillion open-trade zone on Sunday.

U.S. President Donald Trump coerced Canada and Mexico into accepting more restrictive commerce with their main export partner in a deal that will make it harder for global auto makers to build cars cheaply in Mexico and aims to bring more jobs to the United States.

Shares of Ford advanced 1.4 percent, while General Motors gained 1.6 percent.

Trump’s primary objective in reworking NAFTA was to bring down U.S. trade deficits, a goal he has also pursued with China, by imposing hundreds of billions of dollars in tariffs on imported goods from the Asian giant.

Among stocks, Tesla shares jumped 15.4 percent premarket after Elon Musk agreed to step down as the company’s chairman, but remain as chief executive in a settlement with the U.S. Securities and Exchange Commission on Saturday.

Chipmakers were among early losers, with Intel down 1.9 percent after Barclays downgraded the chipmaker, saying it would face a costly battle to keep market share amidst a near-term slowing of its end markets.

AMD fell 1.9 percent after Baird cut its rating to “neutral”.

Adding to the positive sentiment were oil prices, near their four year highs over supply concerns ahead of imminent U.S. sanctions against Iran. This lifted Chesapeake shares 1.78 percent.

At 7:01 a.m. ET, Dow e-minis were up 205 points, or 0.77 percent. S&P 500 e-minis were up 17.25 points, or 0.59 percent and Nasdaq 100 e-minis were up 54.75 points, or 0.72 percent.

This week ends with the Labour Department’s non-farm payrolls report and focus may also shift towards the start of the financial reporting season later this month.

Bolstered by a growing economy, deep corporate tax cuts and increased stock buybacks, S&P 500 companies are expected to post 21.6 percent increase in earning per share from a year earlier, according to Thomson Reuters I/B/E/S.

ISM’s national factory activity index at 10:00 a.m. ET is expected to show a dip to a reading of 60.3 in September from 61.3 in August, still showing the economy growing strongly.

Separately, the U.S. Commerce Department is forecast to report that construction spending increased 0.5 percent in August after edging up 0.1 percent in July. (Reporting by Medha Singh in Bengaluru; editing by Patrick Graham)

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