The Monday Market Minute

  • U.S. stock futures surge after White House officials sign re-vamped NAFTA agreement with Canada, preventing the potential for tariffs on $1.2 trillion in annual trade.
  • Asia shares stall as investors count the cost of U.S.-China trade disputes, but new NAFTA deal boosts shares in Tokyo as markets in China remain closed for the Golden Week holiday.
  • European stocks opened firmer, although Italy's ongoing budget crisis is holding down gains in the region and sending government bond yields higher.
  • Global oil prices continue to rise despite Trump's plea to Saudi King Salman as traders prepare for next month's sanctions on the sale of Iranian crude.

Market Snapshot

U.S. stock futures surged Monday, setting up the Dow for a potential 200 point gain, after White House trade officials reached an agreement with Canada to revamp the North American Free Trade Agreement in a deal that removes tariff risks from around $1.2 trillion worth of a goods each year.

The United States-Mexico-Canada Agreement (USMCA), reached just hours before a self-imposed deadline of mid-night eastern time in order to allow outgoing Mexican President Enrique Peña Nieto to sign it into law before the end of the year, includes a major concession from Canada on access to its dairy market, but also a climb-down from U.S. Trade Representative Robert Lighthizer, who agreed to maintain a dispute settlement panel with America's biggest trading partner.

"USMCA will give our workers, farmers, ranchers, and businesses a high-standard trade agreement that will result in freer markets, fairer trade and robust economic growth in our region," the U.S. and Canada said in a joint statement. "It will strengthen the middle class, and create good, well-paying jobs and new opportunities for the nearly half billion people who call North America home."

"We look forward to further deepening our close economic ties when this new agreement enters into force," the statement added.

A host of other details surrounding the deal, and its impact on issues such as automotive supply chain origins, steel and aluminium tariffs and the contentious issue of U.S.-Canada lumber trading still haven't been fully revealed, but the framework agreement nonetheless removes a significant tariff-related risk for the global financial markets heading into the final months of the year.

U.S. equity futures spiked higher on the deal, with contracts tied to the Dow Jones Industrial Average I:DJI indicating an opening bell gain of 185 points in early European trading while those linked to the S&P 500 I:GSPC suggest an 16.5gain for the broader benchmark. Nasdaq Composite I:IXIC futures were seen 50 points higher from their Friday close.

Tesla Inc. (TSLA) - Get Report shares surged in pre-market trading Monday after Elon Musk agreed to settle fraud charges with the Securities and Exchange Commission over the weekend in a deal that will allow him to remain CEO of the company he founded, even as he is forced to step down as chairman of the board.

Tesla shares were marked 16% higher in pre-market trading Monday, indicating an opening bell price of $307.28 each, a move that would take the stock close to break-even on the year and value the Palo Alto, Calif.-based carmaker at around $52 billion.

General Electric (GE) - Get Report shares were also on the move and trading sharply higher in pre-market trading Monday after the company said it was replacing John Flannery with Larry Culp after just over a year at the helm of the struggling conglomerate.

GE shares were marked 15.3% higher in pre-market trading Monday following the announcement, indicating an opening bell price of $13.02 each, a move that would still leave it with a year-to-date decline of 25%.

The U.S. dollar index, which tracks the greenback against a basket of six global currencies, was marked 0.1% lower on the session at 95.08, while benchmark 10-year U.S. Treasury bond yields  edged modestly higher to 3.09%.

The Canadian dollar jumped to a four-month high of 1.2800 against the greenback following news of the deal, while the Mexican peso rose 0.85% to a seven-week peak of 18.51 per dollar. 

Stocks in Asia, however, were softer on the session, as investors grew increasingly concerned that stalled trade talks between the U.S. and China would continue to impact growth prospects for the world's second-largest economy.

That view was supported by weekend data showing that factory activity in China fell to the lowest since May 2017 last month, although the breakthrough in NAFTA talks could help domestic shares extend gains in Shanghai past an eight week high when investors return from the Golden Week holiday.

Japan's Nikkei 225, as well, was able to rise 0.52% to close at a fresh 27-year high despite a key reading of business confidence falling for three consecutive quarters -- the worst streak in a decade -- amid the ongoing uncertainty over Japan's future trade relationship with the United States.

European stocks were also mixed at the start of trading, but extended gains thanks to gains for Germany,'s auto sector, which offset declines in Italy and the United Kingdom, where investors continued to focus on the former's spending plans and its impact on the bond markets and the latter's Brexit-related uncertainty

The Stoxx Europe 600 was marked 0.36% higher by mid-day in Frankfurt, while the DAX index gain 0.7% and the FTSE 100 edged 0.14% to the upside. 

Global oil prices were also on the rise again Monday, taking crude to fresh four year highs, despite a weekend call between President Donald Trump called Saudi Arabia's King Salman where the two discussed how the world's biggest producer could boost supply ahead of next month's sanctions on the sale of Iranian crude, OPEC's third largest producer.

Brent contracts for November delivery, the global benchmark, were seen 13 cents higher at $82.86 per barrel in early European trading while WTI contracts for November, which are more tightly linked to U.S. gasoline prices, were marked 14 cents higher at $73.39 per barrel.