(Bloomberg) - US stocks added to all-time highs, and Mexico's peso rallied versus the dollar as the Trump administration closed a bilateral trade deal with America's southern neighbour. Treasuries fell.
The S&P 500 Index closed in on 2,900 as President Donald Trump unveiled details of the agreement that he says will replace Nafta. Shares of carmakers and parts producers in the equity benchmark surged more than 3 per cent. The peso rallied, and Canada's dollar strengthened.
European shares advanced, though a British holiday depressed volume. The strongest moves were in Asia after recent efforts by the Chinese central bank to shore up the yuan. That currency was largely stable in the offshore market as the dollar turned lower. The euro reversed a drop after a jump in German business confidence.
"The stock market is confident that the trade war is closer to the end than the beginning," Chris Rupkey, chief financial economist at MUFG Union Bank in New York, said in an e-mail.
"One by one the trade war dominoes are starting to fall backwards and are off the table for risks that threaten the global economy."
The breakthrough on trade with Mexico captured investor attention amid yet another failure for US and China trade talks. American stocks added to records amid strong earnings and domestic expansion, while Federal Reserve Chairman Jerome Powell's indication the US will continue to follow a path of gradual tightening was interpreted as having a dovish tone.
The news enabled investors to look past a host of other macro events, including President Donald Trump's ongoing legal woes, fresh Russian sanctions, a war of words over Syria and faltering efforts to denuclearise North Korea.
While Asian shares rallied on the back of the yuan's stabilisation, the PBOC's moves to steady the currency threaten to be an unwelcome step backward in the longer term.
Elsewhere, European bonds followed Treasuries lower. Turkey's lira dropped as the country's markets reopened following a holiday. Emerging-market stocks rallied. Oil was little changed.
Reporters discuss the week in markets on the Terminal Conditions podcast.
Here are some key events coming up this week: Earnings are due from companies including Canada's largest banks and China Construction Bank Corp., ICBC, Pernod Ricard and Dollar General.
China's official factory PMI are due Friday.
The U.S. economy probably grew in the second quarter at a slightly slower pace, economists predict ahead of Wednesday's report.
The Bank of Korea sets policy on Friday. Weak jobs growth has cooled speculation of an interest-rate increase.
These are the main moves in markets: Stocks The S&P 500 increased 0.8 percent to 2,896.97 as of 12.49pm in New York to the highest on record.
The Dow Jones Industrial Average rose 0.9 per cent to surpass 26,000.
The Stoxx Europe 600 Index gained 0.4 per cent to the highest in almost two weeks.
The MSCI Asia Pacific Index increased 1.2 per cent to the highest in two weeks on the biggest climb in more than 11 weeks.
The MSCI Emerging Market Index gained 1.8 per cent to the highest in two weeks on the largest rise in more than six weeks.
Currencies The Bloomberg Dollar Spot Index declined 0.4 per cent to 1,178.53.
The peso rose more than 1 per cent to 18.66 per dollar.
The euro increased 0.1 per cent to $1.1677.
The Japanese yen rose 0.1 per cent to 111.06 per dollar.
Bonds The yield on 10-year Treasuries rose two basis points to 2.83 per cent, the biggest advance in more than two weeks.
Germany's 10-year yield rose two basis points to 0.37 per cent, the highest in two weeks.
The spread of Italy's 10-year bonds over Germany's dipped one basis point to 2.7988 percentage points.
Commodities West Texas Intermediate crude gained less than 0.05 percent to US$68.75 a barrel, the highest in more than three weeks.
Gold dipped less than 0.05 per cent to US$1,205.79 an ounce.
