Weekly Overview (27 – 31 August 2018): Trump to sign bilateral NAFTA deal amidst tense US-Canada trade relations

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Despite a week-long flurry of intense negotiations, Canada is still facing the possibility of being left out of NAFTA (North American Free Trade Agreement)—a trade pact on which depend 3/4 of the country’s exports and the livelihoods of 2.5 million Canadians.

US and Canadian trade officials are set to rekindle their negotiations on Wednesday in an attempt to forge an agreement that is fair for all parties involved.

This comes as a response to president Trump’s announcement that US and Mexico will sign a bilateral agreement on Monday. Pressed for time, Canada is now trying to negotiate its way into the deal and receive its fair share of the total of $1.2 trillion in regional trades.

The US President’s change of heart came as a surprise to many political figures who vividly remember Trump’s stance about Canada some 18 months ago. Back then, Trump promised that NAFTA-related changes concerning Canada (if any) would be minor at worst.

When confronted by the press, the US President justified his decision with Canada’s exorbitant dairy tariffs on US farmers and demanded better access to the country’s closed dairy market.

Despite being optimistic that Canada could re-enter the NAFTA agreement by September 07th, the country’s prime minister Justin Trudeau made it unequivocally clear that the nation will not be putting up with Washington’s demands:

“We recognise that there is a possibility of getting there by Friday, but it is only a possibility, because it will hinge on whether or not there is ultimately a good deal for Canada. . . . No Nafta deal is better than a bad Nafta deal.”

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On Wednesday, the US released its preliminary quarter over quarter GDP report, according to which the index rose by 4.2% at an annual rate during Q2 of 2018. This is a significant improvement to the 2.2% growth reported for the first quarter.

According to the ANZ Business Outlook Survey carried out in August, a net 50% of all respondents are expecting general business conditions to worsen going further into 2018.

Manufacturers were the least positive about regarding their own activity (-4%), which contrasted with the overall positive responses coming from the retail and services sectors.

Australia’s quarter over quarter Private Capital Expenditure report showed that capital expenditure for the period leading to June 18th was estimated at $29 377 million—0.6% less than the preceding quarter.

Out of this number, $15 592 million were invested in buildings and structures, while $13 804 million went into the purchase and maintaining of equipment, manufacturing plants, and machinery.

Canada’s real gross domestic product marked an increase of 0.7% for the second quarter, or a boost of 0.3% compared to Q1 for 2018. According to the report, a significant chunk of this growth came from a 2.9% spike in the amount of goods exported.

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Dollar Tree met Wall Street estimates and reported a quarterly profit of $1.15 per share. The discount retailer also reported a 3.7% increase in comparable store sales.

Guess exceeded general consensus estimates with an adjusted quarterly profit of 36 cents per share. The apparel maker failed to meet revenue expectations, however the company stated that it is getting closer to making all of its business units profitable.

The stock value of PVH rose with 1.5% during after-hours trading. It also outperformed Wall Street revenue estimates by reporting a figure of $2.3 billion compared to an initial forecast of $2.29 billion. In light of this, the company shifted its full-year EPS expectations from $3.03 to $3.06.

Last week, General Motors reported that it failed to boost their electric vehicle production in China due to the underwhelming performance and safety standards of China-made batteries.

Box reported a loss of 5 cents per share for its second quarter, or 1 cent less than analyst expectations. Despite exceeding revenue estimates the cloud storage provider now predicts significant losses on a year-over-year basis.

PayPal was granted a “buy” status by Berenberg, which commended the company’s flexible platform and its wide range of products.

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On Friday, the S&P 500 closed at 2,901.52, the NASDAQ closed at 7,654.55, the Dow Jones closed at 25,964.82, and the NIKKEI 225 closed at 22,707.38.

Gold reached $1201.19 per ounce on Friday—a significant dip in price compared to the previous Friday’s performance of $1205.82 per ounce. For the same period, silver was valued at $14.495 per ounce, or a slight decrease compared to the price of 14.779 per ounce reported on August 24th.

The Greenback opened strong on Friday morning reaching 94.80, or an increase of 0.18% across a basket of currencies. This growth was a direct response to Trump’s escalation of the already tense relations between the US and China.

The EUR/USD pair echoed the preceding North America session as it continued to decline, falling through lows of 1.1652. The Euro, however, enjoyed a quick recovery as it passed through resistance levels of 1.17 and reached a high of 1.1718.

The British Pound held its ground against the Greenback by maintaining a range of 1.30. The Sterling also dominated the Euro for the duration of the week, forcing the latter to retreat below 0.90 pence.

Trade tensions were not as generous to the Australian Dollar which plummeted below 0.73 and opened at 0.7226 on Friday.

The New Zealand Dollar suffered a huge blow on Thursday, losing almost 100 points and taking the first spot as the day’s worst performer. This rapid decline was mostly caused by the ANZ’s business confidence report which revealed an unprecedented loss in corporate confidence since the infamous financial crisis of 2008. On Friday, the NZD touched intraday lows at 0.6635.

Despite a positive NAFTA outlook for Canada, the Loonie slipped below 0.77 in intra-day trading on Thursday against the US dollar to touch 0.7692. As a result, the Bank of Canada may be forced to raise rates once more before the year expires to battle this volatility.

For a comprehensive list of all important financial events for this past week, make sure to visit our complete trading news report.