U.S. Stock Futures Hold Gains as Deal Struck to Replace Nafta

(Bloomberg) -- U.S. stock-index futures held gains in Asian trading as Washington and Canada agreed on a trade deal that would preserve a three-way bloc with Mexico.

Futures contracts on the S&P 500 Index rose 0.6 percent as of 12:45 p.m. in Tokyo after the underlying gauge fell 0.5 percent last week ahead of last minute negotiations at the weekend. Contracts on the Dow Jones Industrial Average and Nasdaq were up 0.7 percent respectively.

U.S. stock futures had gained in Asia in anticipation a deal would be struck to save the North American Free Trade Agreement, a “better outcome than perhaps what was previously expected,” said Kyle Rodda, a Melbourne-based market analyst at IG. U.S. stocks were pressured last week as traders priced an “unfriendly outcome” to the Nafta negotiations after President Donald Trump said at the United Nations he wouldn’t make the deal they were seeking, Rodda said by phone.

The new deal will be called the U.S.-Mexico-Canada Agreement, replacing the 24-year-old Nafta that involves improved access to Canada’s dairy market for U.S. farmers, stronger intellectual property provisions, and tighter rules of origin for auto production, according to officials who spoke to reporters on a briefing call on condition of anonymity.

“It’s a good day for Canada,” said Canadian Prime Minister Justin Trudeau when asked earlier about the deal in Ottawa.

The agreement also allows assessment of how negotiations may play out in Washington’s other trade disputes, Rodda said.

“You can assess the White House’s negotiating position here and how much they’re willing to compromise with some of these other negotiations going on around the world,” he said. Still, China “won’t be dragged to the negotiating table.”

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