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Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., on Friday, Aug. 24, 2018. U.S. stocks rose, while the dollar deepened losses and Treasuries turned higher after the Federal Reserve chair signaled the central bank has no intention of accelerating the pace of rate hikes. Photographer: Michael Nagle/Bloomberg

(bloomberg)

(Bloomberg) -- U.S. stocks rose to fresh all-time highs and Mexico’s peso rallied versus the dollar as the Trump administration closed a bilateral trade deal with America’s southern neighbor. Treasuries fell.

The S&P 500 Index closed just short of 2,900 and the Nasdaq Composite Index topped 8,000 for the first time 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 3.5 percent. The Dow Jones Industrial Average rose above 26,000 for the first since February. 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 email. “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 U.S. and China trade talks. American stocks added to records amid strong earnings and domestic expansion, while Federal Reserve Chairman Jerome Powell’s indication the U.S. will continue to follow a path of gradual tightening was interpreted as having a dovish tone.

The trade 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 denuclearize North Korea. While Asian shares rallied on the back of the yuan’s stabilization, 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 2,896.66 as of 4 p.m. in New York to the highest on record.
  • The Dow Jones Industrial Average rose 1 percent to surpass 26,000.
  • The Stoxx Europe 600 Index gained 0.5 percent to the highest in almost two weeks.
  • The MSCI Asia Pacific Index increased 1.2 percent to the highest in two weeks on the biggest climb in more than 11 weeks.
  • The MSCI Emerging Market Index gained 1.8 percent to the highest in two weeks on the largest rise in more than six weeks.

Currencies

  • The Bloomberg Dollar Spot Index declined 0.4 percent to 1,178.53.
  • The peso rose more than 1 percent to 18.66 per dollar.
  • The euro increased 0.1 percent to $1.1677.
  • The Japanese yen rose 0.1 percent to 111.086 per dollar.

Bonds

  • The yield on 10-year Treasuries rose four basis points to 2.85 percent.
  • Germany’s 10-year yield rose three basis points to 0.376 percent, 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 0.2 percent to $68.87 a barrel, the highest in more than three weeks.
  • Gold futures added 0.2 percent to $1,216.10 an ounce.

--With assistance from Adam Haigh, Cormac Mullen and Samuel Potter.

To contact the reporters on this story: Jeremy Herron in New York at jherron8@bloomberg.net;Sarah Ponczek in New York at sponczek2@bloomberg.net

To contact the editors responsible for this story: Jeremy Herron at jherron8@bloomberg.net, Todd White

©2018 Bloomberg L.P.

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