Investing.com -- There's a trade deal in the air (but not with China), the House of Representatives is moving closer to sending articles of impeachment to the Senate, and sterling hits a seven-month high against the dollar as Boris Johnson closes in on an election victory in the U.K. Here's what you need to know in financial markets on Monday, 9th December.
1. NAFTA replacement in sight
The U.S. is closing in on a trade deal with – wait for it, no, not China – Mexico and Canada, according to reports over the weekend.
The U.S.-Mexico-Canada Agreement, or USMCA, is closer to completion now that House Democrats and the Trump administration have smoothed over most of their remaining differences, according to The Wall Street Journal and others.
After a bruising year of trade conflicts with China, Europe and, most recently, Brazil and Argentina, progress on USMCA would be welcome. The new agreement, which is supposed to supersede NAFTA, will likely include tighter monitoring of labor standards in Mexico, the reports suggested.
2. House close to sealing articles of impeachment
However, it’s not all good news for President Donald Trump. The House Judiciary Committee is set to decide as early as today on how to frame articles of impeachment, according to Chairman Jerrold Nadler.
The Committee will hear from its own and from another committee’s lawyers Monday about the constitutional grounds for impeachment and the evidence gathered against Trump. It isn’t clear whether the articles of impeachment will focus solely on the allegations of abuse of office with regard to withholding Congressionally-approved military aid for Ukraine, or will be based on a broader slate of charges.
The likelihood of Trump being removed is still low, given that it would need a two-thirds vote in favor from a chamber that is still controlled by the Republican Party.
3. Stocks subdued ahead of central bank meetings, trade deadline
U.S. stock markets are set to start the week in subdued mood, all three main indexes edging down less than 0.1% as of 6:40 AM ET (1140 GMT).
Overnight, Asian and European stocks had also stayed in relatively narrow ranges.
Trading is set to stay ultra-sensitive to trade-related headlines, given that it’s now less than a week before the latest round of U.S. tariffs on imports from China kicks in.
To quieten activity further, there’s the prospect of policy meetings at the Federal Reserve and the European Central Bank in the middle of the week. While neither central bank is expected to touch its official interest rates, there will be the usual close scrutiny of the language used by both Jerome Powell and Christine Lagarde – all the more so in Lagarde’s case, since this will be her first press conference as president.
On the earnings front, online pet food retailer Chewy is due to report after the close along with Stitch Fix and Versum Materials.
4. Crude settles into higher range post OPEC+
Crude oil prices have seemingly settled into a higher range after Friday’s meeting of the OPEC+ group produced a more significant cut in output than had been expected – at least for the next three months.
By 6:40 AM ET, U.S. crude futures were down 1.0% at $58.63 a barrel, while international benchmark Brent was down 0.9% at $63.87 a barrel.
Saudi Arabia decided to cut its own output by more than the agreed amount, meaning that the notional amount of capacity being held back from world markets will rise to 2.1 million barrels a day from 1.7 million currently. Analysts warn that the actual extent of restraint may not match that, but Saudi Arabia will remain under pressure in the near term to keep the market orderly, given that the alternative would risk a big disappointment for all the investors in the Saudi Aramco IPO.
On Friday, data from drilling company Baker Hughes showed that the number of active oil rigs in the U.S. fell to its lowest since March 2017, a reflection that shale producers are finding it increasingly tough to sustain production with only marginal cash flow at current prices.
5. Pound rises as Johnson enters home straight
The British pound hit its highest level against the dollar in nearly eight months as the Conservative Party defended a big lead in opinion polls at the start of the final week of the U.K.’s general election campaign.
While the vagaries of the British electoral system mean that even a 10-point lead in the polls may not translate automatically into a majority in the House of Commons, recent polls have suggested that the Tories have made significant inroads into traditionally Labour areas in northern England which voted overwhelmingly to leave the European Union in 2016.
An optimal result for the foreign exchange and local stock markets would be a big Tory majority, not only because it would ensure the U.K. leaves the EU without further delay, but also because it would allow Johnson to conduct future negotiations on an EU trade agreement secure against pressure from the more extreme Brexiteers in his party. It would also likely force a rethink of the extreme-left policy platform adopted by the Labour Party under Jeremy Corbyn