The sell-off in US tech shares dragged the market lower. The S&P 500 fell for the sixth session of the past eight and closed below the 200-day moving average for the first time in a couple of years. The sell-off in Asia and Europe is more muted. The MSCI Asia Pacific Index slipped less than 0.1%. The Hang Seng, an index of H-shares, and Korea’s KOSDAQ managed post gains. European shares are down a bit more with the Dow Jones Stoxx 500 nearly 1% lower in late morning dealings, with industrials and information technology providing the largest drags. Meanwhile the S&P 500 is trading about 0.3% higher.

Bonds are finding little comfort from the sell-off in equities.  The US 10–year yield is up two basis points to 2.75%. Peripheral European benchmark yields are also up a couple of basis points while the core is up a little less. The 10-year UK Gilt yield is slightly lower at 1.34%.

The dollar is mostly softer, though against the euro and yen, it remains within yesterday’s ranges. The dollar-bloc currencies, Scandis and sterling are outperforming. The Mexican peso and Canadian dollars continue to respond positively to the latest turn in the NAFTA plot. On Sunday, President Trump threatened to leave NAFTA talks and was critical of Mexico’s border controls. Late yesterday, press report suggested that Trump was pushing for a preliminary NAFTA agreement to be announced next week at the regional summit in Peru (April 13-14). The idea is to get an agreement in principle and then allow the technical talks to work out the precise details. 

The eighth round of talks were to begin next week in Washington, but top Mexican and Canadian officials were reportedly coming to the US this week to meet US officials. Trump’s weekend tweet may have been designed to exert pressure on the (Mexican) negotiators for additional compromises. Of course, it seems like in all three parties interest to reach an agreement shortly. The talks were to have ended last year and were extended. Many see the Mexican elections in July as an obstacle if talks continue much longer. A re-negotiated NAFTA would be seen as a win for Trump–that the negotiating strategy worked.

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