Early this Thursday, Mexico and the United States failed to arrive at an accord during their trade talks, following an unsuccessful negotiation by officials to avoid Trump's threat regarding the issuance of tariffs. This caused the U.S. stock-index futures to plummet. The Mexican peso also experienced a plunge as a result of the breakdown of the talks and after Moody changed the country’s outlook to negative, while the country’s credit rating to BBB was downgraded by Fitch. The failed talks also resulted in varied selling of equities in Asia Pacific Trade. The two countries are reported to go into further talks next week. Meanwhile, futures for the S&P 500 are not looking strong as it hangs on to the impending ECB rate announcement and the conclusion of the trade talks between U.S and Mexico.

After Trump’s announcement that he had an impression of Mexico wanting to go into a deal, U.S shares closes with high returns on Wednesday. Subsequent to the reports which announced that the trade talks were unsuccessful, Trump tweeted that there was development in the talks, but stated that it was “not nearly enough”. In the case that Mexico does not take action to control the movement of immigrants and drugs that are illegal in the U.S, the tariffs are set to start on Monday.

Keith Wade, Schroder Investment Management’s chief economist and strategist stated in a research note that with the impending talks between China and the U.S., the current tariffs suggesting a hike in trade tensions and would affect growth in Mexico and in the U.S. Until the trade talks reach a conclusion, equities may experience difficulty when it comes to continuance of material gains, generating a market limbo. This is a result of the increasing situation with the trade wars. The worsening state of the US-China relations and the tentative situation with the USMCA, is casting a shadow over the fundamental outlook. Right now, there is growing anxiety and fear over the Federal Reserve’s rate reduction hazards and the danger of a US recession.

By:Cyril Latrice Cajanding