European Stocks Fall amid NAFTA Trade Negotiations

European stocks dropped on Thursday as weakness in Chinese equities casted a shadow on optimism that a North American Free Trade Agreement (NAFTA) could be reached by Friday’s deadline.

The pan-European STOXX 600 declined 0.5 percent to $384.54 and is on track for its biggest drop in two weeks, while Germany’s DAX lost 0.9 percent to €12,440.63.

Britain’s FTSE 100 fell 0.5 percent to £7,521.75, while France’s CAC 40 slipped 0.3 percent to €5,480.88.

Spreadbetters had expected to see mixed trading in the European markets, with the FTSE 100 and the DAX each falling around 0.1 percent and the CAC 40 gaining 0.05 percent.

Weakness in Chinese Markets

Days after the US and Mexico sealed a bilateral trade agreement, US President Donald Trump and Canadian Prime Minister Justin Trudeau expressed optimism on Wednesday that the two nations could resolve their differences.

The US and Canada plans to settle a deal by the end of the week that would keep the three-country NAFTA deal intact.

However, MSCI’s broadest index of Asia-Pacific shares outside Japan declined 0.3 percent to $538.87, with huge gains across the region offset by losses in Chinese shares.

Chinese equities retreated from earlier gains due to the risks posed by the China-US trade war and as markets took little comfort from an easing business tensions in North America and Europe.

The Shanghai Composite index dropped 1.1 percent to CN¥2,737.74, while the SZSE Component slipped 1.4 percent to CN¥8,552.80. Hong Kong’s Hang Seng lost 0.8 percent to HK$28,164.05.

Analyst Yan Kaiwen stated that investors are relatively pessimistic and cautious for now amid low levels of trading volume, as there are still concerns over the development of the Sino-US trade spat.

US tariffs on another $200 billion worth of Chinese goods are expected to begin in late September.

Chinese stocks also ended lower after data from a London-based news agency showed performance in the factory segment could have turned sluggish for the third consecutive month in August amid uncertainty over an escalating trade war with the US.

Japan’s Nikkei 225 initially reached a three-month high after US stocks rose on positive developments in trade negotiations, but later trimmed gains and was last up by 0.09 percent to ¥22,869.00.

Australia’s S&P/ASX 200 was down 0.01 percent to A$6,351.80.

South Korea’s KOSPI was down 0.07 percent to ₩2,307.35, although major South Korean steel manufacturers POSCO and Hyundai Steel Co. Ltd. edged higher on news of Trump signing proclamations allowing targeted relief from steel and aluminum quotas from countries including South Korea.

Shares of POSCO climbed 0.3 percent to ₩332,500 and Hyundai Steel advanced 0.5 percent to ₩53,500.

US Secretary of Commerce Wilbur Ross said the agreement with South Korea was for a quota of 70 percent of average steel exports to the US in the year 2015 to 2017.

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