Sector movers: US-Mexico trade talks boost miners, steel companies

News that the US and Mexico had agreed to make modifications to the North American Free Trade Agreement appeared to boost investor sentiment on Tuesday, with shares of miners and steel outfits deriving the greatest benefit, amid hopes that it might herald progress in talks with other trading partners.

In that regard, on Monday the White House said the US President and Germany's Chancellor had spoken by phone, with both having reiterated their "strong support" for removing trade barriers against each other.

Following that, on Tuesday, the US Treasury Secretary, Steve Mnuchin, said he believed trade talks with Canada could be wrapped-up by the end of the week.

Copper prices perked up as a result, with three-month LME copper futures rising to $6,090 per metric tonne after opening at $5,991.

There was also some 'market chatter' on Tuesday regarding expectations for economic growth in China to hit bottom over the coming months, as government measures meant to spark infrastructure investment and the flow of credit to small firms kicked-in.

Automobile stocks also found a bid, given how the sector was at the centre of the negotiations between the US and Mexico.

Nevertheless, not all analysts were buying into the chipper mood, with Capital Economics's Oliver Jones telling clients: "Admittedly, signs that the US administration is willing to negotiate and accept a compromise on trade will presumably be welcomed in China and Europe.

"But the agreement between the US and Mexico is no guarantee of progress elsewhere. [...] And even if we are wrong, we remain pessimistic about the outlook for equities globally, given our forecasts that growth in both the US and Chinese economies will slow in the next couple of years regardless of protectionism."

On the other side of the ledger, a drop in shares of Associated British Foods offset gains for Tate&Lyle.

Weighing on the former, analysts at Citi trimmed their estimates for earnings before interest and taxes at ABF's Primark unit in 2019 and 2020 by £10.0m and £45.0m to £900.0m and £953.0m, respectively, citing forecasts for some slight margin erosion due to currency headwinds.

Shares of Tate on the other hand jumped, with investors quickly recognising that the company stands to gain from the rebranding of the NAFTA deal, as given its exports of corn syrup to Mexico.

"While there are still hurdles to clear, Monday's announcement is a positive for companies exporting from Mexico into the US, such as brewers and ingredients companies. Around 10% of US High Fructose Corn Syrup industry production is exported to Mexico, and the fear of ending of NAFTA had weighed on the Tate & Lyle share price since the beginning of the Trump presidency," said Nico von Stackleberg at Liberum.

Top performing sectors so far today

Industrial Metals & Mining 4,657.70 +5.79%

Automobiles & Parts 11,323.21 +3.86%

Forestry & Paper 24,811.53 +3.14%

Leisure Goods 8,941.61 +2.72%

Mining 17,488.92 +2.24%

Bottom performing sectors so far today

Food Producers & Processors 7,031.86 -0.98%

Tobacco 43,312.23 -0.77%

Mobile Telecommunications 3,926.87 -0.08%

Construction & Materials 6,518.89 -0.01%

Alternative Energy 0.00 0.00%