TSX falls as NAFTA risk weighs, gold miners buck move

Glen Norman
January 11, 2018

Canadian government officials said there's an increasing likelihood US President Donald Trump will give six-months' notice to withdraw from Nafta, dragging down the loonie, yields on government bonds and Mexico's peso. Kansas City Southern fell as much as 4.6 per cent after the report, its biggest loss in more than eight months.

Reports of NAFTA's possible demise, meanwhile, sent the Canadian and Mexican currencies tumbling, and the U.S. dollar rising from Can$1.2432 at 1200 GMT to Can$1.2554 at around 2030 GMT.

Mexico's auto sector has benefited from NAFTA as major manufacturers, such as General Motors Co (GM.N), Ford Motor Co (F.N), Fiat Chrysler Automobiles (FCHA.MI) and Volkswagen AG (VOWG_p.DE), have made the country a top export hub, attracted by cheap labor and free trade pacts with more than 40 nations.

A White House official later said there was no change to Trump's position on NAFTA. The peso fell as much as 0.9 per cent to 19.3963 per USA dollar, before rebounding later in the day. It is more likely a "zombie NAFTA" will continue even if Trump pulls out, as such an action could be held up in the US court system and members of congress would have to authorize the addition of new tariffs on goods from Canada.

"The market's been too complacent regarding Nafta termination risk for too long", said Bipan Rai, a Toronto-based foreign-exchange and macro strategist at Canadian Imperial Bank of Commerce.

Talks to overhaul Nafta began in August.

AMIA has a preliminary production forecast of over 4 million units for 2018, said Solis, a 6 percent increase in output over a year ago.

"The Canadian government is aware of the possibility that President Trump may announce the United States' withdrawal from NAFTA", a senior government official said on condition of anonymity. Canada is ramping up the outreach effort because "while we are doing a better job of this, and getting people's attention, we are not where we need to be", MacNaughton said.

"What's surprising to me is that everybody is so surprised". The news agency also said Canada plans to stay on the negotiating table even if Trump pulls out of NAFTA.

Mr Shenfeld sees the loonie falling to 75 USA cents and Mr Poloz slowing the pace of hikes if Mr Trump ultimately quits.

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