Shares rally after Catalonia independence put on hold
WORLD stocks set a record high yesterday as relief that Catalonia had put off plans to break away from Spain followed a two-decade peak for Asia’s biggest share market and more upbeat predictions for the global economy.
Spanish stocks and bonds rallied, and the euro reached a two-week high, in early European trading after Catalonia’s leader, Carles Puigdemont, declined to make a formal declaration of independence on Tuesday. This disappointed many pro-independence supporters, but pleased financial markets.
A 1.5% jump in Spain’s Ibex helped MSCI’s 47-country world stocks index to touch a record high.
The biggest surge came from Spanish banks, which rallied as much as 4%. Spanish government bond yields – a gauge of political tension – saw their second-biggest decline in a month.
“There was a chance Puigdemont would have made a decisive declaration, so now yields are dropping, because there is room for negotiation left,” said DZ Bank strategist Christian Lenk.
The euro climbed as high as $1.18345 (R16.0227) against the dollar, a two-week high. The US currency was down for a fourth day running and on its worst run since July. US President Donald Trump’s feud with Tennessee Senator Bob Corker, an influential fellow Republican, has raised concerns that Trump’s proposed tax-code overhaul would fail.
The early Spanish gains bolstered already-confident markets. The International Monetary Fund pushed up its forecasts for global growth on Tuesday, helping Wall Street to its latest record high.
Asian shares climbed to their highest in a decade as Japan’s Nikkei reached its strongest since 1996. South Korean stocks reached a new record high.
“A risk-on mood has set in, and money is flowing out of bond funds into equities funds,” said Hugh Dive, the chief investment officer at Atlas Funds Management.
“One of the biggest drivers of global equities is the US, and some of the macro data coming out from there has been quite positive. There is also this view that China is travelling much better than many people had expected.”
The weaker dollar helped commodities and emerging markets.
Emerging-market stocks sailed to six-year highs. US crude rose 42 cents to $51.34 per barrel, and Brent added 25c to $56.86 on signs of tighter supply.
Gold prices hovered around their highest level in two weeks, with spot gold at $1 289.06 an ounce. – Reuters