Catalonia keeps European stocks down

LONDON: World shares ground out a fresh record high yesterday, making it almost 50 for the year, although Europe traded cautiously as markets waited to see whether Spain’s Catalonia region would push for independence later in the day. Japan and South Korea returned from extended breaks to give Asia a lift as Wall Street looked set to open higher, but the Catalan uncertainty meant the euro zone’s main bourses and Spanish bond markets spent the day in the red.

Catalonia’s secessionist leader Carles Puigdemont is due to address the region’s parliament in Barcelona around 1600 GMT and could ask the assembly to vote on a unilateral declaration of independence from Madrid. It is Spain’s biggest political crisis since an attempted military coup in 1981 and Madrid’s IBEX stocks index was 1 percent lower in early afternoon trade. It is now down almost 9 percent since May, though a sharp rise in the euro has also taken a toll.

“We have not witnessed any relevant statement or signal by the separatists that would hint at a change of strategy ahead of today’s discussion in the Catalonian parliament,” economists at Barclays wrote. “Consequently, at this point, it seems likely that Catalan President Carles Puigdemont remains on track to announce a unilateral declaration of independence as early as today.”

The euro remained resilient. It hopped to a one-week high of almost $1.18 as data showed German exports surged in August. Traders were also still upbeat after one of the European Central Bank’s German policymakers called for an end to its stimulus. There was also help from a weaker dollar which was down for a third straight day. The dollar index, which tracks the greenback against six major rivals, dropped 0.3 percent to 93.366 and away from Friday’s almost 3-month peak. It gave the Turkish lira a breather after it had been sent sprawling to a nine-month low on Monday after the United States and Turkey scaled back visa services. Mexico’s peso hovered at its weakest in more than four months too, ahead of the latest round of talks over the North American Free Trade Agreement (NAFTA) on Wednesday.

“Mexican asset prices have been very well supported this year so we think there needs to be a little bit of caution,” said UBP’s EM macro and FX strategist Koon Chow.

“There is not much of a cushion for bad news now and NAFTA talks are unlikely to bring any good news.”

Korea path

Futures markets pointed to Wall Street breaking a two-day run of falls with the third quarter earnings season now gathering steam. Bond markets, meanwhile, were waiting to see if 10year Treasuries would get above 2.4 percent ahead of another Fed rate hike that is now seen as almost nailed on for December. Minneapolis Federal Reserve President Neel Kashkari and his Dallas counterpart, Robert Kaplan, are due to make speeches later ahead of the minutes from the Fed’s September meeting, which will be published today.

Overnight, MSCI’s broadest index of Asia-Pacific shares outside Japan had climbed 0.6 percent, boosted by a 1.6 percent jump in Korea as shares of firms such as Samsung which have been closed for the past week, caught up with some of the global rally. Japan’s Nikkei brushed off a weak start to finish 0.6 percent higher too, though China stocks dipped as investors cashed in some of the gains that took them to a 21month high in the previous session.

China’s Statistics Bureau yesterday said the country would have no problem meeting its economic growth target of around 6.5 percent this year, and might even beat it. Such an outcome had been widely expected after a robust start to the year. The offshore Chinese yuan rate surged to its strongest level in more than two weeks. The central bank had also set a firmer-than-expected official rate, suggesting authorities are keen to keep the currency in check ahead of next week’s key national leadership meeting.

The stocks gains came in spite of tensions on the Korean peninsula. Russian Foreign Minister Sergei Lavrov told US Secretary of State Rex Tillerson in a phone call on Monday that any further escalation of the situation was unacceptable.

China had also called for restraint. US President Donald Trump warned over the weekend that “only one thing will work” in dealing with Pyongyang, hinting that military action was on his mind. In commodities, Brent oil prices pushed back above $56 a barrel after top producer Saudi Arabia signalled it would trim its exports and as OPEC flagged ongoing efforts to try to restore the longer-term “balance” of the market. Brent jumped 50 cents to $56.31 a barrel, while a 54 cents rise took US crude back to $50 a barrel. “The kingdom expects all other participants in the (agreement) to follow suit and to maintain the high levels of overall conformity,” a Saudi oil Ministry spokesman said. —Reuters