Spain-Catalonia relief edges world stocks to fresh high


Catalonia’s leader Carles Puigdemont had balked on Tuesday at making a formal declaration of independence, saying the plan would be put on hold and that he instead wanted talks with Spain’s government over the region’s future.

The move disappointed many pro-independence supporters but pleased financial markets with hopes the gesture would mark a de-escalation of Spain’s worst political crisis since an attempted military coup in 1981.

MSCI’s 47-country world stocks index .MIWD00000PUS briefly hit a fresh record high in opening European trading as a 1.5 percent jump in Spain’s IBEX .IBEX added to a 10-year high set by Asian shares overnight. [.T][.SS]

The biggest surge came from Spanish banks which rallied as much as 4 percent .IBEXIB, while the country’s government bond yields – which gauge political tension levels – saw their second biggest fall in a month. [GVD/EUR]

“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 to a two-week high of $1.18345 against a broadly weaker dollar which was down for a fourth day running in its worst run since July. [/FRX]

U.S. President Donald Trump’s public feud with Tennessee Senator Bob Corker, an influential fellow Republican, has raised concern that his push for a tax-code overhaul could be harmed.

At the same time, the Federal Reserve will publish the minutes from its last minute later with a third U.S. rate hike of the year now looking nailed on for December.

“Squabbles surrounding Trump’s efforts come as no surprise, but it is still not helping the dollar,” said Yukio Izhizuki, senior currency strategist at Daiwa Securities in Tokyo.

Europe’s Spain gains bolstered what was already a confident market mood after the International Monetary Fund pushed up its forecast for global growth on Tuesday

That had helped Wall Street hit its latest all-time high.

Asian shares then climbed to their highest in a decade as Japan’s Nikkei .N225 reached its strongest since 1996 despite more losses for scandal-hit Kobe Steel (5406.T) and as South Korean stocks .KOPSI made a new all-time top.

“A risk-on mood has set in and money is flowing out of bond funds into equities funds,” said Hugh Dive, chief investment officer at Atlas Funds Management.

“One of the biggest drivers of global equities is the United States and some of the macro data coming out from there has been quite positive. There is also this view that China is traveling much better than many people had expected.”