Spanish tensions bar Europe from global stocks party
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[October 04, 2017]
By Abhinav Ramnarayan
LONDON (Reuters) - Global stock markets hit
a record high on Wednesday with investors in exuberant mood in the
United States overnight and in Asia, but sentiment in Europe was soured
by a political crisis gathering steam in Spain.
Tensions between Madrid and Catalonia have risen since the wealthy
region held an independence referendum on Sunday that was tarnished by
police violence.
Fallout from those clashes nudged Spanish stocks towards their biggest
daily fall in more than a year on Wednesday, in turn dragging down other
European bourses.
Catalonia would move as soon as this weekend to declare independence
from Spain, the region's leader said.
"If you look at the European markets, the continued political worries in
Spain is the main driver, and that uncertainty seems likely to continue
if the regional government declares independence," Investec economist
Ryan Djajasaputra said.
While world stocks <.MIWD00000PUS> hit a fresh record high, the
pan-European STOXX 600 <.STOXX> index was down 0.31 percent while
Spain's IBEX <.IBEX> fell as much as 2.5 percent, its biggest daily fall
since August last year.
Catalonia-headquartered Banco Sabadell <SABE.MC> led the IBEX lower.
Spanish banks weighed on the euro zone banking index <.SX7E>, down 2.3
percent and on track for its worst fall in weeks with all stocks in the
red.
"The underperformance is across asset classes as well - Spanish bonds
are also underperforming," Djajasaputra said.
Spain's government bond yields rose to their highest since March on
Wednesday, stretching the gap over German peers to its widest in five
months.
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People walk past an electronic board showing exchange rate between
Japanese Yen and U.S. Dollar outside a brokerage at a business
district in Tokyo, Japan August 9, 2017. REUTERS/Kim Kyung-Hoon
The mood in Europe is at odds with the picture in other parts of the world.
Earlier, Japanese and Hong Kong shares led Asian stocks higher, supported by
optimism about global growth and as the Chinese central bank's weekend move to
free up liquidity boosted mainland financial stocks.
"Global growth is on the up," said Greg McKenna, Sydney-based chief market
strategist at AxiTrader. "That's a positive for stocks even before we add in the
stimulatory impact of possible tax cuts or infrastructure spending in the United
States."
Japan's Nikkei climbed to a more than two-year peak while Hong Kong's Hang Seng
Index rose to a level not seen since May 2015. The Philippines Stock Exchange
added 0.7 percent to a record high.
Wall Street futures did suggest a lower open later in the session though, as the
dollar pulled away from seven-week highs amid speculation that U.S. President
Donald Trump's choice for the next head of the Federal Reserve could be a less
hawkish candidate than had previously been expected.
Oil prices also acted as a drag on European stocks. Brent crude futures
fell 0.8 percent to $55.56 a barrel, pulled down by caution that a rally that
lasted for most of the third quarter would not extend through the last three
months of the year.
(Reporting by Abhinav Ramnarayan, Additional reporting by Swati Pandey Editing
by Jeremy Gaunt)
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