09.10 - Political developments sets the tone
There are a lot of political developments this Monday that are affecting global financial markets. Relations between U.S and Turkey are deteriorating, so as the ongoing crisis between the U.S. and North Korea. The crisis is Spain eases after a support rally against separation from Spain took place in Catalonia and restored hopes for peace in Spain. Meanwhile, stocks continue to rise globally on growth optimisim. These are the big things to know for today.
World shares hit their latest in a run of record highs, supported by optimism about global growth.
Asian-Pacific equities closed mostly higher, with China's blue-chip CSI300 index climbing to heights not seen since late 2015, though several major markets in the region, such as Japan and South Korea, were shut for holidays.
Meanwhile, European shares were slightly higher in mid-morning trade, with Germany's DAX touching a fresh new all-time high.
On Wall Street, U.S. stocks pointed to a modestly higher open, with the major benchmarks up around 0.2%. Trading volumes were expected to remain thin, with most banks and federal institutions closed for the Columbus Day holiday. That also means no major data releases are on tap for Monday.
Spanish stocks rebounded and government bond yields fell, as worries about the situation in Catalonia eased off after Sunday's demonstration against independence.
A crowd estimated by local police to number 350,000 took to the streets of Catalonia's capital Barcelona on Sunday to express their opposition to declaring independence from Spain.
Meanwhile, a senior member of the Catalan administration called for dialogue with Spain, while Spanish Prime Minister Mariano Rajoy pledged that “national unity will be maintained” by using all instruments available to him.
Spain's IBEX index of the country's 35 biggest stocks rose by as much as 1.2% in the opening hour of trading in Madrid.
Investors sold the Turkish lira, while the country's main stock market fell the most in more than a year, amid an escalating political standoff between Istanbul and Washington.
The U.S. mission in Turkey and subsequently the Turkish mission in Washington mutually scaled back visa services after a U.S. consulate employee was arrested in Istanbul last week, in the latest sign of fraying diplomatic relations between the NATO allies.
The lira tumbled 5% at one point against the dollar to 3.8060, the lowest in seven months, before clawing back some losses to 3.7104, down about 2.5%.
The BIST 100, Turkey's equity benchmark, fell nearly 5% in the opening minutes of dealing to trade at the lowest levels since early July. It was last down 3.6%. Shares of Turkish Airlines were one of the biggest losers, falling around 9%.
Investors continued to worry over tensions between the U.S. and North Korea as a war of words between the two countries escalated over the weekend.
North Korea's leader Kim Jong Un said his nuclear weapons were a "powerful deterrent" that guaranteed its sovereignty, state media reported on Sunday, hours after U.S. President Donald Trump said "only one thing will work" in dealing with the isolated country.
Trump did not make clear to what he was referring, but his comments seemed to be a further suggestion that military action was on his mind.
Meanwhile, Republican U.S. Senator Bob Corker warned on Sunday that President Trump risks setting the nation “on the path to World War Three" in an interview with The New York Times.
- by Roger Gain