People, one of them with a Catalan independence flag around her shoulders, watch King Felipe's statement to the country in a bar in central Barcelona © AP
Wednesday 14:00 BST
What you need to know
- Spanish bonds and stocks sold as Catalan crisis worries investors
- Euro finds support and wider continental stocks hold steady
- Frankfurt’s Xetra Dax sets record of its own after Wall Street peaks
- S&P 500 and Dow expected to slip from records
- Chinese banks continue climb in Hong Kong
- Dollar down against main currencies
- Oil continues to fall, putting pressure on energy stocks
Leading quote
“The ratcheting up of tensions has negative credit implications for the Spanish sovereign because it complicates the process of legislating policy, including a 2018 budget,” says a report from Moody’s, the credit rating agency.
“Before the referendum, the finance minister had announced that the presentation of the 2018 budget will be delayed and that it is likely that the 2017 budget would need to be extended into 2018. The minority government has depended on the support of the Basque Nationalist Party (Partido Nacionalista Vasco, or PNV) for support in parliament, and recent events could make it even more difficult for the PNV to lend its support to the government’s legislative initiatives in the future.”
Hot Topic
Investors are moving out of Spain’s stock market and its bonds as the political tensions over Catalonia deepen, keeping the country out of a steadier showing for wider European markets.
The yield on the Spain’s benchmark 10-year debt is up 4.2 basis points to 1.76 per cent, having earlier touched 1.793 per cent, its highest level since March. (Yields rise when prices fall.) Meanwhile, German Bund yields over the same maturity are down 4bp at 0.42 per cent.
Bunds are seen as Europe’s safest sovereign debt, and Wednesday’s moves take the yield premium investors are demanding to hold the riskier Spanish debt over its German counterpart to more than 135bp.
The Ibex 35 is down 2.5 per cent, taking it back to March lows led by falling bank shares. The Madrid index is significantly underperforming a 0.1 per cent slip on the regionwide Euro Stoxx 600. A rally in Frankfurt has taken the Xetra Dax 30 to a record high after it returned from a public holiday.
The euro is still finding support, up 0.3 per cent at $1.1770, as the six-week low touched after the Catalonia vote looked to have taken the currency too far.
The wider Euro Stoxx 600 is down 0.3 per cent. London’s FTSE 100 is down 0.1 per cent.
Equities
The S&P 500’s latest record closing high was followed by stronger gains in Asia, although futures trading is predicting marginal opening declines for the S&P 500 and the Dow Jones Industrial Average.
The Hang Seng is up 0.7 per cent in Hong Kong with financial stocks continuing their advance after China’s central bank cut its reserve requirement ratio for the sector. The move that reduces the amount of cash that banks must hold as reserve can often stimulate lending.
Tokyo’s Topix index ended flat , and Seoul’s Kospi gained 0.9 per cent.
Forex
The dollar is slipping back, with the index tracking the world’s reserve currency down 0.2 per cent, taking it further from the intraday peak of 93.920 it touched on Tuesday.
The pound is up 0.2 per cent at $1.3255, as investors continue to track the governing Conservative party’s conference in Manchester for any insight into its latest intentions on Brexit.
Japan’s yen advanced 0.2 per cent to ¥112.60 per dollar, while the Australian dollar gained 0.3 per cent on its US counterpart to $0.7858.
Commodities
Oil prices are continuing to drop as investors weigh reports of rising output from Opec countries in September and a continued recovery in Libya’s production. Brent crude, the global benchmark, is down 0.2 per cent at $55.90 a barrel. US marker West Texas Intermediate is down 0.1 per cent at $50.38.
Gold is up 0.3 per cent to $1,275.40 an ounce.
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