by Pinchas Cohen
Key Events
After plunging on the overwhelming response from both sides to the unofficial referendum for Catalonia's independence (and its aftermath), Spanish stocks today led the rally in European equities, on the heels of this weekend's mass demonstration in favor of Spanish unity.
Spain's IBEX 35 benchmark recovered after a senior member of the Catalonia's regional administration called for a dialogue with Spain, while Catalan President Carles Puigdemont maintained his position of moving ahead toward a declaration of independence, as soon as tomorrow. In opposition, Spanish Prime Minister Mariano Rajoy declared that “national unity will be maintained” using all means available.
The IBEX has been trading within a rising channel since the aftermath of the Brexit vote. Last Wednesday, the benchmark index fell below the channel bottom, within a short-term falling channel, since May. It has since recovered to within the long-term rising channel. However, it is showing signs of running out of steam, forming an intraday bearish Shooting Star. Which channel will be the victor?
Global Financial Affairs
Another headline event currently boosting European equities, as well as its down-and-out single currency, is German Industrial Production. This morning's report for August—Germany's best release for this metric in six years—shows the country's output rebounded from a lull earlier this summer as production rose the most since July 2011.
The euro popped on the good news, up 0.12 percent. Still, that's not nearly enough for it to shift out of its slumping trend.
Sterling recovered from yesterday’s slide, after Prime Minister Theresa May looks to have retained her position, at least for now, despite a concerted effort to unseat her.
Early this morning, financial networks were dominated by news that the Turkish lira had dropped sharply—3.7 percent, on a 2.75 percent gap—the result of a diplomatic standoff between Washington and Ankara. Both the US and Turkey have stopped issuing visas for each other's citizens. The sparring comes after last week’s arrest of a Turkish national who works at the US's consulate in Istanbul. Allegations are that the Turkish national was involved in the failed July 2016 coup attempt against Turkey's President Recep Tayyip Erdogan.
The USDTRY’s rising gap overcame a key resistance level since May, suggesting a potential consolidation, followed by a continued rally.
Up Ahead
- Minutes from the most recent Federal Reserve meeting are due Wednesday.
- The International Monetary Fund and World Bank hold their annual fall meetings this week.
- Q3 earnings season begins. The season opens with major U.S. banks reporting, led by JPMorgan Chase (NYSE:JPM), Citigroup (NYSE:C), Bank of America (NYSE:BAC) and Wells Fargo (NYSE:WFC).
Market Moves
Stocks
- The Stoxx Europe 600 Index headed higher, up 0.3 percent as of 8:13 a.m. London time.
- The MSCI All-Country World Index rose less than 0.05 percent.
- The FTSE 100 Index fell 0.1 percent.
- Germany’s DAX moved higher, up 0.2 percent.
- The MSCI Emerging Markets Index dipped 0.1 percent.
- S&P 500 Futures rose 0.1 percent to 2,548.00.
Currencies
- The US Dollar Index slipped 0.10 percent, to 93.53.
- The euro fell less than 0.05 percent to $1.1726.
- The British pound climbed 0.4 percent to $1.3115.
Bonds
- The yield on 10-year Treasuries was unchanged at 2.36 percent, the highest in almost three months.
- Germany’s 10-year yield fell less than one basis point to 0.46 percent.
- Britain’s 10-year yield climbed one basis point to 1.376 percent.
Commodities
- WTI crude oil rose 0.2 percent to $49.37 a barrel.
- Gold climbed 0.3 percent to $1,280.25 an ounce, the highest in more than a week.
- Copper gained less than 0.05 percent to $3.03 a pound.