Spanish market rebounds as Catalonian tensions ease
Spain’s stock market has opened strongly, on relief that Catalonia’s president has backed away from declaring independence.
The IBEX jumping over 1% in early trading, with traders welcoming President Carles Puigdemont speech last night in which he pledged to negotiate with Spanish government, and “suspend” the independence move
Lukman Otunuga, Research Analyst at FXTM, says investors are hoping that the two sides can hammer out a compromise:
A strong sense of relief was felt across financial markets on Tuesday evening, after Catalan leaders signed a “symbolic” declaration of independence, but immediately suspended its formal approval and called for talks with Madrid.
Although President Carles Puigdemont’s remarks disappointed many of his ardent supporters, who were hoping for a unilateral declaration of independence, his speech was music to investors’ ears, as this softer approach eased tensions.
Kobe data falsification scandal deepend
The Nikkei’s rally comes despite a big scandal enveloping Japan’s third-biggest steel maker, Kobe Steel.
Kobe has shocked Japan, and beyond, by admitting that it has fabricated data on components used in cars, aircraft and space rockets.
The company has sold aluminium and copper products to more than 200 companies, including Boeing, Toyota and Nissan, even though they had failed quality control tests – and falsified data to make it appear that items had passed.
The scandal may stretch back a decade, Kobe says, and involved dozens of staff. It risks damaging Japan’s reputation for manufacturing quality.
Today, the company revealed that iron powder results were also faked.
Kobe’s share price has now plunged by a third since the company came clean on Sunday, and top officials bowed apologetically to reporters.
Introduction: Nikkei hits 21-year high
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Japan’s stock index has closed at its highest level in over two decades, as optimism over the global economy builds and geopolitical worries ease.
Upbeat traders in Tokyo sent the Nikkei 225 index up to 20,881.27, a gain of 57 points or almost 0.3%.
It comes after Wall Street’s Dow Jones index hit a fresh record high last night, as the bull market rally refuses to fizzle out.
There was excitement in Tokyo as trading ended….
The Nikkei, which tracks Japan’s manor companies, is now at levels last seen in December 1996. It’s a strong recovery from the depths of the financial crisis (in 2009, the Nikkei suffered an undignified tumble below 8,000 points).
Is this proof that you should invest in the stock market for the long term? Not exactly. The Nikkei’s alltime peak was actually a stratospheric 38,915.87 points, back in December 1989. Someone who bought Japanese shares 30 years ago may still be waiting patiently to break even…
But still, it’s a nice landmark, and comes after the International Monetary Fund raised its forecasts for global growth yesterday.
Hugh Dive, chief investment officer at Atlas Funds Management, say’s there’s a “risk on” mood in the markets again:
“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 travelling much better than many people had expected.”
There’s also relief that tensions between the US and North Korea haven’t become further inflamed, and that Catalonia has suspended its declaration of independence.
This all helped other Asia-Pacific markets to rally today too. New Zealand shares hit their record high for a seventh day running, while Australia’s market hit an eight-week high.
European stock markets are expected to follow suit this morning:
Also coming up today….
2pm BST: The International Monetary Fund release its Global Financial Stability Report this afternoon. It will single out dangers to the global economy, and identify solutions to avoid a new financial crisis.
7pm BST: The US Federal Reserve releases the minutes of its monetary policy meeting earlier this month. Wall Street will be looking for hints about whether interest rates will rise in December.
at 3.40am EDT