By Joyce Yu
Philadelphia, PA–Wall Street opened higher Monday after a weekend of mass demonstrations in Catalonia supporting Spanish unity. Sterling rebounded as Prime Minister Theresa May looked poised to reassert her leadership.
More than 50,000 demonstrators from across Spain gathered in Madrid’s central Plaza de Colon on Sunday to express their support of Spain staying unified. Meanwhile, two top Catalan banks, CaixaBank and Banco Sabadell, both announced plans to move their headquarters out of Catalonia. The moves seem to work in favor of the country staying unified and bolstered Spanish stocks by 0.6%.
“Markets have looked through previous periods of political tension . . . but the result of the German elections, unrest following the Catalan referendum, the inertia in the UK’s Brexit negotiations and increased speculation about deep divides in the Conservative government hint at a pervasive leadership vacuum that threatens the policy process,” the Financial Times quoted Mark Schofield at Citi.
Wall Street drifted lower on Friday after six days of straight gains.
“As regards Catalonia, it is difficult to have much conviction with respect to the eventual outcome,” JPMorgan Chase & Co strategist Mislav Matejka said in a note. “However, we believe that this will be seen as a localized issue, where the dips should be bought.”
Chinese equities rose after a week-long holiday. Comprising Chinese blue-chip stocks, CSI300 touched their highest levels since late 2015, as the Chinese Central Bank announced a targeted cut in the amount of cash some banks must hold in reserve announced a week ago. This outweighed Monday’s fresh data which showed activity in China’s service sector grew in September at its slowest since December 2015.
Positive news from German also helped to boost investment sentiment. German industrial output rebounded from a summer lull with its best month in six years.
Separately, minutes from the most recent Federal Reserve meeting which will provide more clues regarding the central bank’s next policy move are due Wednesday. The market has continued to pay close attention to the pace of currency normalization by global central banks as debt level remains high. German finance minister Wolfgang Schaeuble, who is leaving his post after eight years, has warned that spiraling levels of debt could lead to another global financial crisis.
“Economists all over the world are concerned about the increased risks arising from the accumulation of more and more liquidity and the growth of public and private debt. I myself am concerned about this, too,” he told the Financial Times.
Coming this week:
Tuesday: IMF World economic outlook
Wednesday: Delta earnings; BlackRock earnings
Thursday: JPMorgan earnings; Citigroup earnings
Friday: Bank of America earnings; Wells Fargo earnings
