Catalonia’s moment of truth, U.S. spat with Turkey exposes old wounds, and U.K. data show the glass is half full. Here are some of the things people in markets are talking about today.
The Catalan parliament meets today to consider a declaration of independence that would elicit a sharp reaction from Madrid. Should regional President Carles Puigdemont start the process of secession, he risks an intervention from Spanish security forces, and the imposition of direct control over the region from Madrid. The IBEX 35 Index traded 0.9 percent lower at 5:50 a.m. ahead of the parliamentary session.
The diplomatic standoff between the U.S. and NATO ally Turkey shows no sign of cooling, with the U.S. ambassador in Istanbul saying he can’t predict how long the crisis will last. This latest iteration of tensions between the countries can trace its roots back to the attempted coup in Turkey last year, which President Recep Tayyip Erdogan’s supporters were quick to blame on followers of Pennsylvania-based cleric Fethullah Gulen. Turkish markets are recovering some of yesterday’s selloff, with Istanbul’s main stock index now less than 2 percent below Friday’s close.
The revelation from Japan’s Kobe Steel Ltd. that staff had falsified data related to the strength and durability of some metal products used in the manufacturing of cars and aircraft saw shares in the firm, the country’s third-largest steelmaker, plunge 22 percent. The scandal, which joins a growing list of Japanese corporate-management debacles, may hit the auto-making sector across the board, since most of Japan’s car manufacturers are customers of Kobe.
Overnight, the MSCI Asia Pacific Index gained 0.7 percent. Japan’s Topix index closed up 0.5 percent as strong economic data outweighed the Kobe Steel scandal to push the gauge to its highest close in more than a decade. In Europe, the Stoxx 600 Index was 0.1 percent lower at 5:50 a.m., with Spanish stocks leading the losses. S&P 500 futures added 0.1 percent, the 10-year Treasury yield was at 2.354 percent, and gold was higher.
Data from the U.K. today produced a classic economist’s dilemma. On the one hand, manufacturing production surprised with an unexpected 0.4 percent gain in August, but, on the other hand, the deficit in goods and services climbed to 5.6 billion pounds ($7.4 billion) during that month, with the shortfall in goods hitting an all-time high. The currency market, which only seems to have eyes for the Bank of England at the moment, pushed the pound higher in the wake of the data, suggesting the net effect of the mixed trade outlook is an increased likelihood of an interest-rate increase.