Euro continues to extend gain as Spanish assets hold advance

Bloomberg

The euro extended gains and Spanish assets held their advance as the country’s government maintained a hard line on Catalonia’s independence bid. The dollar weakened as investors awaited minutes from the last Federal Reserve meeting.
“Fed minutes could show a discussion on inflation, which the market is likely to take as dovish,” said Mark McCormick, North American head of foreign-exchange strategy at Toronto-Dominion Bank. “Keep in mind, though, the minutes have a high noise to signal ratio since we get a lot of views (with little context) in the minutes.”
Spain’s benchmark IBEX 35 Index jumped to a week-high, while the nation’s bonds gained even as core yields across Europe climbed. Spanish Prime Minister Mariano Rajoy stopped short of suspending Catalonia’s government on Wednesday, though starting a process that could lead to that. The Spanish relief rally failed to lift equities elsewhere, however, with the Stoxx Europe 600 little changed and US stocks flat at the open. Oil pared earlier gains to trade around $51 a barrel as OPEC predicted strong demand next year.
Rajoy said he would seek an explanation from Carles Puigdemont after the Catalan president’s announcement that he had a mandate for independence but would hold off and instead seek talks with the Spanish government. The formal demand for clarity may be a first step towards disbanding the regional government and moving control to Madrid. While it averted an immediate confrontation, it means the uncertainty lingers.
In the US, investors will parse Wednesday’s FOMC minutes for further confirmation a December rate increase is on track. Ten-year US Treasury yields nudged lower after President Donald Trump said he plans to make changes to his tax plan within the next few weeks, while dismissing concerns that his public spat with Senator Bob Corker would scuttle an overhaul.
Earlier, Japan’s Nikkei 225 advanced to the highest in almost twenty-one years and the Dow Jones Industrial Average reached a fresh record high. The MSCI Emerging Market Index climbed to a six-year high.
Fed meeting minutes from last month will cover the balance-sheet unwind and rate-path projections, but Capital Economics said the debate surrounding the drop in core inflation may have been particularly lively. The ECB’s Peter Praet speaks on monetary policy under the heading of ‘European Exit Strategies’ on Wednesday afternoon in New York. OPEC’s monthly oil market report is due later. API also issues weekly crude inventory data. Earnings season begins for major US banks, led by JPMorgan Chase & Co., Citigroup Inc., Bank of America Corp. and Wells Fargo & Co. The active Atlantic hurricane season will probably figure prominently in US data on retail sales and consumer prices.
The S&P 500 Index was little changed at 2,550.19 at 9:32 am in New York, after climbing to a record 2,555.23. The Dow Jones Industrial Average and Nasdaq Composite Index were also flat after reaching all-time highs yesterday. The Stoxx Europe 600 Index was little changed. The MSCI All-Country World Index rose 0.1 percent.