Asian markets mostly climb as Catalan relief supports euro

HONG KONG (AFP) – Asian markets mostly rose again yesterday, boosted by another record performance on Wall Street with confidence high heading into the earnings season.

The euro also managed to hold its gains against the greenback as hopes for a resolution to the Catalan crisis in Spain trump expectations the Federal Reserve will hike interest rates for a third time this year in December.

While US-North Korea tensions rumble on in the background, trading floors remain positive following a series of upbeat readings across global economies that have helped equities hit multi-year highs.

In New York all three main indexes chalked up yet more records following strong corporate reports, while analysts said the mood was also improved by the small number of firms warning they expected a negative impact from hurricanes Harvey, Irma and Maria.

The gains in New York provided a solid platform for Asian traders.

Tokyo’s Nikkei closed up 0.4 per cent to a fresh 21-year high, while Sydney added 0.4 per cent and Hong Kong was 0.2 per cent higher in the afternoon. Singapore was up 0.7 per cent.

Seoul gained 0.7 per cent, with Wellington, Manila and Jakarta also well up. However, Shanghai finished down 0.1 per cent.

In early European trade London and Paris each lost 0.1 per cent but Frankfurt added 0.1 per cent.

Shane Chanel, equities and derivatives adviser at ASR Wealth Advisers, said the recent passage of a US budget bill had left him confident that Donald Trump would be able to push through key tax and spending plans, which would give a further lift to markets.

“The question is not if, but when,” he said in a note. “I believe that the tax reforms and planned infrastructure spend are going to be the biggest catalysts for inflation and jobs growth in the US.”

On foreign exchanges the euro built on gains after Catalan leader Carles Puigdemont adopted a more conciliatory tone in a speech on independence. The unit was at $1.1873 yesterday, up from the low $1.17 mark seen last week, though well off the $1.2033 enjoyed in September.

Later, Spanish Prime Minister Mariano Rajoy gave him until next week to clarify whether he intends to push ahead with a breakaway, warning Madrid would suspend the region’s autonomy.

“The market appears to have welcomed the decision… to give Carles Puigdemont, the president of the government of Catalonia, five days to clarify whether he has declared independence from Spain or not,” Rodrigo Catril, FX Strategist at National Australia Bank, said in a commentary.

However, Stephen Innes, head of Asia-Pacific trading at OANDA, warned that he still saw the single currency’s gains “as more of a relief rally as EU risk has tentatively settled”.

The dollar was also being dragged following the release of minutes from the Fed’s most recent board meeting, which suggested policymakers edging towards another rate hike but some expressing concern at still weak inflation.

Dealers are also keeping tabs on the race to take over as the head of the Fed when Janet Yellen’s term ends early next year. Of the two front-runners according to analysts one is a fiscal hawk while the other is more pragmatic, which will have a huge bearing on future direction of the central bank’s policy.