Playlist: BME Spanish Exchanges

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Video / 12 October 2017 at 7:25 GMT

From the Floor: Madrid strikes back, Asia at 10-yr highs — #SaxoStrats

   • Swedish housing data, CPI print place SEK in focus
   • Strong Asian equities rally 'raises the bar' for earnings: Garnry
   • Fed's Evans says December rate hike not a certainty
   • JPMorgan, Citigroup to release earnings pre-US open
   • Gold challenging resistance just shy of $1,300/oz

By Michael McKenna

The Spanish IBEX 35 equities index gained a quick 200 points in the wake of Catalan regional president Carles Puigdemont's failure to declare independence outright on Tuesday, but while markets appear to be treating the secession crisis as a receding risk factor, Madrid is taking a harder line.

Speaking before the Spanish parliament Wednesday, prime minister Manuel Rajoy gave Catalan authorities until 0800 CET Monday morning (October 16) to "confirm whether it has declared the independence of Catalonia, regardless of the deliberate confusion created over its implementation".

If Puigdemont does claim independence, said Rajoy, he would be given three further days to "rectify the situation," with Saxo Bank head of forex strategy John J Hardy saying that the next step would likely see Spanish authorities moving in to essentially dissolve Catalonia's regional government.

The IBEX 35 short higher in the wake of Puigdemont's ambiguous address:

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Source: Saxo Bank 

In terms of today's FX movements, Hardy points to the release of Swedish housing and CPI data as likely to spark a move in SEK with the trend pointing higher unless there are serious negative surprises.

In the US, Hardy reports that yesterday's Federal Open Market Committee minutes did little to shift the outlook regarding the Fed's future policy plans, but Wednesday also saw FOMC voter Evans out saying that a December hike is not a certainty given disappointing inflation levels.

Overnight saw Japan- and Hong Kong-listed shares post another bullish performance with APAC equities now sitting at a 10-year high. According to Saxo Bank head of equity strategy Peter Garnry, the current heights put a lot of pressure on the upcoming earnings season with big downward shifts possible for companies that miss revenue estimates.

On the US eearnings front, today sees JPMorgan out at 1045 GMT with estimated earnings-per-share at $1.66, down 2% year-on-year. At 1200 GMT, Citigroup reports with analysts expecting a 5% y/y jump to $1.30, reflecting the firm's greater exposure to emerging markets.

Finally, Saxo Bank head of commodity strategy Ole Hansen reports that gold prices are challenging resistance just south of the $1,300/oz level, supported by perceptions of instability at the core of the Trump administration. As Hansen notes, the tone coming from Washington is increasingly erratic as Trump challenges Pyongyang, Tehran, as well as his own administration.

For more on gold, crude oil, the Fed, and copper prices, listen to today's Morning Call in full via the above video link.

Manuel Rajoy
Spanish PM Rajoy is taking a hard line on Catalonia. Photo: 360b/

Michael McKenna is senior editor at Saxo Bank


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