Spain-Catalonia relief nudges world stocks to fresh high

World stocks set a record high yesterday, as relief that Catalonia had put off any plans to break away from Spain followed a two-decade peak for Asia’s biggest share market and more upbeat predictions for the global economy.

Spanish stocks and bonds rallied and the euro reached a two-week high in early European trading after Catalonia’s leader, Carles Puigdemont, declined to make a formal declaration of independence on Tuesday. That disappointed many pro-independence supporters but pleased financial markets.

A 1.5 per cent jump in Spain’s IBEX helped MSCI’s 47-country world stocks index touch a record high.

The biggest surge came from Spanish banks, which rallied as much as four per cent. Spanish government bond yields – a gauge of political tension – saw their second-biggest decline in a month.

“There was a chance Puigdemont would have made a decisive declaration, so now yields are dropping because there is room for negotiation left,” said DZ Bank strategist Christian Lenk.

The euro climbed as high as $1.18345 against the dollar, a two-week top.

The US currency was down for a fourth day running and on its worst run since July.

US President Donald Trump’s feud with Tennessee Senator Bob Corker, an influential fellow Republican, has raised concern that Mr Trump’s proposed tax-code overhaul would fail.

“Squabbles surrounding Trump’s efforts come as no surprise, but it is still not helping the dollar,” said Yukio Izhizuki, senior currency strategist at Daiwa Securities in Tokyo.

The early Spanish gains bolstered already-confident markets.

The International Monetary Fund pushed up its forecasts for global growth on Tuesday, helping Wall Street to its latest record high.

Asian shares then climbed to their highest in a decade as Japan’s Nikkei reached its strongest since 1996, despite more losses for scandal-hit Kobe Steel. South Korean stocks reached a new record top.

The dollar was under pressure amid uncertainty over who will be the next Federal Reserve chair, with the predictions market site, PredictIt, favouring Fed Governor Jerome Powell as the most likely candidate.

The weaker dollar helped commodities and emerging markets, which borrow heavily in the United States currency.

Emerging market stocks sailed to six-year highs.

United States crude rose 42 cents to $51.34 per barrel and Brent added 25 cents to $56.86, on signs of tighter supply.

Gold prices hovered around their highest in two weeks, with spot gold at $1,289.06 an ounce. Industrial bellwether metal copper was just below a one-month high.

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