Global Stocks Rise as Investors Brush Off Tensions -- 4th Update

By Riva Gold and Kenan Machado Features Dow Jones Newswires

Spanish assets recover

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-- Turkish lira sinks on political jitters

-- Chinese stocks rise after holiday

Stocks resumed their march higher Monday with investors largely brushing off a host of geopolitical tensions over the weekend.

Futures pointed to a 0.1% opening gain for the S&P 500, following a mostly upbeat session in Asia. The Stoxx Europe 600 edged up 0.2% morning trading after its biggest daily decline in a month.

Spanish stocks led the morning's advance in Europe with shares of lenders CaixaBank and Banco de Sabadell up around 2%.

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Over the weekend, hundreds of thousands of Spaniards gathered in Barcelona on Sunday to decry Catalonia's secessionist push, while some Spanish companies said they would move their headquarters out of Catalonia to mitigate risks associated with potential Catalan independence.

Catalan President Carles Puigdemont asked to address the region's Parliament on Tuesday, to inform it "of the current political situation."

"Overall these events make a unilateral declaration of independence by Tuesday marginally less likely," economists at Barclays wrote in a note Monday.

Spain's IBEX 35 stock index rose 0.9%, trimming losses since the referendum to just 1%. Yields on 10-year Spanish government bonds fell to 1.639% in morning trading, narrowing their yield gap over ultrasafe German paper.

Although an immediate secession may be unlikely, the crisis in Catalonia could impact national politics and lead to strikes and acts of violence that worsen the social and economic climate, said strategists at UBS.

But the impact on markets should remain contained, they added, given the European Central Bank's plans for its bond-purchase program will likely remain the most important performance driver of European government bonds over the next six months. The ECB is expected to announce at the end of October it will slow its pace of purchases following a synchronized global economic expansion.

The euro was little changed against the dollar on Monday at $1.1733, while a 0.4% climb in the British pound to $1.3114 led London's export-heavy FTSE 100 index to lag behind. The pound remains down 2.1% this month.

Political worries unsettled the Turkish lira, which was last down 2.6% against the dollar and around a record low against the euro amid an escalating diplomatic row between the U.S. and Turkey. The two countries on Sunday stopped issuing nonimmigrant visas to each others' citizens after Turkey last week arrested a Turkish employee at the U.S. Consulate in Istanbul.

The WSJ Dollar Index was unchanged after rising for four consecutive weeks. CME Group futures suggest investors currently price a 93.1% chance that the Federal Reserve will raise interest rates by December, a figure bolstered by Friday's U.S. jobs report. The country shed 33,000 jobs in September, but wages were 2.9% higher from a year earlier, the report showed.

"We had the strongest wage gains we've seen in a while," said Phil Orlando, chief equity strategist at Federated Investors. While he believes the most recent report was likely hugely influenced by hurricanes Harvey and Irma and shouldn't be given too much weight, it could prompt some investors to rethink the inflation picture and path for rates, he said.

In Asia, Chinese markets echoed last week's gains in global stocks as investors there returned from a holiday. The Shanghai and Shenzhen composite indexes rose 0.8% and 1.6% respectively.

Some were anticipating bigger gains, however, given the 5% jump in an index of Hong Kong-traded Chinese stocks last week. That followed the People's Bank of China saying it would ease some reserve requirements if lending targets for financing to smaller businesses were met.

There is a "wait-and-see approach" keeping some investors out of local markets ahead of the twice-a-decade Communist Party Congress, said Willie Chan, a regional strategist at Kim Eng Securities in Hong Kong. At that gathering, which starts Oct. 18, leadership and policy intentions for the next five years will be set."

Growth in China's service sector slowed sharply in September to a 21-month low, a private gauge also showed Monday, in contrast with official data showing a faster pace of activity.

Hong Kong stocks lagged behind Monday after hitting 10-year highs Friday. The Hang Seng Index was down 0.5% amid declines in some Chinese property-developer stocks. Data showed just 78 new units were contracted in Beijing during the Golden Week holiday, a 64% slump from a year earlier and the least since 2005.

Markets in Japan, South Korea and Taiwan were closed for holidays.

Australian stocks built on Friday's rebound. After notching its best day since mid-July to end last week, the S&P/ASX 200 rose a further 0.5% Monday, helped by gains in the country's big banks.

The mostly upbeat session in Asian trading came despite reports in North Korean state media that leader Kim Jong Un had defended his nuclear-weapons program in a weekend speech. U.S. President Donald Trump also tweeted Saturday that " only one thing will work" to rein in Pyongyang's nuclear ambitions, without elaborating.

Gold rose 0.8% to $1,284.70 an ounce.

--John Wu and Felicia Schwartz contributed to this article.

Write to Riva Gold at riva.gold@wsj.com and Kenan Machado at kenan.machado@wsj.com

-- Spanish assets recover

-- Turkish lira sinks on political tensions

-- Chinese stocks rise after holiday

Stocks resumed their slow march higher Monday with investors largely brushing off a host of geopolitical tensions over the weekend.

Futures pointed to a 0.2% opening gain for the S&P 500, following a mostly upbeat session in Asia. The Stoxx Europe 600 edged up 0.1% midday after its biggest daily decline in a month.

Spanish stocks led the day's advance in Europe as Spain's IBEX 35 stock index rose 0.7%, trimming losses since the Oct. 1 Catalan referendum to just 1.2%.

Over the weekend, hundreds of thousands of Spaniards gathered in Barcelona on Sunday to decry Catalonia's secessionist push, while some Spanish companies said they would move their headquarters out of Catalonia to mitigate risks associated with potential Catalan independence.

Catalan President Carles Puigdemont asked to address the region's Parliament on Tuesday, to inform it "of the current political situation."

"Overall these events make a unilateral declaration of independence by Tuesday marginally less likely," economists at Barclays wrote in a note Monday. Yields on 10-year Spanish government bonds fell to 1.637%, narrowing their yield gap over ultrasafe German paper.

Although an immediate secession may be unlikely, the crisis in Catalonia could impact national politics and lead to strikes and acts of violence that worsen the social and economic climate, said strategists at UBS.

But the impact on markets should remain contained, they added, given the European Central Bank's plans for its bond-purchase program will likely remain the most important performance driver of European government bonds over the next six months. The ECB is expected to announce at the end of October it will slow its pace of purchases following a synchronized global economic expansion.

The euro was little changed against the dollar on Monday at $1.1733, while a 0.6% climb in the British pound to $1.3146 led London's export-heavy FTSE 100 index to lag behind. The FTSE posted its biggest weekly gain of the year last week as the dollar gained 2.5% against the pound.

Political worries unsettled the Turkish lira, which was last down 2.3% against the dollar and around a record low against the euro amid an escalating diplomatic row between the U.S. and Turkey. The two countries on Sunday stopped issuing nonimmigrant visas to each others' citizens after Turkey last week arrested a Turkish employee at the U.S. Consulate in Istanbul.

The WSJ Dollar Index was unchanged after rising for four consecutive weeks. CME Group futures suggest investors currently price an 88% chance that the Federal Reserve will raise interest rates by December, a figure bolstered by Friday's U.S. jobs report. The country shed 33,000 jobs in September, but wages were 2.9% higher from a year earlier, the report showed.

"We had the strongest wage gains we've seen in a while," said Phil Orlando, chief equity strategist at Federated Investors. While he believes the most recent report was likely hugely influenced by hurricanes Harvey and Irma and shouldn't be given too much weight, it could prompt some investors to rethink the inflation picture and path for rates, he said.

Mr. Orlando believes the equity market will remain strong this year regardless and is preparing to use any dips in the market to add more exposure to stocks. Should there be a 3% correction or so, "we're going to tell clients to treat that as manna from heaven," he said.

In Asia, Chinese markets echoed last week's gains in global stocks as investors there returned from a holiday. The Shanghai and Shenzhen composite indexes rose 0.8% and 1.6% respectively.

Some were anticipating bigger gains, however, given the 5% jump in an index of Hong Kong-traded Chinese stocks last week after the People's Bank of China said it would ease some reserve requirements if lending targets for financing to smaller businesses were met.

There is a "wait-and-see approach" keeping some investors out of local markets ahead of the twice-a-decade Communist Party Congress, said Willie Chan, a regional strategist at Kim Eng Securities in Hong Kong. At that gathering, which starts Oct. 18, leadership and policy intentions for the next five years will be set."

Growth in China's service sector slowed sharply in September to a 21-month low, a private gauge also showed Monday, in contrast with official data showing a faster pace of activity.

Hong Kong stocks lagged behind Monday after hitting 10-year highs Friday. The Hang Seng Index was down 0.5% amid declines in some Chinese property-developer stocks.

Australian stocks built on Friday's rebound. After notching its best day since mid-July to end last week, the S&P/ASX 200 rose a further 0.5% Monday, helped by gains in the country's big banks.

Markets in Japan, South Korea and Taiwan were closed for holidays.

Gains in stocks Monday also came despite reports in North Korean state media that leader Kim Jong Un had defended his nuclear-weapons program in a weekend speech. U.S. President Donald Trump also tweeted Saturday that " only one thing will work" to rein in Pyongyang's nuclear ambitions, without elaborating.

In commodities, gold rose 0.8% to $1,284.70 an ounce, while Brent crude oil fell 0.6% to $55.28 a barrel after its biggest daily decline in months.

--John Wu and Felicia Schwartz contributed to this article.

Write to Riva Gold at riva.gold@wsj.com and Kenan Machado at kenan.machado@wsj.com

(END) Dow Jones Newswires

October 09, 2017 07:33 ET (11:33 GMT)