Summary:

• Fading chances of Catalonia declaring independency push Spanish stocks higher
• GBP is the strongest currency amid its G10 peers this morning as PM May tries to reassert her position and there was a revision of Q2 labour costs
• Turkish lira retreats due to political tensions between USA and Turkey

 It was a calm start of the new trading week. As far as stock markets are concerned, we saw a substantial rebound on Spanish IBEX (SPA35 on xStation5) as there were mass demonstrations against Catalonia independence over the weekend and the split wit Madrid has looked less likely. Moreover, GBP was the strongest G10 currency, gaining over 0.7% against USD. Meanwhile, Turkish lira took a hit as new tensions sparked between USA and Turkey.

There is no doubt that geopolitics has had a major impact on financial markets of late. Even as we got the excellent jobs report on Friday (wage growth), upbeat moods were spoiled to some extent in the aftermath of reports related to North Korea regarding possible missile tests which were to take place during the past weekend but they didn’t. As a result, all European equity markets have started the new week slightly higher while the DE30 may be poised to register its new all-time record. On top of that, the Spanish SPA35 soared over 1% at the opening following myriad protests which took place on the streets of Barcelona on Sunday.

The Turkish lira has weakened against the US dollar the most since the beginning of this year following a diplomatic spat between Turkey and the United States as both countries have chosen to suspend their non-immigration visa services, the move which could afflict those who are looking to visit the other country. The moves from both sides followed the arrest of a Turkish national who works at the US consulate in Istanbul for alleged involvement in the July 2016 coup attempt against President Recep Erdogan. The statement from the US Embassy based in the Turkish capital suggests that “recent events” were key to implement visa restraints, those events were not been singled out though.

It wasn’t exactly a triumphant comeback of China to financial markets after a week long holiday. Although we had Hong Kong trading between Tuesday and Friday last week, continental China was shut and no data was released. The manufacturing PMIs were released ahead of the holiday and while they showed a mixed picture, it was the Markit PMI from the services sector that really disappointed. The measure tanked from 52.7 pts. to just 50.6 pts., the lowest since December 2015.

Monday is relatively calm with regard to the macroeconomic data, however much more interesting events will be unfolding later this week. Markets await FOMC minutes and inflation data from the US. Moreover, there are plenty of central bankers scheduled to speak at the IIF conference on Thursday.