Asian markets were mostly higher on Wednesday, extending a rally that has seen benchmark indices across the region gaining for the past month. Japan’s Nikkei reached its highest level in 21 years as investors there remain upbeat ahead of the Oct. 22 snap elections. The Nikkei is now up 7% over the past month. Australia’s market did well, with gains led by the big four banks and shares of oil companies responding to the overnight surge in the price of crude.
European markets got some relief on Wednesday after the Catalan president said he was putting independence plans for the region on hold, and would instead enter into talks with Madrid. While the fate of Catalonia is still uncertain, the current shelving of independence plans help restore investor confidence across the region to some extent. London’s market was slightly lower as investors there are cautiously awaiting the latest round of Brexit negotiations to end.
U.S. markets crept higher throughout the session and ahead of the release of the September Federal Reserve meeting minutes. When released, the minutes had little impact on equities, giving them possibly a slight boost as the tone of the meeting minutes was somewhat less hawkish than investors were expecting. That boost solidified the gains for the day as all three of the major U.S. benchmark indices closed once again at record levels.
The pair gained for the fourth session in a row Wednesday following news that Catalonia would be delaying any announcement of independence while opening up discussions with Madrid. The pair is now closing in on the 1.1900 level as trader confidence in the shared currency returns, although any renewed political uncertainties from Spain, or Germany for that matter, could send the pair rapidly lower.
The strength in the crude market has combined with broad based USD weakness to send this pair lower over the past two sessions, with the pair breaking below the 1.2500 level today. We should see muted trade in the pair early Thursday as traders will be looking ahead to the U.S. crude inventory report. Once that report is released expect some volatility, unless it comes in pretty much in-line with expectations.
The cryptocurrencies are continuing to inch their way higher on Wednesday, but there haven’t been many strong moves. Late in the day Bitcoin and Litecoin are slightly lower, but holding well above support levels, while Ripple and Ethereum are making gains, although Ethereum is struggling to remain above the $300 level.
Precious metals ended Wednesday’s session lower just ahead of the release of the Federal Reserve meeting minutes. There was a brief rally in the electronic session following the release of the minutes, but the market soon dropped back to closing levels as traders found little new information in the September meeting minutes. The drop saw silver snap a four-session winning streak, while gold broke its own three-session rally.
Crude added onto solid gains made in the previous session after OPEC forecast rising demand for crude in the coming year, while the U.S. Energy Information Administration raised its price target for crude for the remainder of this year as well as for 2018. It also lifted its production forecast for 2018, but markets shrugged off that piece of news.
The technology heavy index outperformed on Wednesday as technology was one of the best performing sectors of the day following the release of the latest Fed meeting minutes. The less hawkish than expected tone was beneficial for technology shares. The healthcare sector, which is also well represented on the Nasdaq, also saw modest gains for the day, helping lift the index further. The Nasdaq has now gained 22% in 2017, making it the best performing of the major U.S. indices.
While most markets in Europe were little changed on Wednesday, the IBEX rallied higher by 1.3% in response to news that Catalan officials were shelving independence plans for the time being. President Carles Puigdemont said he is interested in talks with Madrid, which helped calm investors as it takes the political atmosphere in Spain nearly back to normal. While there could be more volatility as talks progress, we should see the market returning to normal, with bank shares the largest beneficiaries.
Citigroup was one of nine banks that the International Monetary Fund said will struggle to remain profitable in the coming year, and was the only one based in the U.S. to make the undesirable list. The IMF cited the current weak capital buffers of the company to withstand future regulatory requirements, as well as a lack of capital to create those buffers in the next several years. Citi was already hit hard by regulatory requirements following the 2007-2008 financial crisis, but the IMF feels it will fare no better now if a crisis were to bring about a new regulatory environment. Shares of Citi were flat on Wednesday following the report.