DAX Hit Record High Following Draghi’s Dovish Commentary

The DAX posted new record highs as Draghi’s dovish guidance Thursday continues to underpin risk appetite. The German index has falling back slightly since hitting a high, but remains up approximately 0.75% on the day, the CAC gained nearly 1%, but the Spanish IBEX is down as Spanish lawmakers discuss whether to back emergency powers for Rajoy to take over direct control in Catalonia, while lawmakers in Barcelona are reportedly asked to vote on a declaration of independence later today. Asian stock markets also moved mostly higher, led by Japanese stocks. The Nikkei gained 1.24% and headed for another weekly advance after positive leads from the U.S. where equities rallied on earnings and increased hopes for Trump’s tax reform. Australian’s benchmark underperformed and lost -0.22% as the government lots its majority following a High Court ruling on the citizenship eligibility of lawmakers.

Spain heading for show down in Catalonia

Prime Minister Rajoy is expected to get backing from lawmakers today to implement legislation to take over direct control in Catalonia. It seemed Thursday as though Puigdemont would cave in and allow early elections to go ahead, but the Catalan leader said he could only allow that to happen if Madrid stops its move to take over control, a condition Rajoy, who so far has taken a hardline in the conflict, may not be willing to accept. It seems more likely that Rajoy will at least get the official clearance from lawmakers.

The ECB’s survey of professional forecasters showed unchanged inflation projections for the period from 2017-2019, but the long-term forecast was lifted to 1.9%, from 1.8% in the previous forecast round. Growth projections meanwhile were lifted substantially to 2.2% this year, followed by 1.9% and 1.7% in the following 2 years. The long-term growth forecast though was left steady at 1.6%. While this backs the decision to reduce asset purchase volumes next year, for the hawks at the council, the numbers will show that the ECB should have done more to scale back stimulus.

Japan’s core CPI grew at a 0.7% year over year pace in September, as expected and identical to the 0.7% pace in August. National CPI also expanded 0.7% year over year after a 0.7% gain. Tokyo core CPI accelerated to a 0.6% year over year pace in October, slightly better than expected, from 0.5% in September. But Tokyo total CPI fell 0.2% year over year, contrary to expectations for growth, after the 0.5% year over year pace in September. Broadly, six quarters of GDP growth have been accompanied by a pick-up in core CPI growth this year to 0.7% year over year in August and September from 0.1% in January and flat or falling CPI in each month of 2016.