It’s been a slow start to the new week for UK assets with the FTSE 100 trading at similar levels to where it ended last week and the pound fairly mixed.
Abe victory boosts Japanese stocks
Shares in Tokyo recorded a 15th consecutive day of gains overnight following the news that incumbent Prime Minister, Shinzo Abe, has won a landslide victory in the Japanese elections. The victory marks the third successful campaign for Mr. Abe who signalled he wants to push ahead with further large scale economic stimulus dubbed “Abenomics” and with the ruling coalition now retaining a super majority with more than two-thirds of the seats in parliament, the decision to call a snap election has been well and truly vindicated.The Nikkei 225 closed higher by more than 1% to post its highest end of day price of the year and you have to go back more than two decades for the benchmark to have traded at a higher level.
Catalan tensions escalate
The weekend also saw potentially significant political developments in Spain, with Prime Minister Rajoy stating his intention to trigger Article 155 of the constitution which allows for direct rule to be imposed on the Catalan region. Whilst Mr. Rajoy stopped short of dissolving the regional parliament, the outcome of the emergency cabinet meeting on Saturday is another inflammatory step and the news was swiftly met by a strong rebuttal from Catalan president Carles Puigdemont who stated that the region will not accept direct rule from the Spanish capital. The Spanish senate will vote on Friday on the triggering of Article 155 and the upper house are expected to support Rajoy’s stance. The Catalan parliament have attempted to front run this event by meeting on Thursday and with there now having been 3 weeks elapse since the referendum itself, the situation appears to be escalating further with an amicable solution looking less likely. The events have been weighing on Spanish stocks, with shares in Madrid lagging behind their European peers throughout the month and the IBEX 35 has fallen once more this morning.