Catalonia independence vote sinks Madrid stocks
london — The Madrid stock market sank on Friday, bucking an upwards trend in Europe as Catalonia’s parliament voted to declare independence from Spain, while Spanish lawmakers were set to vote on the imposition of direct rule on the region.
A motion declaring independence was approved with 70 votes in favour, 10 against and two abstentions, with Catalan opposition MPs walking out of the 135-seat chamber before the vote in protest at a declaration unlikely to be given official recognition.
Madrid’s benchmark IBEX 35 index of major companies was showing a loss of more than one per cent in value in late afternoon deals. “The IBEX 35 is the notable exception to Europe’s positive move, as the market is in the red,” said IG analyst David Madden.
Shares in Catalan banks fell sharply on Friday, dragging the entire stock market with them.
CaixaBank, Spain’s third largest lender, fell by around five per cent while Sabadell, the country’s fifth biggest bank, fell roughly six per cent.
Shares in the two banks have fallen since Catalonia’s separatist government went ahead with an independence referendum in the wealthy northeastern region on October 1, despite it having been deemed illegal by Madrid and the courts. Some clients withdrew their deposits from the banks, prompting the two lenders to move their legal headquarters out of Catalonia to other parts of Spain.
Neither CaixaBank nor Sabadell have revealed how much money was withdrawn, but they said the flow stopped after they moved their headquarters. Nearly 1,700 companies have moved their headquarters outside of Catalonia since the referendum. —
london — European shares hit a five-month high on Friday as one the biggest weekly drops in the euro this year buoyed investors’ moods.
The euro fell after the European Central Bank signalled it would tread carefully as it removes stimulus, and as the dollar kicked higher on signs that US President Donald Trump is pushing ahead with tax cuts and could install a more hawkish head of the Federal Reserve.
Stocks gains were also underpinned by strong earnings that boosted bank shares such as UBS and Royal Bank of Scotland, while tech stocks gained following upbeat earnings reports from US giants Alphabet, Microsoft and Amazon.com.
Europe’s STOXX technology index
A weaker euro leaves it more attractive to buy eurozone stocks David Madden, CMC Markets analyst
rose 1 per cent to its highest in almost 16 years. The wider pan-European FTSEurofirst climbed 0.5 per cent and eurozone blue chips were set for their ninth straight week of gains. “I think it’s a continuation of yesterday’s European Central Bank update,” said CMC Markets analyst David Madden.
“Mr Draghi will be certainly happy with himself because he likes to talk the currency down and that’s exactly what he’s done — a weaker euro leaves it more attractive to buy eurozone stocks.”
Europe’s gains also dragged MSCI world equity index back into positive territory for the day, though it was still on course for its first weekly fall in seven weeks, mainly driven by weaker emerging markets.
The euro hit a three-month low of $1.1616, down 0.2 per cent on the day having notched its biggest oneday drop of year on Thursday following the ECB’s announcement.
While the central bank will cut its stimulus in half from the start of next year, it will stretch it out towards the end of 2018 and actually rate hikes are even further off.
Investors in Spain appeared to be looking beyond a parliamentary vote for Madrid to impose direct rule over Catalonia in a crisis over a secession vote.
The premium investors demand to hold Spanish government bonds over benchmark German peers held near one-month lows on Friday.
The relative calm in markets is in contrast to the bouts of volatility seen since Catalonia staged its independence referendum on October 1, ruled illegal by Spanish courts.
Spanish 10-year bond yields fell 3 basis points to 1.53 per cent on Friday, having fallen 10 bps on Thursday in their biggest daily drop in six months. That kept the gap with German peers — which fell 2 bps to 0.43 per cent on Friday — to around 110 bps, the tightest level in around a month.
Earlier in Asia, Japan’s Nikkei gained 1.3 per cent. MSCI’s broadest index of Asia-Pacific shares outside Japan was flat, while Hong Kong and South Korean shares gained 0.7 per cent in local currency.
The dollar index, which tracks the greenback against a basket of six major rivals, added 0.2 per cent to 94.800 .DXY, trading at threemonth highs and on track for a weekly gain of 1.1 per cent. — Reuters