Spanish stock market rallies on Catalan relief

A screen shows an evolution of Spanish market's main index Ibex 35 at Madrid's Stock Exchange in Madrid, Spain.
A screen shows an evolution of Spanish market's main index Ibex 35 at Madrid's Stock Exchange in Madrid, Spain. PHOTO: EPA-EFE

NEW YORK (AFP) - The Madrid stock market soared Monday (Oct 30) on investor relief over an apparent easing in Spain's Catalan independence crisis, dealers said.

Equity markets elsewhere were mixed, with other European bourses little changed, Japan flat ahead of a Bank of Japan monetary policy meeting this week and US stocks pulling back from records in anticipation of a heavy week of economics news, including major earnings, a Federal Reserve policy meeting and the October jobs report.

Spanish shares had plunged on Friday after Catalan lawmakers voted to declare independence from Spain, but Madrid immediately moved to quash the breakaway bid.

However, Madrid's benchmark IBEX 35 index of major companies had rallied by 2.4 per cent by the close Monday, while the euro regained its composure after touching a three-month dollar low on Friday.

"We think that financial markets are right to take a relaxed view of the constitutional crisis in Catalonia," said Andrew Kenningham, chief global economist at Capital Economics.

"The economic fallout for Spain itself should be small, and the risks to the euro-zone are even smaller."

Earlier Monday, Spain reported vigorous growth in the third quarter but local economists and business groups warned the crisis in wealthy Catalonia could impact the economy going forward.

Spanish banks were among the main risers in Madrid, including Catalonia's CaixaBank and Banco Sabadell which surged 4.2 per cent and 5.7 per cent, respectively.

"After an escalation of the Catalan crisis on Friday, Spanish markets are in recovery mode at the start of this week," said City Index analyst Kathleen Brooks.

"This is largely in response to the peaceful transferral of power to Madrid from the Catalan authorities over the weekend." Spain nevertheless entered uncharted and potentially perilous territory as Madrid moved to take over the running of Catalonia in response to the rebellious region's parliament unilaterally declaring independence.

Spanish Prime Minister Mariano Rajoy has dissolved Catalonia's parliament and called Dec 21 elections for the region.

US stocks opened the week on a down note, a decline primarily attributed to buyers' fatigue after a slew of stock market records over the last month.

Investors also were cautious after the first indictments connected to the investigation into Russia's connections to President Donald Trump's presidential campaign, although the cases do not directly connect to Trump himself.

The probe is seen as a potential threat to tax cuts that have helped propel the market higher.

"It does not directly impact Trump... but it's still not good," said Adam Sarhan of 50 Park Investment. "Maybe nothing happens at all, but there's a lot of question marks."

Oil prices rose, with the benchmark Brent contract in London finishing at its highest price since July 2015 at US$60.90 a barrel, as investors detected growing evidence that Opec and other producers will extend a landmark output cut deal.

Saudi Crown Prince Mohammed bin Salman said last week that Riyadh would "of course" give its backing to a rollover of the agreement.