Catalan vote batters Spanish stocks; euro dips

Updated - January 09, 2018 at 02:41 PM.

Spanish bond yields hit over 1-month high; bitcoin falls over 14%

Catalonia election results battered Spanish stocks, with Spain's IBEX falling as much as 1.1 per cent as European bourses opened. Financial stocks were the biggest drag on stock indices across the region, with the euro zone banks index falling 0.8 per cent.

Spanish stocks and the euro fell, while Spanish government bond yields hit their highest levels in over a month after Catalan separatists wanting to break away from Spain won a regional election.

Separatist parties won a slim majority in the Parliament of the wealthy Spanish region of Catalonia, a result that looks likely to prolong political tensions which have damaged Spain's economy and prompted a business exodus from the region.

The result battered Spanish stocks, with Spain's IBEX falling as much as 1.1 per cent as European bourses opened. Financial stocks were the biggest drag on stock indices across the region, with the euro zone banks index falling 0.8 per cent.

The pan-European STOXX index, dipped only 0.1 per cent as Spanish stocks dominated the biggest fallers, confirming analyst expectations that any shake-out from the Catalonia vote would be mostly confined to Spain. Germany's DAX edged down 0.1 per cent, in line with France's CAC 40.

Spanish stocks were Europe's best-performing benchmark for much of the year, before October's independence referendum sent the IBEX tumbling. It was last 9 per cent down from its May peak.

The euro momentarily dipped to $1.1817 earlier in the day as preliminary results from regional votes on Thursday showed pro-independence parties in Catalonia keeping an absolute majority. It trimmed losses to last stand at $1.1853, down 0.2 per cent.

“This is Groundhog Day, we have been here,” said Christopher Peel, chief investment officer at Tavistock Wealth. “I just don't think the Spanish government can do anything other than come to the table now.”

He added thatthin liquidity due to the holidays could be accentuating what he called a kneejerk reaction on the IBEX. "Likely there's some hedge funds leaning on it, but in terms of long-only money I don't think there will be much movement now.”

Spain's 10-year borrowing costs rose 5 basis points to a one-month high of 1.52 per cent in early trades, before settling back at 1.49 per cent. The premium investors demand for holding Spanish bonds over top-rated German peers widened 6 bps to around 111 bps at one stage.

Asian stocks rise

The MSCI index of world stocks was flat. The Asia-Pacific region's equities took cues from Wall Street, after all three of its indexes posted gains overnight on strength in bank and energy stocks and news the U.S. economy grew in the third quarter at its fastest pace in more than two years.

Supporting US stocks this week, and by extension global equities, was the passage through Congress of a $1.5 trillion tax-cutting Bill.

MSCI's broadest index of Asia-Pacific shares outside Japan was 0.5 per cent higher. Hong Kong's Hang Seng added 0.3 per cent and Shanghai dipped 0.1 per cent. Australian stocks advanced 0.15 per cent, South Korea's KOSPI gained 0.45 per cent and Japan's Nikkei rose 0.15 per cent.

The dollar index, which measures the US currency against a basket of peers, was up 0.1 per cent. Bitcoin fell as much as 14.7 per cent to below $14,000 on the Bitstamp exchange on Friday, last trading at $13,400. The cryptocurrency, which was at about $1,000 at the start of the year, had climbed to a record high of $19,666 on Sunday.

In commodities, US crude futures slipped 0.5 per cent to $58.07 per barrel, an earlier rise losing steam as traders sold to adjust positions ahead of the year-end.

The contracts had reached a nine-day peak of $58.38 overnight as OPEC started working on plans for an exit strategy from its deal to cut crude supplies, fuelling hopes it would not end supply cuts abruptly. Brent was down 0.3 per cent at $64.72 a barrel after closing Thursday at $64.90 a barrel, its highest since June 2015.

Published on December 22, 2017 10:49