Catalan crisis hits stock markets, bonds, euro

World
Europe

Spanish shares accelerated losses, Spain’s 10-year government bond yields hit a day high and the euro dipped against the dollar on Friday after Catalonia’s regional parliament declared independence.

A motion declaring independence was approved with 70 votes in favor, 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.

Pro independence supporters gather in front of the Palau de la Generalitat de Catalunya in Placa St. Jaume following the parliamentary vote to declare Catalan independence in Barcelona, Spain, on Friday, Oct. 27, 2017. /VCG Photo

Spain’s IBEX fell as much 2.1 percent to a four-day low and euro zone banking shares as much as 1.8 percent.

Shares in Catalan banks were among the biggest losers. CaixaBank, Spain’s third largest lender, fell by around five percent while Sabadell, the country’s fifth biggest bank, fell roughly six per cent.

“We are likely to see more sustained unrest, possibly including strikes, as well as more serious clashes between national police and pro-independence activists,” Eurasia Group analyst Federico Santi predicted in a note.

Nevertheless, elsewhere in Europe, the other main stock markets extended the previous day’s rally after the European Central Bank said it would soon start to taper its monetary stimulus program.

US markets were also upward bound, as blowout earnings by Microsoft, Google parent Alphabet and other tech giants propelled the Nasdaq 2.2 percent higher to an all-time record of 6,701.26.

The gap between Spanish and German 10-year bond yield also widened to 120 basis points, the most in four days.

Markets stabilised somewhat after Spanish Prime Minister Mariano Rajoy tweeted that the rule of law would “restore legality” in Catalonia and called for calm.

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Source(s): AFP ,Reuters