Catalan Separatist Victory Pressures European Stocks

by 22 Dec, 2017

What next for Catalonia?

It’s the last day of trading before the Christmas break, which should mean low volatility, but Spanish stock markets are anything but calm and have taken a major hit this morning, thanks to a win for pro-independence parties in the Catalonian election held yesterday.

Separatist groups won 70 out of 135 seats in the Parliament of Barcelona, in a major humiliation for the Prime Minister Mariano Rajoy, whose odds of being victorious seemed to be assured by pollsters. However, his party (the ‘People’s Party’) ended up only winning 3 seats. Figures show the turnout for the vote was 80%.

Indices tracking Spanish stocks including the FTSE Spain Index and BATS Spain 35 fell by over 1% each after markets opened, while the picture for broader European markets also looks weaker – see the chart (blue and red lines indicate the FTSE Spain and BATS Spain 35).

The outcome of the vote will deepen Spain’s political crisis further, as questions remain over what moves independence parties will make next. For now, the election has provided a major boost to separatists who will feel emboldened by the outcome.

Though separation from Spain may be good in their eyes, it may deter foreign investment further. Official data shows foreign direct investment in Catalonia fell by 75% in the third quarter from a year earlier, dragging down the rest of the country too.

Today we are watching: #spainx #eurusd #eurgbp #bats-es35

Markets Elsewhere

Wall Street was seemingly unphased by the goings on in Europe today, with US futures pointing to a higher open ahead a ton of data which is due later on.

At 8:30 a.m EST, reports on durable goods orders, core capital orders, personal income, consumer spending and core inflation for November will be released. New-home sales figures for that month and a consumer sentiment reading for December are also due at 10 a.m EST.

At 5:30AM EST, Dow futures rose by 25 points, or 0.10%, S&P500 futures gained 3 points, or 0.09%, while Nasdaq futures inched up 6 points, or 0.09%.

In earnings, Nike shares moved higher in pre-market trading after the company released a positive earnings report.

Bank shares were some of the most successful stocks on US indices yesterday. Goldman Sachs and Wells Fargo gained over 2% each while JPMorgan Chase, Citi and Bank of America picked up over 1%.

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