EUROPE MARKETS: Spanish Political Drama Keep European Stocks Under Pressure

By Sara Sjolin, MarketWatch Features Dow Jones Newswires

Pound on track for worst week in a year

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European stocks ended a tumultuous week on a downbeat note, driven lower by continued uncertainty over the political drama in Spain and a mixed reading on the U.S. labor market.

Closing levels: The Stoxx Europe 600 index ended 0.4% lower at 389.47, trimming its weekly gain to 0.3%.

The euro rose to $1.1730, from $1.1711 in late Thursday's trade in New York, erasing earlier losses. The shared currency had initially dipped against the dollar after the closely watched nonfarm-payrolls report (http://www.marketwatch.com/story/blame-irma-and-harvey-us-loses-33000-jobs-in-september-in-first-decline-since-2010-2017-10-06)in the U.S. was seen as strengthening the case for a Federal Reserve rate increase in December.

The report showed the U.S. "lost" 33,000 jobs in September, but the decline was widely due to disruptions caused by hurricanes Irma and Harvey. The unemployment rate, however, fell to 4.2% from 4.4% and wages rose more than expected.

Higher interest rates in the U.S. are important to traders in Europe as they are a key driver for markets globally.

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Week of uncertainty: The pan-European Stoxx Europe 600 has flipped in and out of losses for most of the week, buffeted by events in Catalonia, where separatists have vowed to declare the region's independence from Spain.

Prime Minister Mariano Rajoy's government has been criticized for its heavy-handed response to Sunday's referendum on independence and to subsequent developments. Separatist leaders looked ready to declare independence as early as Monday next week, but national authorities moved to thwart that Thursday by suspending the regional parliament for that day.

This sort of pressure "will make life tricky for the Catalan separatists, but it is an improvement on the violent scenes that we saw last weekend," said David Madden, market analyst at CMC Markets UK, in a note.

"Just because the Spanish stock market is no longer in free-fall, doesn't mean everything is all right. Traders will be reluctant to buy into the IBEX 35 or Spanish stocks will this situation is still ongoing, and for now there isn't an endgame in sight," he added.

Spanish assets suffer: Spain's IBEX 35 index logged a 1.9% drop for the week, after hitting an almost seven-month low on Wednesday. The index ended down 0.3% at 10,185.50 on Friday, led by losses for banks.

Shares of Banco de Sabadell SA (SAB.MC) fell 1.9%, and CaixaBank SA (CABK.MC) lost 0.6%. They rallied in Thursday's session on reports the companies were looking to move their headquarters out of Catalonia (http://www.marketwatch.com/story/major-spanish-bank-to-move-out-of-catalonia-2017-10-05).

On Friday, Spanish daily El Mundo reported that major cava producer Freixenet also was considering moving its corporate address outside the region (http://www.elmundo.es/cataluna/2017/10/06/59d7346522601da65f8b46b7.html).

Other indexes: France's CAC 40 index dropped 0.4% to 5,359.90. The country's current-account and trade deficits narrowed (http://www.marketwatch.com/story/frances-trade-deficit-falls-as-exports-grow-2017-10-06) in August as the country's exports strengthened, statistics showed Friday.

Germany's DAX 30 index slipped 0.1% to 12,955.94. A report showed orders for Germany's important manufacturing sector surged in August (http://www.marketwatch.com/story/german-manufacturing-orders-surge-in-august-2017-10-06-24853827), more than compensating for July's unexpected decline.

The U.K.'s FTSE 100 index rose 0.2% to 7,522.87, boosted by a weaker pound. Sterling fell to $1.3056 (http://www.marketwatch.com/story/british-pound-drops-set-for-worst-week-in-a-year-on-talk-of-early-uk-election-2017-10-06) from $1.3118 late Thursday on New York, as speculation mounted that the U.K. is headed for another early general election after Prime Minister Theresa May came under pressure.

The pound was on track for a 2.6% weekly loss, its worst week since the early October flash crash a year ago.

Read:Sterling has a long way to fall, as snap election risk mounts in the U.K (http://www.marketwatch.com/story/sterling-has-a-long-way-to-fall-as-snap-election-risk-mounts-in-the-uk-2017-10-05).

(http://www.marketwatch.com/story/sterling-has-a-long-way-to-fall-as-snap-election-risk-mounts-in-the-uk-2017-10-05)Also read:Will she stay or will she go? Bookie sees 33% risk Theresa May will resign in October (http://www.marketwatch.com/story/will-she-stay-or-will-she-go-bookie-sees-33-risk-theresa-may-will-resign-in-october-2017-10-06)

Stock movers: Shares of Ryanair Holdings PLC (RYAAY) fell 2.9% after the discount carrier's Chief Executive Michael O'Leary promised to boost pilots' pay (http://www.marketwatch.com/story/ryanair-ceo-promises-to-boost-pilots-pay-2017-10-06), in a move seen as an attempt to ease recent tensions.

Shares of EasyJet PLC (EZJ.LN) fell 1.6% after the discount airline said it expects profit for fiscal 2017 to be at the upper end (http://www.marketwatch.com/story/easyjet-sees-profit-at-upper-end-despite-fx-hit-2017-10-06) of its guidance range, but also highlighted pressures facing the sector.

Daimler AG (DAI.XE) rose 0.4% after the German car maker said its Mercedes-Benz group sold 3.7% more vehicles in September (http://www.marketwatch.com/story/daimlers-mercedes-benz-sales-get-a-china-boost-2017-10-06), with increased SUV sales and a rise in Chinese demand.

In the same industry, Renault SA (RNO.FR) advanced 0.5% after the French company said it aims to bump up sales outside Europe as part of a strategic six-year plan published Friday (http://www.marketwatch.com/story/renault-aims-to-bump-up-sales-from-outside-europe-2017-10-06).

Credit Suisse Group AG (CSGN.EB) (CSGN.EB) added 1.4% after RBC Capital Markets lifted the Swiss bank to outperform from sector perform, according to Dow Jones Newswires.

(END) Dow Jones Newswires

October 06, 2017 12:24 ET (16:24 GMT)