EUROPE MARKETS: Spanish Stocks Rally To The Close As Worries Over Catalan Independence Ease

By Sara Sjolin, MarketWatch Features Dow Jones Newswires

Euro climbs as secession process is suspended for now

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Spanish stocks bounced higher on Wednesday, as worries over the standoff between Catalonia and Madrid subsided, after Catalan leader Carles Puigdemont suspended independence plans.

What stocks are doing: The IBEX 35 index rallied 1.3% to end at 10,278.40, its highest close since Sep. 29, according to FactSet. The Madrid benchmark was rebounding from a 0.9% loss on Tuesday, when concerns over an escalation in Spain's political crisis blunted the appetite for investing.

The pan-European Stoxx Europe 600 index ended flat at 390.15.

Spanish de-escalation: The upbeat tone for Spanish stocks came after Puigdemont spoke to the Catalan parliament late Tuesday. The separatist leader told lawmakers he still intends to declare independence (http://www.marketwatch.com/story/catalan-president-opts-for-spanish-dialogue-call-over-outright-independence-declaration-2017-10-10) for the Spanish region, but was suspending the secession process to allow negotiations with the central government in Madrid first.

In response, Spain's Prime Minister Mariano Rajoy on Wednesday demanded that the Catalan leader clarify whether he declared independence in his speech before parliament. Rajoy also said the government won't engage in dialogue with the Catalan separatists, but he opened the door for constitutional reform.

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The comments from the prime minister are seen as the first move toward triggering Article 155 of the constitution, which would allow the central government to effectively suspend Catalonia's home rule. The article has never before been activated and is referred to by some as a so-called nuclear option (http://www.marketwatch.com/story/spain-nuclear-option-on-table-as-confusion-over-catalan-independence-hangs-in-the-air-2017-10-11).

"The stalemate between the region and the Spanish government is still ongoing, but the news that the region isn't rushing for the exit has lifted investor confidence," said David Madden, market analyst at CMC Markets UK, in a note.

"We don't have any clarity as to how the situation will develop from here, but at least the market can be confident of political stability in the country. Dealers may become nervous again when the separatists try and pursue their agenda, but at the moment normality has returned to the Spanish market," he added.

How other assets responded: The euro moved higher after Puigdemont's speech on Tuesday evening local time and extended its climb in Wednesday's trade. The shared currency bought $1.1847, up from $1.1808 on Tuesday and $1.1743 on Monday.

The yield on 10-year Spanish government bonds fell 6 basis points to 1.628%, according to Tradeweb.

Other indexes: Germany's DAX 30 index rose 0.2% to 12,970.68, while France's CAC 40 index closed little changed but in negative territory at 5,362.41.

The U.K.'s FTSE 100 index lost 0.1% to 7,533.81.

Eurozone news: Dutch finance minister Jeroen Dijsselbloem said he would leave domestic politics (http://www.marketwatch.com/story/eurogroup-head-jeroen-dijsselbloem-to-quit-dutch-politics-2017-10-11) when a new government takes office on Oct. 25. He will complete his term as president of the Eurogroup of eurozone finance ministers, which ends in January.

Stock movers: Shares of Mondi PLC (MND.JO) slid 7.8% after the packaging and paper group said underlying performance for the year is expected to be modestly below market expectations (http://www.marketwatch.com/story/mondi-profit-rises-8-on-higher-prices-2017-10-11).

Gerresheimer AG (GXI.XE) put on 1% after a well-received earnings report.

Economic data: Spanish inflation in September fell to 1.8% from 1.9%, slightly missing forecasts of a 1.9% reading.

After the European markets close, the minutes from the U.S. Federal Reserve's September meeting are due. Monetary policy in the U.S. is important to traders in Europe as it's a key driver for markets globally.

(END) Dow Jones Newswires

October 11, 2017 12:35 ET (16:35 GMT)