EUROPE MARKETS: Spanish Stocks Lower As Catalan Standoff Continues, But Germany's DAX Has Sights Set On Record Close

By Carla Mozee, MarketWatch Features Dow Jones Newswires

Euro losing ground vs. dollar

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Spanish stocks fell Monday as the political standoff between Madrid and the Catalonian region wore on, but a drop in the euro appeared to provide a lift to other European markets.

What stock indexes are doing

The Stoxx Europe 600 index was up 0.2% to 390.97. Only the financial and consumer services groups fell. The regional benchmark on Friday rose 0.3% (http://www.marketwatch.com/story/european-stocks-nudge-higher-as-volvo-rallies-2017-10-20), but lost 0.3% for the week, its first weekly loss in six.

In Madrid, the IBEX 35 gave up 0.3% to 10,195.40, but managed to pare deeper losses. There, shares of CaixaBank SA (CABK.MC) and Bankia SA (BKIA.MC) each fell 1.1%.

Germany's DAX 30 index rose 0.4% to 13,041.09 and France's CAC 40 added 0.4% to 5,391.82, as both indexes started to gain more traction after a lackluster open. The DAX was once again within striking distance of a new record close.

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In London, the FTSE 100 turned up 0.1% to 7,530.11.

Italy's FTSE MIB was fractionally lower at 22,343.45 after voters in two regions in the northern part of the country backed more autonomy.

What's driving markets?

The euro was losing ground, trading at $1.1745 versus $1.1783 late Friday in New York. Traders appeared to be turning their attention to Thursday's monetary policy decision from the European Central Bank, led by President Mario Draghi.

"Markets are expecting asset purchases to be cut in half, to around EUR30 billion. However, the duration will likely have more impact on the direction of the single currency. If Mr. Draghi signaled that QE might continue running beyond December 2018, it would be interpreted as a dovish taper, thus pushing further expectations of a rate hike and dragging the euro lower," said Hussein Sayed, chief market strategist at FXTM, in a note.

Shares of exporters can rise on the back of a weaker euro on prospects a lower value of the currency can, in part, make European products less expensive for oveseas buyers to purchase. Among exporters, British American Tobacco PLC (BATS.LN) rose 1.4%, auto maker Daimler AG (DAI.XE) gained 1% as did shares of luxury goods maker LVMH Moet Hennessy Louis Vuitton .

"The stalemate between Madrid and Catalonia still continues, and this is keeping the pressure on Spanish stocks," wrote CMC Markets analyst David Madden. Spain's government is moving to strip Catalonia of its autonomous powers and "impose direct rule, and even though we haven't had a major reaction from the Catalan politicians, traders are getting nervous," Madden added.

Stock movers: GKN PLC (GKN.LN) rose 3.4%, near the top of the Stoxx 600, following a Sunday Times report the company is considering a split of its aerospace and automotive businesses (https://www.thetimes.co.uk/article/gkn-which-makes-wing-tips-for-airbus-and-parts-for-mercedes-eyes-split-to-create-two-ftse-champions-x7c2t6bj0).

Air France-KLM SA (AF.FR) was up 1.6% after the airline reach a pension scheme agreement with a pilots union.

Assicurazioni Generali SpA (G.MI) was up 0.8% after Jefferies upgraded the Italian insurance and financial services company to buy from hold.

"Following decades of political intrigue we believe Generali is finally free to forge its own strategic destiny. Cash earnings are accelerating, and together with the capital being released from non-core, Generali will soon be ready in our view to redeploy capital," said Jefferies analysts.

(END) Dow Jones Newswires

October 23, 2017 09:15 ET (13:15 GMT)