EUROPE MARKETS: Spanish Stocks End Sharply Lower As Catalonia Moves To Declare Independence

By Carla Mozee, MarketWatch Features Dow Jones Newswires

Clariant and Huntsman end merger talks; Electrolux shares rise

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Europe's broad-market benchmark closed higher on Friday, even as Spanish stocks tumbled as the Catalonia region moved to separate itself from the central government. A continued pullback in the euro and some well-received corporate earnings have helped to sustain buying momentum.

What stock indexes are doing

In Madrid, the IBEX 35 closed 1.5% lower at 10,197.50, after falling as much as 2%, following reports that the Catalan parliament voted for a resolution to declare independence, although members of anti-independence parties walked out in protest before the vote.

Read:Catalans declare independence from Spain, as central government prepares to move in (http://www.marketwatch.com/story/catalans-declare-independence-from-spain-as-central-government-prepares-to-move-in-2017-10-27)

The Stoxx Europe 600 index rose 0.6% to 393.43, ending at its highest level since May. For the week, the pan-European benchmark gained 0.9%, marking the index's sixth advance in seven weeks, according to FactSet data.

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On Friday, Germany's DAX 30 index rose 0.6% to 13,217.54, logging a fresh all-time closing high.

In Paris, the CAC 40 moved up 0.7% to 5,494.13, and in London, the FTSE 100 rose 0.3% to close at 7,505.03 (http://www.marketwatch.com/story/ftse-100-steps-higher-as-pound-slips-again-2017-10-27).

What driving markets

After Catalonia's parliament voted to declare independence, the Spain government then voted in favor of invoking Article 155, which would strip Catalonia of its autonomous powers and impose direct rule from the capital.

The yield on 10-year Spanish government bonds rose 2 basis points to 1.578%, according to Tradeweb. Yields rise as prices fall.

The euro extended losses after the Catalan news, buying $1.1578 and falling below $1.16 for the first time since late July, according to FactSet data. The currency was still struggling after the European Central Bank on Thursday said it would reduce its monthly bond purchases by half, to EUR30 billion, starting in January and extend the duration of those purchases to at least September 2018.

Read:Draghi averts 'taper tantrum'--for now--as ECB takes baby step toward end of QE (http://www.marketwatch.com/story/draghi-averts-taper-tantrumfor-nowas-ecb-begins-slow-walk-to-normalization-2017-10-26)

Also read:Is the euro rally toast after ECB unveils dovish bond-buying cutback? (http://www.marketwatch.com/story/is-the-euro-rally-toast-after-ecb-unveils-dovish-bond-buying-reduction-2017-10-26)

Euro weakness can lead to gains in shares of European exporters, in part on the prospect that their products will become less expensive for buyers using other currencies.

The reduced amount in monthly bond purchases was widely anticipated as the eurozone economy continues to recover, but the bank is still wrestling with stubbornly low inflation. ECB President Mario Draghi said during his news conference the decision reflects an "open-ended" program that won't stop suddenly.

Read:Draghi averts 'taper tantrum'--for now--as ECB begins slow walk to normalization (http://www.marketwatch.com/story/draghi-averts-taper-tantrumfor-nowas-ecb-begins-slow-walk-to-normalization-2017-10-26)

Read MarketWatch's recap of Draghi's news conference (http://blogs.marketwatch.com/thetell/2017/10/26/live-blog-ecb-to-begin-tapering-its-massive-bond-buying-program-in-january/)

What strategists are saying

"The political outlook is very uncertainty, and investors are getting more nervous by the minute. Investors will be reluctant to hold Spanish stocks over the weekend, for fear we could see a repeat of the violence that took place on the referendum day," said David Madden, market analyst at CMC Markets UK, in a note.

Read: Why Italy faces worst shock in Europe as ECB prepares to taper bond buys (http://www.marketwatch.com/story/why-italy-faces-worst-shock-in-europe-as-ecb-prepares-to-taper-bond-buys-2017-10-24)

Stock movers

Gemalto NV (GTO.AE) rallied 8.3% as the digital-security company backed its profit forecast for the year (http://www.marketwatch.com/story/gemalto-sales-flatten-backs-2017-profit-outlook-2017-10-27). Sales during the third-quarter were virtually flat.

Volkswagen AG shares (VOW.XE) leapt 4.5% as the German auto maker raised its operating margin guidance for the full year. But third-quarter net profit slid to EUR1.06 billion (http://www.marketwatch.com/story/vw-profit-slides-on-emissions-scandal-charges-2017-10-27) ($1.25 billion), hit by costs related to its diesel emissions scandal.

Shares of Banco de Sabadell SA (SAB.MC) were yanked 4.9% lower as Spanish stocks overall sold off. The lender said third-quarter net profit fell slightly on the year, to EUR203.2 million (http://www.marketwatch.com/story/sabadell-profit-falls-sticks-to-annual-view-2017-10-27). Sabadell recently moved its legal headquarters out of Catalonia as political tensions surround the region after its independence drive.

Clariant AG (CLN.EB) fell 0.9% as the Swiss chemicals maker and U.S.-based Huntsman Corp. (HUN) said they have ended their proposed merger (http://www.marketwatch.com/story/clariant-huntsman-call-halt-to-planned-merger-2017-10-27) to create a $15 billion chemicals company after facing pressure from U.S. activist investors.

SES SA shares tumbled 15%. The Luxembourg-based satellite operator posted a 9% decline in third-quarter revenue to EUR478.5 million, which was below FactSet's consensus estimate of EUR487.10 million. Shares of rival Eutelsat Communications (ETL.FR) slid 12%.

Electrolux AB (ELUXY) rallied 5.4%, with the Swedish household-appliance maker's quarterly profit of 1.42 billion Swedish kronor ($175.2 million) beating expectations. (http://www.marketwatch.com/story/electrolux-profit-rises-12-beating-forecasts-2017-10-27)

Kindred Group PLC (KIND-SDB.SK) surged 12% after the online gambling company said gross winnings revenue of GBP193.6 million in the third quarter was an all-time high.

UBS Group AG (UBS) said third-quarter net profit rose 14% to 946 million Swiss francs ($952.7 million). Shares of the Swiss lender closed 0.8% lower.

(END) Dow Jones Newswires

October 27, 2017 12:37 ET (16:37 GMT)