EUROPE MARKETS: Spanish Stocks Extend Losses 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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Spanish stocks dropped further Friday as the Catalonia region moved toward separating itself from the central government. But a continued pullback in the euro and some well-received corporate earnings reports helped European stocks hold to higher ground.

What stock indexes are doing

In Madrid, the IBEX 35 fell as much as 2%, but has since slightly pared the decline to 1.2% at 10,221.40. The benchmark hit an intraday low after the Catalan parliament voted for a resolution to declare independence, although members of anti-independence parties walked out in protest before the vote, according to media reports.

The Stoxx Europe 600 index rose 0.4% to 392.95, led by tech and consumer goods shares. But the consumer services and financial sectors lost ground. On Thursday, the benchmark jumped 1.1%, (http://www.marketwatch.com/story/european-stocks-cling-to-small-gains-as-investors-brace-for-ecb-move-2017-10-26) a move that could help leave it higher by 0.7% this week. That would be the index's sixth advance in seven weeks, according to FactSet data.

On Friday, Germany's DAX 30 index rose 0.7% to 13,223.67, after finishing Thursday's session at a record close of 13,133.28.

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In Paris, the CAC 40 moved up 0.6% to 5,489.58, and in London, the FTSE 100 rose 0.1% to 7,496.57 (http://www.marketwatch.com/story/ftse-100-steps-higher-as-pound-slips-again-2017-10-27).

Italy's FTSE MIB fell 0.6% to 22,662.61.

What driving markets

Spain's IBEX 35 drove was on track for a small loss for the week, with the escalation of the conflict between Madrid and Barcelona exacerbating losses on Friday. The Spanish Senate in Madrid on Friday -- after Catalonia's parliament voted to declare independence -- 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 4 basis points to 1.591%, according to Tradeweb. Yields rise as prices fall.

The euro was little changed but remained below $1.1600 after news of the Catalan vote hit. The euro on Friday fell below $1.16 for the first time since late July, according to FactSet data, still struggling after the European Central Bank on Thursday said it will 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 overseas clients to purchase.

The reduced amount in monthly bond purchases was widely anticipated as the eurozone economy continues to recover, but the bank is still dealing 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

"While [the ECB decision] was exactly what most economists anticipated, it was slightly less than what some euro bulls may have hoped for," said Kathy Lien, managing director of FX strategy at BK Asset Management in a late Thursday note.

"More importantly, the ECB said they would keep rates at current levels well past the end of QE. That means the first rate hike would not be until October 2018. Nothing else mattered after Draghi made it clear that rates won't be increased anytime soon," she added.

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 10% 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 3.5% 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 5.3% 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 1.9% as the Swiss chemicals maker and U.S.-based Huntsman Corp. (HUN) said they've 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 13%. 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) sprang up 5.6%, 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) charged up 11% 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 turned lower, down 1.3%.

(END) Dow Jones Newswires

October 27, 2017 10:26 ET (14:26 GMT)