EUROPE MARKETS: Spanish Stocks Slump After Separatists Win Catalonia Election

By Sara Sjolin, MarketWatchFeaturesDow Jones Newswires

French GDP upwardly revised

Spanish stocks led European markets lower on Friday, after parliamentary elections in Catalonia handed a win to the separatist movement, rekindling fears of the re-emergence of tensions in Spain.

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What are markets doing: Spain's IBEX 35 index dropped 1.2% to 10,182.50, setting it on track for its biggest one-day percentage loss since late October.

The Stoxx Europe 600 index fell 0.1% to 390.51, following a 0.6% gain on Thursday (http://www.marketwatch.com/story/european-stocks-drop-as-us-tax-optimism-fades-2017-12-21). For the week, it was on course to rise 0.6%.

Germany's DAX 30 index fell 0.1% to 13,100.82, while France's CAC 40 slipped 0.1% to 5,380.46.

The U.K.'s FTSE 100 index was up 0.1% at 7,607.52.

The euro fell to $1.1850 (http://www.marketwatch.com/story/euro-under-pressure-after-separatists-in-spains-catalonia-win-majority-2017-12-22), down from $1.1876 late Thursday in New York.

What's driving the market: The euro and Spanish stocks came under pressure after the three Catalan separatists parties won a majority in regional parliamentary elections in Spain on Thursday (http://www.marketwatch.com/story/catalan-separatists-win-majority-in-regional-assembly-but-divisions-may-slow-secession-2017-12-21). The result was a rebuff to the central government and Spanish Prime Minister Mariano Rajoy, as he had called for the elections in a bid to quash the secessionist move after a chaotic and illegal independence referendum in October.

Following October's vote, Rajoy's government seized power of the Catalan region, dissolved its parliament and jailed its leaders. Ex-regional leader Carles Puigdemont fled to Belgium where he's been campaigning in exile. Together for Catalonia, the party led by Puigdemont, got the most votes among the pro-independence parties in Thursday's election, while Rajoy's Popular Party got the least votes.

The election, which saw a high turnout, is likely to reopen the debate about independence for the region, and potentially bring about fresh turmoil for Spain.

What are strategists saying: "This result will not be welcomed by the Madrid government who were hoping this snap election would reduce the calls for independence, and today's result will keep the issues on the table," said David Madden, market analyst at CMC Markets U.K.

"The results of the Catalan regional election are a wake-up call for Spanish Prime Minister Mariano Rajoy. He suffered two major defeats yesterday," said Carsten Hesse, European economist at Berenberg, in a note.

"First, the three pro-independence parties won combined the majority of seats in the regional assembly (70 out of 135), after 99.9% of the votes were counted, despite Rajoy's efforts to reduce the power of the independence movement following the illegal 1st October independence referendum," he said. "Second, Rajoy's own party, the centre-right PP, ended in last place among the major mainstream parties, winning only 3 seats."

Stock movers: Spanish banks were among the biggest decliners in Friday's trade. Shares of Banco de Sabadell SA (SAB.MC) dropped 2.6%, CaixaBank SA (CABK.MC) fell 2.1% and Banco Santander SA (SAN) (SAN) gave up 1.5%. The Stoxx Europe 600 Banks Index was down 0.4%.

Shares of Steinhoff International Holdings NV jumped 5.9%, rebounding after sharp losses earlier in the week. The retailer, which owns the Poundland and Mattress Firm retail chains, on Tuesday said lenders were increasingly pulling their credit lines. Steinhoff shares have collapsed 93% this year after an accounting scandal was disclosed earlier this month.

Economic news: France's third-quarter GDP growth was revised up to 0.6% (http://www.marketwatch.com/story/french-third-quarter-gdp-revised-up-to-06-2017-12-22), up from an earlier estimate of 0.5%. There was also good news for French consumer spending, which rebounded in November, rising 2.2% (http://www.marketwatch.com/story/french-consumer-spending-rebounded-in-november-2017-12-22-34854810).

(END) Dow Jones Newswires

December 22, 2017 04:23 ET (09:23 GMT)