Spanish Stocks Fall Sharply, Europe Holds Gains Following Catalan Referendum

Madrid (Oct 2)  Spain's main equity index opened sharply lower Monday, while government bond yields rose, as investors reacted to  the violence that marred Catalonia's attempt to hold a referendum on independence from Madrid over the weekend.

The IBEX 35, Spain's bluechip stock index, was marked 0.7% lower in the opening hour of trading in Madrid, contrasting strong gains elsewhere around the region, following the disputed vote and indications from Catalan President Charles Puigdemont that he may make a declaration of independence in the coming days.

Benchmark 10-year Spanish government bond yields were also marked higher, rising 8 basis points to 1.68%, taking the extra yield, or spread, that investors demand to hold the triple-B rated paper instead of top-grade German bunds to around 1.26%, the widest in four months.

The European single currency slipped around 0.65% from Friday's close to change hands at 1.1738 against the U.S. dollar in the wake of the Sunday vote, which injured hundreds and sets the governments of Barcelona and Madrid on a potential collision course over the fate of Spain's richest and most important economic region.

Stocks, however, appear more resilient, with the DAX performance index in Germany rising 0.5% and France's CAC-40 rising around 0.3%. Britain's FTSE 100 added 0.4%, thanks in part to a weaker pound, which slipped 0.56% to 1.3322 against the greenback, largely in sympathy with the decline in the euro.

Overnight in Asia, the dollar index, a measure of the greenback's strength against a basket of six global currencies, started the third quarter on strong footing with a 0.55% to 93.584 gain -- the highest since mid-August -- thanks in part to both flows from investors selling the euro and speculation that President Donald Trump may nominate Kevin Warsh, a former Federal Reserve governor, to replace Janet Yellen as chair of the central bank.

TheStreet