Europe close: Catalan uncertainty weighs on stocks, focus shifts to voter polls
Europe's main equity benchmarks ended the session mostly higher, albeit off their best levels, amid optimism regarding prospects for tax reform in the States, even as investors kept tabs on the political ructions down in Spain, including some of the most recent and perhaps somewhat unexpected developments.
By the closing bell, the benchmark Stoxx 600 was up 0.16% to 390.74, alongside gains of 0.09% in the German Dax to 13003.14, while Spain's Ibex 35 closed at its session lows, retreating 0.60% to 10,161.40.
At the weekend, authorities in Madrid approved a series of measures including the possible removal of the very top officials in the Catalan government -including the regional president Carles Puigdemont - and calling for regional elections within a maximum of six months.
Thus, come Monday all eyes were on the Catalan authorities' potential response, amid calls from opposition politicians in the region and influential business lobby Circle d'Economia for Puigdemont himself to call fresh elections, which it was thought would remove the risk of the state intervening the region's autonomy.
Nonetheless, reports in the local Spanish press were increasingly focusing on the last batch of voter polls at the national level, which showed the centrist Ciudadanos party climbing steeply up the rankings while far-left Podemos leader Pablo Iglesias was apparently on the backfoot.
Whereas Ciudadanos had been very vocal in calling for a strict response to Puigdemont's independence rush, Iglesias had backed Puigdemont's claim that the illegal referendum held on 1 October showed a majority of Catalans wanted to hold a referendum vote. That, Iglesias reportedly said on Monday, was why he backed a legally agreed independence vote.
In fact, in so far as they could be trusted, at least two of those polls, one carried out on behalf of local daily ABC and another for El Diario showed that if national elections had been held roughly one week ago then Ciudadanos and the centre-right PP would in fact command an absolute majority in the national parliament, something wholly unthinkable just a few months ago.
To take note of, the latter poll also showed the main Catalan nationalist party, ERC, also gaining traction.
Meanwhile, other reports indicated Puigdemont was mulling whether to travel to Madrid on Thursday or Friday to defend his actions in Congress in order to try and impede what now appeared to be the inevitable outcome of events.
Against that backdrop, analyst Henry Croft at Accendo Markets said European stocks were participating in a broadly positive start to the new week, welcoming a favourable Japanese election result, US bullishness on the back of tax reforms and the weakness of the euro helping Germany’s DAX to outperform peers.
As such, the DAX was led higher by heavyweight exporters such as SAP, Thyssenkrupp, Heidelberg Cement, Daimler and Infineon, as the euro fell erased 0.44% of its value against the greenback to trade at 1.1733.
Economic news was thin on the ground on Monday, with investors left to peruse figures showing an acceleration in the rate of growth of Switzerland's money supply from a 4.1% year-on-year clip in August to 4.4% for September.
In other news, the European Commission's euro area consumer confidence index for the month of October edged higherby 0.2 points to stand at -1.0 (consensus: -1.1).
No first-tier economic reports were scheduled for release in the States on Monday.
On the corporate front, consumer goods group Henkel may opt for non-organic growth in the US market, company boss Hans van Bylen told Welt am Sonntag.
Workers at Audi, a unit of German car manufacturer Volkswagen, were demanding five-year extensions of their job guarantees to 2025, according to Der Spiegel.