Global stocks fall as Spanish referendum rattles markets

Helen Reid and Julien Ponthus, Reuters

Independence supporters gather in Barcelona's main square, Spain, Sunday, Oct. 1, 2017. Authorities say 844 people and 33 police were injured Sunday in Spanish police raids to halt the independence vote organized by the Catalan autonomous government that was declared illegal by Spain's constitutional court. , The Canadian Press

LONDON — Spanish stocks sank on Monday after violence surrounding Catalonia's independence referendum fueled political worries and left Madrid's bourse missing out as European shares hit a three-months high and Wall Street fresh new records.

The pan-European STOXX 600 began the fourth quarter with a 0.5-per-cent gain, boosted by a weaker euro. But Spain's IBEX fell 1.5 per cent after Catalans defied a police crackdown to vote for independence in a referendum the Spanish government said was unconstitutional.

Spain's IBEX has been a strong performer among European benchmarks, up 10 per cent in the year to date, but lost some of its shine leading into the referendum.

Shares in Catalonia-headquartered Banco Sabadell and Caixabank were the worst-performing within the Spanish index, down 4.4 and 4.5 per cent each.

Euro zone lenders felt some of their Spanish counterparts' pain, and lost 0.7 percent.

"There is clearly a Catalan effect" for financial shares, said Stephane Barbier de la Serre, a strategist at Makor Capital Markets.

In the longer run, the Catalonian crisis is unlikely to derail the bullish trend of the sector, he said, explaining tighter monetary policies would gradually push rates higher, benefiting lenders.

Not all banks fell. Italy's UBI Banca jumped 4.6 per cent to the top of the FTSE MIB after Societe Generale upgraded the stock to a "buy," saying higher Italian GDP forecasts indicated growing lending demand and better non-performing loan management.

Outside financial stocks, European markets seemed immune to the events in Spain.

EasyJet, Ryanair and Lufthansa were among top gainers, up between 3.5 and 5.2 per cent after Monarch Airlines went bust.

Travel and leisure stocks gained 0.9 per cent as airlines rose on the prospect of carving up Monarch's assets, in the sector's latest failure after Alitalia and Air Berlin succumbed earlier this year.

"Capacity being taken out of the market was always going to be good news for other airline stocks ... but the collapse of Monarch does highlight serious issues for the airline industry," said Rebecca O'Keefe, head of investment at Interactive Investor.

Ballpoint pen and razor maker BIC posted the worst performance and fell 9.9 per cent after lowering its 2017 sales forecast because of weaker-than-expected performance in U.S. and Latin American markets.

U.S. stocks started the fourth quarter on a strong note on Monday, with the S&P 500, the Dow and the Russell 2000 all hitting record high closes as data pointed to underlying strength in the economy.

The Dow Jones Industrial Average rose 154.02 points, or 0.69 per cent, to 22,559.11, the S&P 500 gained 9.84 points, or 0.39 per cent, to 2,529.2 and the Nasdaq Composite added 20.76 points, or 0.32 per cent, to 6,516.72.