European stocks falter as Spain tensions heighten

LONDON: Europe’s stock markets slid Thursday on Spain’s escalating political crisis, while investors awaited the start of an EU summit where Brexit will once again be the focus of attention.

In midday deals, Spain’s IBEX 35 index was down 0.9 percent compared with Wednesday’s closing level.

The euro meanwhile rose versus the dollar on the 30th anniversary of Black Monday — that “saw the largest single-day decline seen in US stocks in their history” on October 19, 1987, recalled David Cheetham, chief market analyst at traders XTB.

On Thursday meanwhile, European stock markets were “firmly on the back foot as a raft of company report earnings missed expectations, while investors await the next steps with respect to the constitutional crisis in Spain and today’s EU summit in Brussels”, noted Michael Hewson, chief market analyst at CMC Markets UK.

Spain said it would press ahead with suspending Catalonia’s autonomy after the region’s leader warned he may declare independence, heralding an unprecedented escalation of the country’s worst political crisis in decades.

The prolonged uncertainty is taking a toll on one of Spain’s most important regional economies.

More than 800 companies have moved their legal headquarters out of Catalonia, citing the risk of instability. The national government has cut its growth forecast for next year to 2.3 percent, blaming the current crisis.

– Brussels warns on Brexit –

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Traders were looking also to Brussels, as EU President Donald Tusk warned Britain not to expect any breakthrough in Brexit negotiations at a European summit starting Thursday, saying London needed to come up with more concrete proposals.

Leaders of the other 27 EU members meeting in Brussels through to Friday are set to postpone until at least December a decision on whether enough progress has been made in talks to move on to discussing Britain and the EU’s future relationship.

Elsewhere, the seemingly unending run of records on Wall Street continued to help most Asian markets on Thursday, with Tokyo buoyed also by a weaker yen and expectations for a clear election win for Prime Minister Shinzo Abe on Sunday.

Tokyo closed up 0.4 percent at a 21-year high — and a 13th straight gain that marks its best run in 30 years.

Shanghai slipped however after data showed China’s economic growth moderating.

Another positive day of earnings provided a base for the Dow and S&P 500 to clock up fresh all-time highs on Wednesday, while US investors were hopeful that US President Donald Trump would succeed in pushing through his tax cut plans.

“With stock markets in the US setting more record highs… doom mongers suggest that a similar (Black Monday) drop could lie ahead but the price action at present is markedly different,” said analyst Cheetham.

“The Dow was already 17 percent off its record highs in 1987 heading into Black Monday and given the extremely low levels of volatility seen recently there is little to suggest that we’ll get anything but a continuation of the slow and steady grind higher that has been evident throughout much of the year,” he added in a note to clients.

– Key figures around 1000 GMT –

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Madrid – IBEX 35: DOWN 0.9 percent at 10,189.5

London – FTSE 100: DOWN 0.3 percent at 7,522.42 points

Frankfurt – DAX 30: DOWN 0.5 percent at 12,974.7

Paris – CAC 40: DOWN 0.4 percent at 5,361.29

EURO STOXX 50: DOWN 0.6 percent at 3,598.62

Tokyo – Nikkei 225: UP 0.4 percent at 21,448.52 (close)

Hong Kong – Hang Seng: DOWN 1.9 percent at 28,159.09 (close)

Shanghai – Composite: DOWN 0.3 percent at 3,370.17 (close)

New York – DOW: UP 0.7 percent at 23,157.60 (close)

Euro/dollar: UP at $1.1811 from $1.1790 at 2100 GMT