Spanish Stocks, Bonds Under Pressure After Catalan Vote
By Riva Gold and Lucy Craymer -- Spanish stocks, euro down after Catalan election -- Equities post biggest weekly outflows since Brexit -- Bitcoin sheds one-fourth of its market value in 24 hours
A victory for Catalonia's separatist parties in a regional election sapped some demand for Spanish assets on Friday, while benchmarks elsewhere in the world continued to climb ahead of the Christmas holiday.
Futures pointed to a 0.1% opening gain for the S&P 500, on track to extend Thursday's modest rebound. Congress passed a stopgap spending bill to keep the government funded through mid-January, avoiding a looming shutdown.
Markets in Hong Kong and Japan closed with gains, but the Stoxx Europe 600 edged down 0.1% midday, held back by a fall in Spanish stocks.
Spain's benchmark IBEX 35 index fell 1% on Friday, with lenders Banco de Sabadell and CaixaBank among the day's biggest decliners, down 2.7% and 3% respectively.
Catalonia's separatist parties won a majority in a vote Thursday for a new regional assembly, keeping alive the threat of secession from Spain. Divisions within the secessionist movement over how to achieve independence mean they now face hurdles to form a pro-independence government, opening a period of uncertainty over relations between Catalonia and Madrid.
Still, many analysts were skeptical the development would maintain pressure on the common currency or meaningfully weigh down European markets. While the results are considered a blow to Spanish Prime Minister Mariano Rajoy, few expect another unilateral independence declaration soon, and there are few signs Spain's growth has been dented in recent months.
"These events are very uncertain and difficult to predict and investors are focused on economic growth and earnings growth," said Jon Adams, investment strategist with BMO Global Asset Management. Among political concerns in Europe, "We're more worried about Italian elections and German coalition talks," he added.
The euro was last down 0.2% at $1.1850 after falling to $1.1817 shortly after the vote. Spanish 10-year government bond yields rose to 1.529% on Friday before paring gains to 1.502%, up from 1.467% at Thursday's settle. Yields move inversely to prices.
Elsewhere in markets, bitcoin slumped to $13,200 from $15,800 in barely three hours during Asian trading, and was last at $13,866, according to CoinDesk. Bitcoin has wiped out one-fourth of its market value in the past 24 hours and lost about $121 billion of its total market value in less than a week.
Many of the other big cryptocurrencies also fell significantly, with Bitcoin Cash prices slumping by one-quarter at one point over the past day.
Investors withdrew $14.5 billion from equity funds in the most recent week as investors watched the tax bill make its way through a final vote in the House--the largest outflow since Britain's vote to leave the European Union, according to Bank of America Merrill Lynch analysis of EPFR Global data. Some investors believe the tax cut was already priced into U.S. stocks ahead of the vote, underscoring the muted reaction in markets.
Later Friday, the U.S. releases the price index for personal-consumption expenditures--the Federal Reserve's preferred inflation gauge. Many investors cite a rise in inflation as a key market risk for 2018.
BMO's Mr. Adams said the tax bill could exacerbate inflationary pressures next year, just as the temporary dampening effects of telecom pricing and medical costs wear off.
Earlier, Asia-Pacific stocks were mostly higher in muted trading ahead of the holidays. South Korea's Kospi--one of Asia's worst performers Thursday--edged up 0.4% after four straight declines. Japan's Nikkei rose 0.2% and Hong Kong's Hang Seng added 0.7%, ending the week with gains.
Jeannette Neumann and Steven Russolillo contributed to this article.
Write to Riva Gold at email@example.com and Lucy Craymer at Lucy.Craymer@wsj.com
(END) Dow Jones Newswires
December 22, 2017 07:11 ET (12:11 GMT)Copyright (c) 2017 Dow Jones & Company, Inc.