Spanish banks sink on Catalan vote, European shares gain

By Helen Reid

LONDON, Oct 2 : Spanish stocks sank on Monday after a violent referendum in Catalonia, underperforming the wider European market as political uncertainty dented bank shares.

The pan-European STOXX 600 began the fourth quarter with a 0.2 percent gain, boosted by strong travel stocks and a mining sector supported by higher metals prices.

But Spain’s IBEX fell 0.8 percent after Catalans defied a police crackdown to vote for independence in a referendum the Spanish government said was unconstitutional.

Spanish banks opened sharply lower, leading the IBEX down, with shares in Catalonia-headquartered Banco Sabadell and Caixabank the worst-performing, down 4 percent and 1.9 percent respectively.

Analysts said the reaction would likely be short-lived.

“The consequences could act as an ongoing background negative force on European risk assets, but it is likely markets…will still put more weight on the improved growth and inflation data from the region,” said Bernstein European equity strategists.

Spain’s IBEX has been one of the best-performing European benchmarks, up 10 percent year-to-date, though it lost some of its shine leading into the referendum.

On the broader STOXX index, ballpoint pen and razor maker BIC sank 9 percent after shaving its 2017 sales forecast due to weaker than expected performance in U.S. and Latin American markets.

EasyJet, Ryanair and Lufthansa were among top gainers, up between 2.5 and 3.7 percent after Monarch Airlines went bust, prompting Britain’s biggest-ever peacetime repatriation effort to return thousands of stranded passengers.

Travel and leisure stocks gained 1.2 percent 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.

Despite Spanish weakness, European stocks hit new three-month highs, supported by a weaker euro which helped ease concerns over company earnings. The exporter-heavy DAX was particularly strong, up 0.5 percent.

Gjensidige Forsikring shares gained 3.5 percent after DNB raised the insurer to a “buy”, saying its current discount to Nordic peers was unwarranted considering the prospect of extraordinary dividend payments.

Italy’s UBI Banca jumped 2.9 percent 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.

/Reuters

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