On Friday, the Madrid stock market sank, ousting an upward trend in Europe as Catalan lawmakers voted to declare independence from Spain. However, Madrid immediately proposed to repeal the breakaway bid.
A motion declaring independence was approved with 10 against , 70 votes in favour, and two abstentions, with Catalan opposition MPs walking out of the 135-seat chamber prior to the vote in protest at a declaration that is unlikely to be given official recognition.
Madrid’s benchmark IBEX 35 index of major companies closed the session about 1.5% lower.
Among the biggest losers were shares in Catalan banks. CaixaBank, the third largest lender of Spain, fell by about 5% while Sabadell, the fifth-biggest bank in the country, dropped roughly 6%.
Nevertheless, elsewhere in Europe, the other main stock markets continued the previous day’s rally after the European Central Bank said that it would soon start to reduce its monetary stimulus programme.
“Equities remain positive into the weekend, building on the recent recovery in bullish sentiment and rebounds from recent lows,” stated Mike van Dulken, an Accendo Markets analyst.
“The main factors behind the gains were better-than-expected earnings results in the US technology sector, the ECB’s suggestion that its easy money policies would be around for some time and investors’ unruffled feathers from geopolitical risks,” stated van Dulken.
The greenback shot up after the European Central Bank said on Thursday that it will reduce from January its purchases of government and corporate bonds to 30 billion euros ($35 billion) per month, from 60 billion at present.
However, policymakers left themselves a nine-month horizon to decide regarding the next step for the quantitative easing (QE) policy.
“Now that QE has been reduced in half and simultaneously extended in duration again, the ECB has effectively maintained the same level of monetary stimulus as before,” said Fawad Razaqzada, a Forex.com analyst.
“This is good news for the stock markets in the eurozone,” he continued.
Dollar supported in long run
As dealers eyed the passing of the budget of President Donald Trump overnight by US Congress, the dollar improved before publication of US economic growth data. The development paves the way for debate over his tax overhaul.
“As monetary conditions tighten in the US, other major central banks are still keeping their policies extraordinarily loose — including the Bank of Japan, European Central Bank, Swiss National Bank and the Bank of England,” said Razaqzada.
“The growing divergence of policy stances between the US and basically the rest of the world should keep the dollar supported in the long run.”
Asian equities increased on Friday on the back of the stronger dollar and optimism over the tax cuts of Trump.
Bourses across the region, including the major indexes in Hong Kong and Tokyo, traced an upward swing on Wall Street after solid US corporate earnings.