Should the leaders of Spain’s Catalonia region declare independence in the coming days, European markets look poised to march on even as domestic assets take a major hit.
Spanish government bonds -- which have weakened since the vote -- could be one of the biggest losers, while the country’s banking and construction stocks are also vulnerable to further drops. The euro may escape damage, as a rebel declaration would unlikely have immediate ramifications for the future of Europe.
“It is not a threat to the euro,” said Jan Loeys, chief investment strategist at JPMorgan Chase & Co., in an interview with Bloomberg Television. “This is a local problem. There will be affects on the local banks, local asset prices -- yes, Spanish equity prices will be hurt a bit.”
Spain has been roiled by escalating tensions between Catalonia, its largest regional economy, and the central government in Madrid. That has fed through into the nation’s bond market, with the premium demanded by investors to hold 10- year bonds over similar-dated German securities rising to the highest level since May. Spanish stocks have also b een hit, with the IBEX benchmark falling 2.4 percent this week. Stocks and bonds pared losses on Thursday after Bloomberg reported that separatists were trying to find a way to put off a definitive declaration of independence to create space for a negotiated settlement with Spain.
Source: Bloomberg Pro Terminal
Jr Trader Alexander Kumanov
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