European stocks take a slight dip on Monday after Spanish elections raise concerns about secession possibilities.
The major European stock indices were slightly in the red on Monday after the weekend elections in Spain raised more concern about secession (NYSEARCA:VGK). The Basque Nationalist Party won 27 seats in the regional assembly, raising the possibility that the Basque Country may attempt to secede from Spain. Although the People’s Party, led by Prime Minister Mariano Rajoy, extended its majority in Rajoy’s home region of Galicia, another challenge to Rajoy looms on November 25. On that date, Catalonia will hold an early election to determine whether that region will seek independence. Catalonia’s economy accounts for approximately 20 percent of the total economy of Spain (NYSEARCA:EWP). It is widely feared that Catalan President Artur Mas will coordinate a secession attempt with Basque Nationalist Party leader Inigo Urkullu.
Many commentators have emphasized the importance for Prime Minister Rajoy to make a request to the European Central Bank for participation in the EDB’s new Outright Monetary Transactions (OMT) bond-buying program before the Catalan election. Another nationalist victory could send Spain’s sovereign debt yields to higher levels.
Spain’s ten-year bond yield jumped to 5.47 percent on Monday from Friday’s closing level of 5.33 percent. Spain’s two-year bond yield climbed to 2.85 percent on Monday from Friday’s closing level of 2.75 percent (NYSEARCA:EWP).
Italy’s ten-year bond yield declined to 4.80 percent on Monday from Friday’s closing level of 4.85 percent (NYSEARCA:EWI).
As of 11:14 EDT, the Euro STOXX 50 Index fell 0.44 percent to 2,531 (NYSEARCA:VGK). The FTSE 100 Index dropped 0.41 percent to 5,871 (NYSEARCA:EWU). The German DAX Index sank 0.84 percent to 7,318 (NYSEARCA:EWG). France’s CAC 40 Index fell 0.67 percent to 3,481 (NYSEARCA:EWQ). Spain’s IBEX 35 Index dropped 0.58 percent to 7,867 (NYSEARCA:EWP). Italy’s FTSE MIB Index advanced 0.07 percent to 15,874 (NYSEARCA:EWI).
As of 11:23 EDT, the euro advanced 0.28 percent against the dollar, trading at $1.3059 (NYSEARCA:FXE).
On London’s ICE Futures Europe Exchange, November futures for Brent crude oil advanced by 13 cents (0.12%) to $110.27/bbl. (NYSEARCA:USO).
In China, stocks advanced following rumors that the nation’s Party Congress in November will bring about new measures to stimulate equities trading. The Shanghai Composite Index advanced 0.21 percent to 2,132 (NYSEARCA:FXI). Hong Kong’s Hang Seng Index climbed 0.68 percent to 21,697 (NYSEARCA:EWH).
In Japan, stocks advanced despite a report from the nation’s Finance Ministry that exports declined 10.3 percent in September on a year-over-year basis. Economists had anticipated a less-severe decline of just under 10 percent. A weakened yen helped keep stocks in positive territory on Monday (NYSEARCA:FXY). The Nikkei 225 Stock Average advanced by 0.09 percent to 9010 (NYSEARCA:EWJ).
American stock index futures were in positive territory ahead of Monday’s opening bell, as earnings reports from Peabody Energy (BTU) and Caterpillar (CAT) beat expectations. The December 12 Dow Jones Industrials future advanced 0.09 percent to 13,264 as of 9:14 EDT. The December 12 S&P 500 future rose 0.12 percent to 1,425 (NYSEARCA:SPY). The December 12 Nasdaq 100 future climbed 0.23 percent to 2,670.
Bottom line: Anxiety increased in Europe on Monday in anticipation of a request by Spain to participate in the ECB’s new OMT bond-buying program after a weekend election victory by the Basque Nationalist Party raised concerns that the Basque Country and Catalonia may secede from Spain.