Monday, 2 October 2017

Spanish Stocks In Focus Following The Catalonia Referendum

Posted by Valentine at 10:36 Labels:

It was a hell of a weekend in Spain. Nope… not because of its great parties, beaches, people and dishes this time. The Catalonia region held an illegal referendum on the region’s independence and more than 800 people were injured by the police.

Understanding the politics behind what’s happening seems a bit challenging if you are not really into the topic. Therefore, we’ve put together a few key facts to help you make sense of the news coming out from Catalonia and get an idea of how those news might affect markets today.

Why Catalonia’s referendum is illegal?

Because the Spanish High Court has determined so and well… because Catalonia is just a region. The referendum (like it or not) is not legally-binding and the results will not able the region to get out of Spain or the Eurozone. Therefore, don’t worry too much about it.

And… why Catalans want to leave Spain anyway?

Catalonia is one of the wealthiest regions in Spain. They have a strong industrial heritage and most rich families belong to that area. Catalonia lost its autonomy in the Spanish civil war. And since it regained some powers in 2006, the region has been trying to work on its independence.

How the Spanish government responded to the referendum?

With a clear message: Catalonia is not leaving Spain. Prime Minister Mariano Rajoy has opted for an aggressive posture on the matter, sending police to stop voters at “whatever the cost”. Plus, the central government arrested Catalan officials, confiscated millions of ballot papers and shut down websites with information on the vote. The police closed over 300 voting centres.

Will violence resolve this internal crisis?

No, it won’t. But the central government is sending a message such like Don Corleone will, do not mess around with us. If we have to stop you, we will do it. The mayor of Barcelona, where most police violence took place, asked for support to stop the “outrageous” response from La Moncloa. Several EU officials later condemned the violence seen in the streets.

What to expect on Monday?

The Spanish IBEX 30 index is not likely to post strong losses due to this event. Yes. Of course we could see some more volatility than the usual on Monday, but correction is expected as the week moves on. Political uncertainty could support the safe-haven demand.

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