Europe: Shares hit five-month high; Spain hurt by Catalonia vote

[LONDON] European shares reached a five-month high overall on Friday, but Spanish stocks fell after Catalonia's parliament declared independence.

Spain's IBEX dropped 1.5 per cent, making it the worst-performing major index, and the IBEX banking index fell 2.4 per cent.

The declines came as Spain's central government prepared to impose direct rule over Catalonia. The region's declaration of independence appeared to be a futile gesture, but the moves on both sides took Spain's political crisis to a new and possibly dangerous level.

"We have already seen Spain dial down its expectations for growth this year as a result of the crisis. With both sides leaning towards extremes, things could get rockier for investors," Neil Wilson, senior market analyst at ETX Capital, said in a note.

The broader market performed better. The pan-European STOXX 600 index closed up 0.6 per cent and the euro zone Stoxx 50 posted its ninth straight week of gains, reaching its highest level since August 2015. Germany's export-oriented DAX index rose 0.6 per cent to a record high.

On Thursday, the European Central Bank took a step towards tightening monetary policy after years of loose money. But it promised years of stimulus and even left the door open to backtracking.

"European equities will benefit from the continuation of ample financial conditions, with strong GDP growth in the fourth quarter expected to help further corporate earnings gains," said Sandrine Perret, European strategist at Credit Suisse. "Germany could benefit in particular."

The DAX was supported by gains in Volkswagen, which rose 4.5 per cent after posting results that Jefferies analysts said were "strong all around".

UBS gained as much as 2 per cent. The world's largest private bank reported net profit increased 14 per cent in the third quarter, but it kept a cautious outlook for the rest of 2017, citing political and monetary policy uncertainty .

The stock later pared some gains and ended 0.8 per cent lower.

"UBS reported relatively solid results, but we also see some shadows. We think that the significant beat on adjusted EBT (earnings before tax) level is of rather low quality and investors might dislike a notable deterioration of net new assets dynamic in WM unit," Baader Helvea said in a note.

Elsewhere, Sweden's Kindred Group hit a 22-month high after reporting a record quarter.

Tech stocks gained 1.2 per cent to their highest level since January 2002, following upbeat earnings from Alphabet, Microsoft and Amazon.com.

Gemalto rose 8.3 per cent. The digital security company posted healthy results after issuing four profit warnings in the past year.

So far this year, Europe's tech sector has outperformed the Nasdaq in the United States in dollar terms. Chipmakers ams and STMicroelectronics have soared 196.4 per cent and 85 per cent respectively in 2017.

Eutelsat, however, posted one of the biggest losses on the Stoxx, sliding 9.4 per cent after reporting lower revenues. SES dropped 14.9 per cent after a third-quarter miss .

According to Thomson Reuters data, 34 per cent of MSCI Europe companies have reported results so far, with earnings beats at 54 per cent and misses at 36 per cent. Revenue beats were 52 per cent and misses 48 per cent.

REUTERS