Europe: Rattled investors dump Spanish shares amid Catalan tension

[NEW YORK] The Madrid stock market tumbled on Wednesday amid deepening worries about the Catalan independence crisis, although the euro gained on the dollar.

All three major US stock indices finished at fresh records for the third day in a row, while equity markets elsewhere in Europe and Asia were mixed.

Madrid's main index, the Ibex, fell nearly three per cent at the close after sinking below the key 10,000 level.

As the European Union urged dialogue to ease the standoff between separatists in the northeastern region and Madrid, a regional government source said the independence declaration could be as early as Monday.

"The eyes of the world are on Catalonia and the spike in political tensions is likely to keep investors away," said David Madden, an analyst at CMC Markets.

Analysts said they detected a switch from Spanish equities into German stocks, a move that pushed the Frankfurt exchange higher and close to record peaks, bucking a Europe-wide lower trend.

Paris shares were slightly softer at the closing bell.

Across Europe, investors were held back by "ongoing jitters following the unofficial independence referendum in Catalonia," NFS Macro analyst Nick Stamenkovic told AFP.

In spite of the unease, the euro advanced against the dollar as investors continued to bet that the European Central Bank would soon taper monetary stimulus.

"Investors are looking beyond these dangerous political risks to the next European Central Bank meeting," said Kathy Lien of BK Asset Management. "We still think (the euro-dollar trade) could still take another hit from the political crisis in Spain but as the monetary policy decision nears, buyers will swoop in quickly."

In other markets, the Dow, S&P 500 and Nasdaq all edged to fresh records after Institute for Supply Management showed growth in the US services sector hit a 12-year high.

British energy providers including Centrica and Scottish & Southern Energy fell as British Prime Minister Theresa May unveiled plans to cap household energy prices.

AFP