Spanish market rises despite Catalan crisis

Madrid's dramatic move to seize control of secessionist Catalonia was shrugged off by financial markets today as Spain’s leading share index jumped higher.

Spanish prime minister Mariano Rajoy fired Catalan leader Carles Puigdemont and his cabinet on Friday following the autonomous state’s declaration of independence in the wake of an unrecognised referendum four weeks ago.

The apparently smooth transition — ahead of snap elections called by Rajoy for December — soothed the nerves of financial markets however, sending Spain’s IBEX index up 1.7%. Spanish debt was also in demand in bond markets, with higher prices pushing down Madrid’s benchmark cost of borrowing for 10 years by six basis points to 1.51%. Portuguese and Italian borrowing costs also fell.

Markets were also buoyed by another strong quarter of growth for the Spanish economy, which expanded 0.8% in the July to September quarter.

But the impact of a political crisis in a region accounting for 20% of Spain’s overall growth remains to be seen.

Earlier this month the Government trimmed its growth forecasts for next year from 2.6% to 2.3% to acknowledge a weaker growth outlook for the region, which has a population of some 7.5 million people.