Spanish stock market tumbles after Catalan election – business live

Good morning, and welcome to our rolling coverage of the of the word economy, the financial markets, the eurozone and business.

It’s the final trading day before Christmas. Traditionally, a calm time in the City as traders count this year’s winnings (or losses) and head to the pubs after trading ends at lunchtime.

But not this year. Instead, European markets have been rattled by the news that Catalonia’s pro-independence parties have retained their majority in the snap election held yesterday.

Separatist parties won 70 of the 135 seats in the Barcelona parliament (even though the centre-right, pro-unionist Citizens party actually came first).

This is a major embarrassment for Spain’s PM, Mariano Rajoy, and a significant boost to the independence movement who are pushing for Catalonia to break away. Less than two months ago, Rajoy dissolved the previous parliament after it declared independence.

This is going to spark a wave of selling in Madrid, and also weaken Spanish government bond prices.

Reuters has the details:

Spain’s IBEX futures opened down 1.2 percent before tumbling further, last down 1.8 percent and indicating a sharp fall at the open as the country’s political crisis, which has damaged the economy and caused a business exodus from Catalonia,deepened.

Spanish bond yields also edged higher in early deals.

Spain’s 10-year borrowing costs were up 4 basis points, to 1.515%.

Euro zone stocks were also set for a downbeat open with Euro STOXX 50 futures down 0.5%.

This latest twist is also likely to drag Britain’s FTSE down from yesterday’s record high (the blue-chip index closed over 7,600 points for the first time at 7,603).

It’s not quite clear what will happen next in Spain, as my colleagues Sam Jones and Stephen Burgen report from Barcelona:

Much will now depend on what the pro-independence parties agree. Puigdemont is facing arrest if he returns to Spain and fractures have appeared between him and Junqueras, who has appeared to take a more moderate line on independence.

The vote is the latest chapter in Spain’s worst political crisis since its return to democracy four decades ago. The results will be bruising for Rajoy and will do nothing to heal divisions in the region, which remains deeply and evenly divided over the independence issue. Any solution to the vexed question of Catalan sovereignty remains as elusive as ever.

Also coming up today, we get a final estimate of Britain’s economy performance in the third quarter of this year.

These national accounts are likely to confirm that GDP rose by 0.4% in July to September, and will also show business investment and the balance of payments.

The agenda:

9.30am GMT: Final estimate of UK GDP for the third quarter of 2017

1.30pm GMT: Canadian GDP for October