Spanish stock market rallies on Catalan relief

The Madrid stock market soared Monday on investor relief over an apparent easing in Spain's Catalan independence crisis, dealers said.

European and Asian equities meanwhile diverged in hesitant trade before this week's key Japanese and US central bank announcements.

Wall Street opened lower, as stocks pulled back from recent record high levels "kicking off a week that will bring heavy doses of earnings and economic data", including Apple results, analysts at the Charles Schwab brokerage said.

Spanish shares had plunged on Friday after Catalan lawmakers voted to declare independence from Spain, but Madrid immediately moved to quash the breakaway bid. 

However, Madrid's benchmark IBEX 35 index of major companies rallied close to two percent in midsession business on Monday, while the euro regained its composure after touching a three-month dollar low on Friday.

CaixaBank and Sabadell -- Spain's third and fifth largest banks respectively -- each saw their share prices jump.

- 'Recovery mode' -

"After an escalation of the Catalan crisis on Friday, Spanish markets are in recovery mode at the start of this week," said City Index analyst Kathleen Brooks.

"Although this is a fluid situation, there are a few things that are keeping the markets calm -- which is why the euro is back above $1.16 and the IBEX is the best performer in European equity markets.

"This is largely in response to the peaceful transferral of power to Madrid from the Catalan authorities over the weekend.

"So far, the streets also seem to be free of violent protest, suggesting that the prospect of an election in December has eased investors' and secessionists' minds for the time being."

Spain nevertheless enters uncharted and potentially perilous territory on Monday as Madrid moves to take over the running of Catalonia in response to the rebellious region's parliament unilaterally declaring independence.

Spanish Prime Minister Mariano Rajoy has dissolved Catalonia's parliament and called December 21 elections for the region.

Catalan leaders have urged "democratic opposition" to Madrid, raising fears around Europe that the nation's worst crisis in decades might turn ugly.

- The bright side, cautiously -

"Spanish equities recovered their poise on Monday following Friday's sell-off," added ETX Capital analyst Neil Wilson.

"Tensions have been put on ice for a while after Madrid took direct control and a major unionist rally over the weekend. But this is likely to be temporary with elections due in December.

"For now, it seems that investors are prepared to look on the bright side, albeit with due caution."

Elsewhere, Asian stock markets were largely flat Monday as investors locked in gains on earnings reports.

In Tokyo -- where the Nikkei cooled but still reached its best level in 21 years -- the focus is on a two-day Bank of Japan policy meeting that started Monday.

The US Federal Reserve meanwhile begins its two-day meeting Tuesday, with President Donald Trump expected to announce the Fed's next chair by Friday before he embarks on an 11-day Asia tour.

Neither meeting was expected to result in an immediate rate rise, with inflation low in each country, but investors were watching with caution.

Hong Kong-listed shares in banking giant HSBC briefly rose on news that profits had leapt fivefold in the third quarter to $4.6 billion on booming Asian business and a huge restructuring drive. But they later fell back on profit-taking, losing over 1.5 percent in London.

- Key figures around 1335 GMT -

Madrid - IBEX 35: UP 2.0 percent at 10,405.80 points

London - FTSE 100: DOWN 0.2 percent at 7,490.06

Frankfurt - DAX 30: UP 0.2 percent at 13,242.19

Paris - CAC 40: UP 0.1 percent at 5,498.02

EURO STOXX 50: UP 0.3 percent at 3,663.62

New York - DOW: DOWN 0.3 percent at 23,368.20

Tokyo - Nikkei 225: FLAT at 22,011.67 (close)

Shanghai - Composite: DOWN 0.8 percent at 3,390.34 (close)

Hong Kong - Hang Seng: DOWN 0.4 percent at 28,336.19 (close)

Euro/dollar: UP at $1.1611 from $1.1604 at 2100 GMT

Pound/dollar: UP at $1.3194 from $1.3131

Dollar/yen: DOWN at 113.40 yen from 113.67 yen 

Oil - West Texas Intermediate: UP 41 cents at $54.31 per barrel

Oil - Brent North Sea: UP 29 cents at $60.42 per barrel