Madrid's stock market fell Tuesday, while the euro rose versus the dollar, with all eyes on whether Catalonia's leader will declare the region's independence from Spain, a key eurozone economy.

Outside the eurozone, London's benchmark FTSE 100 stocks index climbed as traders shrugged off news of a widening British trade deficit and slowing UK industrial growth against a background of Brexit uncertainty. 

Shares in BAE Systems were down 0.3 percent at 616.5 pence after the British maker of defence equipment said it plans to cut almost 2,000 jobs, mainly owing to weaker demand for Eurofighter Typhoon and Hawk fighter jets.

Eurozone "equities are trading lower thanks to a stronger euro and Catalonia worries", with the single currency weighing on share prices of multi-nationals earning in other currencies, said IG analyst Chris Beauchamp.

- Catalonia crisis -

Spain's worst political crisis in a generation meanwhile comes to a head Tuesday as Catalonia's leader could declare independence from Madrid in a move that would send shock waves through Europe.

Whether or not Carles Puigdemont will follow through on his threat to announce a full breakaway -- defying the central government and Spanish courts -- was still anyone's guess.

"The uncertainty is weighing heavily on risk appetite but it currently only appears to be directly impacting Spanish assets, with the euro showing little or no sign of being negatively affected," said Craig Erlam, senior market analyst at Oanda currency trading platform.

The crisis has caused deep uncertainty for businesses in one of Spain's wealthiest regions. 

A string of companies have already moved their legal headquarters -- but not their employees -- from Catalonia to other parts of the country. 

Wall Street stocks opened higher, with the Dow adding 0.2 percent in the first moment of trading.

US stocks dipped on Monday in light Colombus Day holiday trading, with the major indices snapping multi-day winning streaks, but left them close to record highs.

Elsewhere Tuesday, traders sent shares rallying in Japan and South Korea as they returned from a long weekend, while most other Asian markets tacked on gains despite a soft lead from Wall Street.

Seoul's Kospi jumped 1.6 percent and Tokyo finished up 0.6 percent at its highest level in more than two years.

Unease over US-North Korea tensions also subsided as Kim Jong-Un's regime did not launch, as some had feared, another long-range missile to mark the anniversary of the founding of the ruling party on Tuesday.

Hong Kong ended at a new 10-year high.

- Key figures around 1330 GMT -

London - FTSE 100: UP 0.3 percent at 7,528.19 points

Frankfurt - DAX 30: DOWN 0.2 percent at 12,952.50

Paris - CAC 40: DOWN 0.03 percent at 5,364.12

Madrid - IBEX 35: DOWN 1.1 percent at 10,124.30 

EURO STOXX 50: DOWN 0.3 percent at 3,599.38

New York - DOW: UP 0.2 percent at 22,808.50

Hong Kong - Hang Seng: UP 0.6 percent at 28,490.83 (close)

Shanghai - Composite: UP 0.3 percent at 3,382.99 (close) 

Tokyo - Nikkei 225: UP 0.6 percent at 20,823.51 (close)

Euro/dollar: UP at $1.1791 from $1.1741 at 2100 GMT

Pound/dollar: UP at $1.3190 from $1.3140

Dollar/yen: DOWN at 112.36 yen from 112.65 yen

Oil - Brent North Sea: UP 76 cents at $56.55 per barrel

Oil - West Texas Intermediate: UP 98 cents at $50.56