Summary:

• European stock markets have begun the day mixed, IBEX (SPA35 on xStation5) jumps on the Catalan thread
• DE30 struggles with its another resistance line but an upward move could continue
• Volkswagen (VOW.DE) leads the gains following an upbeat recommendation

The ECB brought about an increase in the German equity market last week and this move could continue in the upcoming days once the US dollar keeps rising against the common currency. Over the weekend the Spanish government took control over Catalonia but only until the election scheduled for 21 December. This move could see separatists’ efforts unproductive and may undermine pro-independence parties’ strength which in turn could be conducive to the Spanish equity market. Let’s pin down what happened there and what could transpire going forward.

Going back to Friday the Catalan Parliament voted to establish an independent republic, the move which forced the Spanish government to take control over Catalonia and dissolve the local parliament. What’s more, Spanish PM Mariano Rajoy decided to hold regional elections on 21 December after removing the Catalan govt along with the head of the regional police force. On top of this, the Catalan government’s international embassies are expected to be shut down as well. Let us also add that the step taken by Mariano Rajoy was aimed at restoring autonomy, not at suspending it. Having said that, in the longer-term this decision may be upbeat for the economy, however everybody who counted on the Catalan secession from Spain might be disappointed.

On the flip side, the Spanish govt said on Sunday that Carles Puigdemont could be jailed within the two next months for taking part in a declaration of unilateral independence. However, he could run for re-election if the courts decide he should remain free until then, according to the country’s foreign minister Alfonso Dastis. Notice that the nearest future is uncertain as there are unknowns what kind of judicial activity will happen between now and 21 December. Otherwise, there are reports in early Monday that despite the step taken by the Spanish govt some senior government officials and lawmakers managed to gain access to their offices. To sum up, even though this topic could be supportive of Spanish assets in the long-term, it may constitute a risk in the short one as the process of reasserting control over the rebel region has only started.

Technically the SPA35 has jumped shortly after the opening, though a pivotal resistance area is still ahead of us. Once the price is able to break 10400 points, it could spur investors to add in to their longs. Source: xStation5

Even as the Spanish stock market has jumped immediately after the opening, the remaining equity markets have begun the day equivocally, the DE30 could continue its upward move though.

The DE30 surged at the end of the last week but failed to break 13210 points durably. Source: xStation5

Having looked at a H4 interval one may spot that the price surged at the end of the last week mainly on the back of the ECB meeting, however the beginning of the new week has been tepid so far. We may assume that until the price hovers above 13210 points, a move to the upside seems to be likely. On the other hand, a decline below the above-mentioned level would bring about an extended pullback even towards 12900 points.

Volkswagen (VOW.DE) leads the gains within the DE30 in early trading on Monday. Source: Bloomberg

The Asian session turned out a bit weaker as the Shanghai Composite (CHNComp) closed lower 0.8%, the Hang Seng (HKComp) lost 0.7% while the NIKKEI (JAP225) closed unchanged. The Australian S&P/ASX 200 was the sole index which managed to add 0.3% during the session. In turn the European indices are trading broadly unchanged except the SPA35 which is surging as much as 1.6%. The Italian FTSEMIB (ITA40) is adding 0.35% which has been the second best index thus far.

Company news

Volkswagen is by far the best stock within the German index as it’s been buoyed by a recommendation from Warburg. The stock was upgraded from hold to buy which could have been a ramification of the better than estimated results for the third quarter revealed on 27 October.