Summary:

• SPA35 drops towards last week’s low and below 10200
• Fall comes as Spain rejects Puigdemont’s response on independence issue
• 10AM Thursday set as deadline for Puigdemont to back down

Last week saw Spanish stocks recover following a sharp fall at the start of the month after Catalan leader Carles Puigdemont suspended the region’s independence declaration. The step was warmly welcomed by traders with the SPA35 surging higher into the close last Tuesday on what was seen as a key step to avert a major political fallout.

 

Against a fairly benign overall start to the week for European stocks the SPA35 is the worst performing with the market the only one of the major stock indices to be trading lower on the day. Source: XTB.COM

However, Spanish stocks aren’t quite out of the woods yet with the governemnt rejecting Puigdemont’s response to demands that he clarify his position on independence. Deputy Prime Minister, Soraya Saenz de Santamaria, announced during a televised statement this morning that the Catalan leader now has until 10AM on Thursday to back down, or else the central government will step up its response. 

Spain has said that it will not engage in any negotiations until Puigdemont withdraws his demands for independence with PM Rajoy saying last week that he would consider using Article 155 of the Spanish constitution to suspend Catalan self-rule in necessary. 

 The SPA35 has fallen lower today with the 38.2% of the recent rise acting as support. Source: xStation

 After hitting a 7-month low at the start of October at 9836 the market has recovered fairly well. Fib retracements of this recovery could offer possible levels to keep an eye on going forward with the 23.6% fib at 10228 previously offering support before being broken this morning. This could now provide resistance to any moves higher. The 38.2% fib at 10153 coincides with the low of the day and could be worth watch as a potentially key support zone in the short term.