In a mixed week for the world’s stock markets, European shares fell sharply on Thursday as the Spanish government indicated that it would seek to invoke Article 155 of the Spanish constitution and suspend Catalonia’s regional autonomy.
These are uncharted waters. Article 155 has never been invoked before. No one knows quite what form direct rule from Madrid would take – especially as there is uncertainty over the loyalties of Catalonia’s police force. Meanwhile, the Catalan government is considering a formal declaration of independence as a response.
The uncertainty has the potential to cause considerable economic disruption. Around 700 companies are reported to have moved their headquarters out of Catalonia since the referendum. Tourism to the region is falling, and the Spanish authorities expect this to affect economic growth. Spain’s IBEX, France’s CAC and Germany’s DAX all fell heavily on Thursday as the crisis escalated.
The jolt from Spain meant that the FTSE World Europe ex UK Index finished down 0.2% for the first four days of the week. The Catalan concerns outweighed some good corporate results earlier in the week.
The dinner game
Catalonia wasn’t the only European standoff this week. The wrangling over Brexit continued over a series of official dinners. Theresa May’s Monday meal with Jean-Claude Juncker appeared to go better than the last one, but Mr Juncker’s reference to having an “autopsy” after the meeting struck a morbid note.
On Thursday, however, Angela Merkel sounded more optimistic ahead of her own dinner date with Mrs May, citing “encouraging” signs that negotiations could proceed to the terms of a trade deal in December. There was also some positivity from Xavier Bettel, the prime minister of Luxembourg: “We were friends, we are friends and we still will be friends. I am sure we will find an agreement”.
Frankfurters, anyone?
From a British perspective, Goldman Sachs chief executive Lloyd Blankfein was distinctly less cheering when he said the same day that he would be “spending a lot more time” in Frankfurt. The German financial capital is increasingly seen as a beneficiary of Brexit-driven job relocations from London.
The UK stock market appeared to share this gloomy sentiment. The FTSE 100 had fallen 0.2% by Thursday’s close, with the bulk of the loss coming towards the end of the week. Among the biggest fallers was Unilever, which slumped on Thursday after announcing disappointing third-quarter results. The recent hurricanes in the US hit sales of Unilever’s ice-cream brands hard. The company’s ice-cream ranges, which include Wall’s, Ben and Jerry’s and Magnum, have also been affected by wet weather in Europe and a loss of market share to low-calorie rival Halo Top.
Shares in Merlin Entertainments, which runs Legoland and the apostrophe-light Madam Tussauds, were down more than 17% by Thursday’s close after it issued a profit warning. The company blamed bad weather and fears of further terrorist incidents in London for its disappointing trading. Its management hopes, however, that a new Peppa Pig-themed hotel will save its bacon.
There was better news from educational publisher Pearson, which had gained around 10% by the end of Thursday’s trading after releasing a positive trading statement. Sales of textbooks in the US have proved more resilient than expected, and the company is reaping some benefits from last year’s restructuring.
S&P in rude health
It was a heartier week for shares in the US. The S&P 500 was up 0.4% by Thursday’s close and hit yet another record high along the way. The rally was helped by healthcare stocks, with Envision Healthcare, Gilead Sciences and Danaher all doing well towards the end of the week.
Apple takes a bite
The news from the Nasdaq was less rosy: the tech-heavy index fell heavily on Thursday as Apple’s shares plummeted. The sell-off came as investors absorbed reports that production of the iPhone 8 was being cut after disappointing sales. Although Apple keeps its sales figures to itself these days, the indications from its supply chain are that the staggered release of its new models has hurt sales of the iPhones 8 and 8 Plus as smartphone enthusiasts hold out for the iPhone X, which will be released in November.
And finally …
Lock up your porkers!
Crafty cryptids are in engaging in livestock larceny – at least according to a US farmer identified only as Keith. He claims to have encountered five Bigfoots (Bigfeet?) purloining a pig in East Fresno County, California.
The stealthy sasquatches were startled by the farmer, however, and one hog-hefting hominid tripped over an irrigation pipe, releasing his porcine prisoner in the process.
Paranormal investigator Jeffrey Gonzalez says that there have been other sightings recently, but that people have refrained from reporting them for fear of ridicule. Don’t worry, Jeffrey – we’ll be keeping the sty door firmly barred!
