LONDON (Reuters) - The Catalan stand-off comes to a head today with a 1600 GMT session of the regional parliament that Madrid fears will be a platform to make a unilateral declaration of independence.
That in theory would start a six-month process culminating in actual independence but PM Mariano Rajoy has made it clear he will do whatever he can to nip it in the bud well before then: the first step likely being a suspension of the Catalan regional parliament.
There are still voices out there calling for both sides to avert a showdown and start talking about a possible compromise; France and Germany have also weighed in to support Spanish unity, with Paris in particular noting the fact that any secession would mean Catalonia being kicked out of the EU - and by definition the euro zone.
Moreover, no major country has come forward to say it would recognise an independent Catalonia, which ultimately is the litmus test of any separatist movement. Yet the Catalan leadership may feel it has gone too far to back down just yet.
Over 200 days after they voted back in March, the Dutch are finally going to get a government after a coalition deal was agreed. The accord approved late Monday is expected to feature an overhaul of the corporate tax code to make it more attractive to foreign business, new anti-immigrant measures, as well as extra spending on military, healthcare, and teacher salaries. Details are expected to be unveiled today.
Public sector workers across France are set to go on strike today in protest against Emmanuel Macron's planned job cuts in the state sector plus measures such as a reduction in sick leave compensation. It is a testing time for Macron right now: he is currently facing accusations that he is the "president of the rich" after making good on a campaign pledge to scrap France's wealth tax - a symbol of social justice targeting millionaires. The 2018 budget in which that measure is contained comes before the National Assembly's finance commission today.
MSCI’s index of global stock markets set another all-time record early on Tuesday. The first full Asia trading session in over a week of holidays there saw regional stock markets push higher, partly in a catch-up to last week’s moves but also riffing off a slightly weaker dollar. Japan’s Nikkei closed 0.6 percent higher, with South Korea’s Kospi up 1.6 percent on perceptions the North Korea nuclear crisis may be easing somewhat with the stepped-up involvement of China and Russia.
Wall St stocks closed lower on Monday and the ViX volatility gauge crept back above 10 percent as this week’s start of the Q3 corporate earnings season looms. U.S. bond markets were mostly closed there for the Columbus Day holiday. S&P futures were a touch higher in early trading.
European financial markets will watch Catalonia closely on Tuesday as regional leaders decide whether to unilaterally declare independence from Spain despite intense opposition from Madrid, businesses and hundreds of thousands of Catalans who demonstrated at the weekend for unity with Spain. A move to secede from Spain would, under Catalan law, start six months of talks on separation though Madrid has said it would not recognise it and may look at laws removing Catalonia’s parliament and existing autonomy.
After a positive start to the week European shares were set for a slight dip on Tuesday, following the lead of Wall Street indexes. With third-quarter results beginning to trickle in, the world’s biggest luxury group LVMH hit the ground running, reporting higher-than-expected revenue growth and setting a high hurdle for luxury peers to measure up to.
Spanish government bond yields held near Monday’s lows, meantime, and the euro/dollar was higher. Turkey’s lira bounced almost half a percent after the previous day’s steep falls following a deterioration in diplomatic relations between Washington and Ankara at the weekend.
editing by John Stonestreet