Spanish stocks and bonds rallied and the euro hit a two-week high on Wednesday as European markets took relief from Catalonia stopping short of declaring immediate independence from Madrid. Kate King reports.
These were the words which calmed European markets. (SOUNDBITE) (Catalan) CATALAN PRESIDENT CARLES PUIGDEMONT SAYING: 2130 2 grab "The government and myself, we propose parliament suspend the effects of the declaration of independence to undertake talks in the coming weeks." That statement reflected on Wednesday as Spanish stocks and bonds rallied. The Euro also hitting a two-week high as the threat of immediate unrest weakened. SOUNDBITE (English) SENIOR MARKET ANALYST, LONDON CAPITAL GROUP, JASPER LAWLER, SAYING: "Now I think markets are in a place where they can put it behind them for now, it is probably going to be something that rumbles on in the background and so I would expect that over the next few weeks given the strength of Spain's economy, for the IBEX index to start closing the gap that has emerged over the last month or so." While a symbolic signing of independence did take place, Madrid quickly dismissed it. So too the call for more 'political talks'. An indication the crisis is still far from over, and markets may have been premature. SOUNDBITE (English) SENIOR MARKET ANALYST, LONDON CAPITAL GROUP, JASPER LAWLER, SAYING: "Of course things can flare up, but in the context of general uplift in global growth, generally solid earnings, low interest rates, all those potential risk factors are being put aside until they really flare up." The stakes are high for Spain - losing Catalonia would deprive it of a fifth of its economic output and more than a quarter of exports. But the European Union has made it clear the region wouldn't be part of the EU. Scaring a stream of companies, which announced plans to move head offices out of Catalonia ahead of Tuesday's declaration.