10-2-17 12:07 PM EDT | Email Article

By Sara Sjolin, MarketWatch

Travels stocks rally after Monarch Airlines collapses

European stocks kicked off the week in an upbeat mood on Monday, getting a boost from a weaker euro that tumbled after violent clashes in Catalonia in Spain during the weekend's independence referendum.

The Stoxx Europe 600 index rose 0.5% to close at 390.13, rising for an eight straight session.

Spain's IBEX 35 index , however, slumped 1.2% to 10,255.70 for its worst day since mid-August after a chaotic independence referendum in the wealthy northeastern region of Catalonia in Spain.

Read:EU headed for new crisis? Analysts fear political turmoil after violent Catalonia vote (http://www.marketwatch.com/story/eu-headed-for-new-crisis-analysts-fear-political-turmoil-after-violent-catalonia-vote-2017-10-02)

More than 800 people were injured in clashes with the police as they cast their ballots, or tried to vote in the referendum that the central government in Madrid has declared illegal. Catalan officials said about 90% of voters voted in favor of a split and that a declaration of independence could come in the next few days. (http://www.marketwatch.com/story/catalonia-leader-with-90-approval-we-have-the-right-to-be-independent-2017-10-01)

"The Catalan referendum looks set to start a new phase of political instability for the EU, with clashes between protesters and police unlikely to do anything other than strengthen the resolve of those seeking independence," said Joshua Mahony, market analyst at IG, in a note.

Banks in Spain were among the biggest losers in Monday's trade. Shares of Banco de Sabadell SA (SAB.MC) lost 4.5%, CaixaBank SA (CABK.MC) fell 4.4% and Banco Santander SA (SAN) (SAN) gave up 1.6%.

Read: Brave investors might want to buy the dip on these 2 Catalonia-based banks (http://www.marketwatch.com/story/brave-investors-might-want-to-buy-the-dip-on-these-2-catalonia-based-banks-2017-10-02)

The yield on 10-year Spanish government bonds rose 7 basis points to 1.676%.

The euro declined after the vote (http://www.marketwatch.com/story/euro-extends-losses-after-chaotic-independence-vote-in-spain-2017-10-02), buying $1.1741, compared with $1.1814 late Friday in New York.

"Another week, a fresh wave of politics driving currency markets. Noise around Catalan independence is likely to keep the euro on the back foot and risks fueling a deeper technical correction. But the fundamental fallout may be limited," said Viraj Patel, foreign exchange strategist at Rabobank, in a note.

A weaker euro can help export-heavy European companies as their products become cheaper for other currency holders.

Indexes: Germany's export-dependant DAX 30 index picked up 0.6% to end at 12,902.65 on Monday, a record close for the gauge and its first since June 19 , while France's CAC 40 index rose 0.4% to 5,350.44.

The U.K.'s FTSE 100 index climbed 0.9% to 7,438.84 (http://www.marketwatch.com/story/uk-travel-stocks-lead-ftse-100-to-3-week-higher-after-monarch-collapse-2017-10-02), getting a boost from the benchmark's travel stocks after low-cast carrier Monarch Airlines went into administration and canceled all flights and vacations booked through the company.

The London benchmark was also lifted by a slide in the pound , which dropped to $1.3266 from $1.3399 late Friday in New York after data showed a drop in U.K. manufacturing growth.

Travel stocks: Shares of easyJet PLC (EZJ.LN) rallied 5.2%, while fellow discount carrier Ryanair Holdings PLC (RYAAY) added 3.5%. U.K. travel operator TUI AG put on 1.5%.

Read:European airlines take off after Monarch collapse leaves room for rivals (http://www.marketwatch.com/story/european-airlines-take-off-after-monarch-collapse-leaves-room-for-rivals-2017-10-02)

"Capacity being taken out of the market was always going to be good news for other airline stocks, with easyJet, Ryanair and Tui all enjoying a bounce this morning, but the collapse of Monarch does highlight serious issues for the airline industry," said Rebecca O'Keeffe, head of investment at Interactive Investor, in a note.

"The weaker pound has seen U.K. holidaymakers tighten their budgets and the increased threat of terrorism has reduced target holiday destinations and made these routes more congested and competitive," she added.

Among other airlines, British Airways-parent International Consolidated Airlines Group SA (IAG.LN) (IAG.LN) added 2.4%, Deutsche Lufthansa AG (LHA.XE) ascended 3.5% and Norwegian Air Shuttle ASA (NAS.OS) gained 1.6%.

Economic news: The U.K.'s manufacturing sector continued to grow in September, but at a slower pace than in August (http://www.marketwatch.com/story/growth-in-uk-manufacturing-slows-in-september-2017-10-02). The purchasing managers index came in at 55.9, down from 56.7 in August and missing forecasts of a 56.4 reading.

Meanwhile, the final reading for eurozone manufacturing PMI for September was cut to 58.1 (https://www.markiteconomics.com/Survey/PressRelease.mvc/ce5a4153e22c409198325fa3176fc7ea) from the flash reading of 58.2. It was, however, higher than August's 57.4 print.

 

(END) Dow Jones Newswires

October 02, 2017 12:07 ET (16:07 GMT)

Copyright (c) 2017 Dow Jones & Company, Inc.
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