European stocks fell for the first time in eight days Friday, as jitters about Catalonia’s push to separate from Spain returned to Europe, just as bets on higher U.S. interest rates sent the dollar to its highest since mid-August.
Specifically, Spanish stocks and bond prices, which had rallied on Thursday, were sent tumbling back again as a Catalonian official said the region’s parliament would meet on Monday in defiance of a ruling by Spain’s constitutional court.
The news sent the euro scuttling back below $1.17/EUR, giving the dollar another leg up as it headed for a fourth consecutive week of gains a move that is also starting to apply pressure to currency-sensitive emerging markets.
Traders who normally prepare for their monthly installment of U.S jobs data were held back due to too much movement in Europe to allow the normal pre-payrolls lull in market activity, reports Reuters.
“Uncertainty about whether Catalonian parliament will meet on Monday persists,” Commerzbank strategists said in a note.
U.S. data this week has been solid on the whole. It has been one of the reasons for the dollar’s strength by also feeding bets that the Federal Reserve will raise U.S. interest rates for a third time this year in December.
Interest rate futures traders are now pricing in an 86 percent likelihood of a December rate hike, up from 78 percent a week ago, according to the CME Group’s FedWatch Tool.
Friday’s other focus for markets will be U.S. jobs data due out later Friday.
Economists polled by Reuters expect the figures to show 90,000 new U.S. jobs were created in September, down from 156,000 in August. It will also show how hurricanes Harvey and Irma affected the labour market.