European shares fell on Wednesday despite new record highs on Wall Street, as the impact of the crisis in Catalonia spread from Madrid and Spanish banks to the wider industry and euro zone region, particularly Italy.
The pan-European STOXX 600 index was down 0.2 percent by 0922 GMT while Spain's IBEX was set for its worst day in 14 months with a 2.1 percent fall.
Catalonia-headquartered Caixabank and Banco Sabadell, the stocks most sensitive to the rising political risk, sank 4.9 and 4.3 pct.
King Felipe VI accused secessionist leaders of shattering democratic principles in a rare televised speech -- itself a sign of the seriousness of the crisis, analysts said.
Italian banks also took a hit as yields on Italian sovereign bonds rose, with Banco BPM and UBI Banca losing 4 and 3.1 percent respectively.
The broader euro zone banking index was down 1.7 percent and set for its worst fall in two weeks with all its component stocks in the red.
Laurent Gaetani, head of Degroof Petercam Gestion France, said he was "surprised by the impact" of the Catalonian crisis on markets given that a process leading to effective independence for the province is still widely seen as unlikely.
"I am not too worried," he added, arguing some investors may even see the dip in banking shares as an opportunity.
Other investors were also phlegmatic.
"There is a little impact from Catalonia, that's for sure, because a few large stocks are based there ... but this is nothing extraordinary," said Jerome Legras, head of research at Axiom Alternative Investments.
He said the price swings were not huge and the main view on the street was that independence was unlikely and the impact on banks outside the country should remain limited.
Adding to the downside, energy stocks were down 0.7 percent, pulled down by caution that a rally that has lasted for most of the third quarter would not make it to the end of the year.
Germany's DAX, which was closed for a bank holiday on Tuesday, caught up lost territory with a new record high and was the only main bourse trading in positive territory, with a 0.1 percent rise.
Buoyed by strong data in the United States, car makers boosted Germany's DAX, up 0.4 percent, with Volkswagen rising 2.2 percent and Daimler rising 1.5 percent.
