The Catalans seem more and more determined to separate, and Madrid is increasingly reluctant to do so.
The main IBEX stock index rose 2.3%, on track for its biggest daily gain in a month, and Spain's 10-year bond yield was set for its biggest daily fall since April.
Catalan leaders have threatened to declare independence within days - possibly during Monday's plenary session in the regional parliament. In a rare and strongly worded television address on Tuesday, the king described the regional government's actions as "an unacceptable attempt" to take over Catalan institutions and said it had placed itself outside democracy and the law.
The European Commission has also branded the Catalonian referendum illegal.
King Felipe VI on Tuesday branded the independence drive illegal and undemocratic, throwing his weight behind the national government.
Puigdemont on Wednesday said he was disappointed by the king's intervention.
With the Spanish king accusing Catalonia of disloyalty, the environment isn't exactly one conducive to talks anymore.
"If the law does not give you what you want, you can oppose the law, work to change the law, but you cannot ignore that law", he said.
Josep Lluís Trapero and three other people are expected to appear in court on Friday in a move likely to inflame sentiment further amid Spain's deepest political crisis in decades, say correspondents. There was no organized campaign for "No" for the referendum, which Spain's highest court had suspended and was marred by police raids to confiscate ballot boxes that injured hundreds of voters.
Catalan leaders "with their irresponsible conduct could put at risk the economic and social stability of Catalonia and all of Spain", Felipe said.
Catalonia's president is due to speak later on Wednesday after secessionist regional lawmakers announced the region's independence declaration would be Monday. People in Barcelona were enraged with the violence and protested fervently.
Spain has accused Catalonia of trying to achieve independence through blackmail, as tensions continue to mount over the region's plans to secede from the mainland.
Indeed, when Scotland voted to remain in the UK, Mr Rajoy - with an eye on Catalonia and the Basque Country - congratulated Scots for "clearly and unequivocally" rejecting independence, and voting "en masse, peacefully and with scrupulous respect to the laws of their country".