The Ibex 35 does not celebrate the arrival of Trump to the White House and This Wednesday he recorded his worst session in a year and eight monthswith a fall of 2.9% that leaves the Spanish index at September levels. In the early stages of the day, the reference was separated from the photo of the rest of the European stock markets, which were dyed green. However, this optimism did not last the entire day and the continental indices closed with losses of around 1%. The United States did react well to the news of the new president, with increases of up to 5% in the Russell 2000 and with the S&P 500 once again revalidating historical trading highs, with data at the European close.
The expectation of a greater cooling in the drop in interest rates in the US after the victory of the Republican candidate is one of the aspects that influence this side of the Atlantic, since a change in financing policy in North America directly and indirectly affects to much of the world, with companies (such as Iberdrola, in the case of Spain, among others, or the banking segment) penalized for it.
Spanish banks were the biggest victims on Wednesday, with a correction in the Ibex Banks that reached 5%. BBVA and Banco Sabadell led these declines, with falls of more than 6% in both cases. The sharp fall in the segment strongly weighed down the performance of the Ibex 35, since the banking segment has a weight of almost 30% within the index. “Global banks (Santander and especially BBVA) could be negatively influenced by their exposure to emerging market currencies, which a priori would perform poorly after Trump’s victory, especially in the case of BBVA, which also has a significant exposure to Mexico,” explains Antonio Castelo, iBroker analyst, in this sense.
“The market senses that, if the business in Mexico weakens, it could have more difficulties in carrying out the takeover bid for Sabadell and that is why Sabadell’s shares are also very punished, since its price would, in some way, depend on the BBVA price when the payment is made in shares,” adds the expert, who also believes that the market is not taking into account that Banco Santander (which fell 4.2% yesterday) “could benefit with Trump in the presidency by having a important presence in the United States, since its policies tend to favor financial deregulation,” he adds. The premium in the exchange operation (5.0195 Catalan titles for each Basque one) is reduced to 1.7% after the falls.
Regarding the reaction of European stock markets, Matthew Gilman and Thomas Parmentier, strategists at UBS Global Wealth Management explain: “Although equity fundamentals remain generally favorable, we see less upside for European equities under a Trump presidency in particular, we see risks to economic growth from trade tariffs and rising US bond yields, which may weigh on valuations.”
“Possible tariffs in the region, which could generate a 1% drop in the GDP of the common area over the next year, would be the fundamental reason for these differences. In fact, companies in the luxury or automotive sectors have suffered in the recent weeks the advantage of the polls that gave Donald Trump as the winner,” they say in XTB.
Loss of supports
As anticipated, the Ibex lost support at 11,560 points at Wednesday’s close. Something that would be, according to Joan Cabrero, technical advisor at Ecotrader, “anything but bullish for Spanish equities, and would open a probable additional fall towards the September lows around 11,130 points and I do not rule out that it could seek support to its bullish guideline that runs through 10,900/11,000 points. I am talking about a minimum drop of an additional 3.5% and limited to 6%,” he explains.
Cabrero indicates that, if this fall finally occurs, the investor would be faced with an opportunity to buy a Spanish stock market in search of a final stretch of a bullish year. However, he recommends waiting for the weekly close, where you can have a clearer reading of the digestion of the results in the US.
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