Ibex moderately higher after liquidation of Italian banks

European markets closed higher on Monday (+0.5% average) after the Italian government’s decision to liquidate two if its banks. Despite the memory of the financial crisis it is becoming clearer and clearer (including the bailout of Popular) that investors are opting to continue buying. The Ibex 35 closed 0.62% higher at 10,696.60 points without really moving away from the key technical support.

“We understand that it avoids a banking crisis extending to other banks, in order to calm investors down,” pointed out analysts at Link Securities.

Problems in the Italian banking system is one of the worst kept secrets around, and it appears that the country’s government has made the most of the recent step to save Popular. Italian authorities said that they are prepared to spend up to 17bn euros in closing these regional banks. The agreement says that there will be a transfer of the best shares from the banks to Intesa Sanpaolo. The measure will come two days after the ECB warned that the two banks would probably end up collapsing.

“The truth is that after what happened with Popular and now Italy, investors might start to wonder if things have calmed down or it is only the beginning of a large scale restructure of European banks,” Carax AlphaValue analysts said in their morning report.

The FTSe Mib in Milan gained 0.67%, while the PSI 20 rose 0.69%, and the CAC 40 by 0.66%.

The black swan to the problems of European banks comes with the weakness of crude. Oil moves upward without a clear reaction on Monday. Brent rose 0.11% to $45.6 per barrel, while West Texas finds itself at 0.40% to $43.18.

In the Spanish index, Iberdrola led the winenrs with a 1.92% rise, followed by IAG on 1.51% and Banco Sabadell 1.46%, while Red Electrica ( +1.15%) and Caixabank (+1.12%) also had good days. On the other side was Acerinox with a loss of 1.54%, Grifols fell 0.67% and Acciona was 0.62% lower. In the general atock exchange Solaria was boosted 10.08%, Ercros by 5.71% and Duro Felguera 5.17%, while Pescanova led the losses with a fall of 13.55%, followed by Service Point (-7.29%) and Urbas (-6.25%).

In Monday’s session it was announced that Telefonica is looking into a stock market debut for its Argentinian affiliate, in order to boost funds from eager investors. Citi maintained its Buy recommendation and target price of 28 euros. Barclays lowered their recommendation on Aena to Neutral, but kept its TP at 170 euros.

In the UK, an agreement has been announced between the Conservatives and the DUP from Northern Ireland. After the latest meeting with DUP leader Arlene Foster, Theresa May will now form a government with the support of her party.

Meanwhile, trade representatives from the EU and MExico met on Monday as part of the negotiations to update their free trade agreement. Business confidence in German companies reached a record high of 115.1 from 114.6 for June.

TECHNICAL ANALYSIS

José María Rodríguez, technical analyst at Bolsamanía, said that “we woke on Monday with light gains of 0.3% and after hitting more than 1% higher we ended up a long way away from the highs of the day. We missed an opportunity to escape the danger of the support level (10,600). As a result we find ourselves in the same situation as last week, inside the triangle and not able to attack resistances or break supports.”

“As well as that, there is little trading volume, well below average. In any case there will be very few technical implications until we head towards either the resistance or support.”