Sharp falls of 3.8% on the Ibex while virus fear persists

The Ibex 35 has fallen sharply by 3.79%, to 6,839.50 points, while fear continues over the economic impact of the coronavirus. Amadeus (-10%), IAG (-9.9%), ArcelorMittal (-8.4%), Repsol (-7.5%) and BBVA (-7%) have led sales within the stock index, which turned downward violently after the big rebound from the lows in March.

The International Monetary Fund (IMF) warned on Tuesday of the very strong economic shock expected from the virus. The agency said the world economy is likely to suffer the worst financial crisis in 2020 since the Great Depression due to the pandemic. In Spain, the IMF foresees a fall in GDP of 8% and a strike of 21% this year. Furthermore, it coincides with those experts who consider that the crisis will be worse in our country than in the rest of Europe.

The IMF now expects the world economy to contract by 3% in 2020. Faced with this, in January it had forecast a world GDP expansion of 3.3% for this year. For Spain, it has anticipated this Wednesday that the public deficit will shoot up to 9.5%, to drop in 2021 to 6.7%.

And while the warnings continue, measures to curb the economic impact of the virus also continue. The People's Bank of China has lowered one of its key interest rates again on Wednesday. It has cut the interest rate on loans to banks by 20 basis points, from 3.15% to 2.95%, which is its biggest reduction since it was implemented in 2014.

In other markets, Brent oil plummets 7%, to $ 27.31, because investors consider the cut in production of almost 10 million barrels approved by OPEC and Russia insufficient. In addition, the euro depreciates 0.6% and changes to $ 1.0916, while the yield on the Spanish 10-year bond rebounds to 0.85%.

For his part, Donald Trump has followed through on the threats and has announced that he is suspending funding to the World Health Organization, considering that the WHO has made many mistakes in managing the crisis and that it has not launched any criticism of China, where the pandemic started.

In addition, investors continue to watch this Wednesday for signs of reopening of economies throughout the world. After France and Italy have chosen to prolong their closings, German Chancellor Angela Merkel will hold consultations with heads of state on possible opening measures today. The Danish and Austrian governments have already announced a cautious opening of their respective economies for this week.

In the United States, Trump's reopening wishes clash with reality. Larry Kudlow, economic adviser to the president, said Tuesday that he will make a very important economic announcement in the coming days about the reopening of the economy. Morgan Stanley warns that reopening the US economy will be a very complicated process and believes that the country will not regain normalcy in this regard until the end of next year.

The new economic data published in the US has been appalling. For example, March retail sales, one of the lungs of the economy, plunged 8.7%; and industrial production is down 5.4%. For their part, the experts at CMC Markets warn that the Libre Beige, which will also be released today, "will be horrendous." In Spain, the CPI has posted lows since August 2016 after falling seven tenths in March, more than expected.

IBEX ANALYSIS

"This Tuesday we commented that the Ibex had partially filled the bearish gap of 7,450 points and that experience had shown us that in most cases these types of 'gaps' were not used to close / cancel the first time it appeared, and today we can see the abrupt turn downwards by prices, "says José María Rodríguez, analyst at Bolsamanía.

"The truth is that it is advisable to be cautious again because, for example, the Dax and the S&P 500 have rebounded around 50% of the previous fall. In other words, many of the weight indexes have rebounded considerably more than the IBEX, reached homologous levels to the 8,000 points of our selective (50% of adjustment) and this means that we are weaker than the stock market as a whole, "adds this expert.

"Something that on the other hand comes from far away and therefore should not surprise us in the least. I also do not like that the daily stochastic momentum oscillator is overbought and turning downward. Let us trust that the support of 6,580 points (bullish gap) act as a brake on very short-term falls, "concludes Rodríguez.