Ibex becomes safe haven after political tensions in Britain and France

Political uncertainty rose drastically on Tuesday. As if the nervousness caused by the French elections were not enough, Theresa May announced a snap election in the UK for 8 June. The Ibex 35 fell more than 1% towards 10,216 points, but ended up 0.6% lower on 10,264.50 points.

The big loser of the day was the FTSE 100, which dropped more than 2%, penalised after the rise of more than 1% for the pound in the currency market. The market has priced in a win for Theresa May’s Conservatives, which would allow for less dependency on Tory backbenchers to push Brexit plans through.

In Spain, Banco Popular saw a strong rebound of 6.2% after having tanked 25% in the previous week. In addition, Abertis was suspended when it shot up 6.6% after it announced a merger with Italian firm Atlantia. In the general stock exchange, Sniace was boosted 17% after completing its capital injection.

Most stocks finished in negative on Tuesday, however. ArcelorMittal (-5.9%) and Acerinox (-2.8%) led the losses in a poor day for materials firms in all of Europe. DIA (-2.9%), Acciona (-2.4%) and Repsol (-2.2%) were the other poor performers.

At an economic level, the IMF lifted its growth forecasts for Spain by three points to 2.6%. As such, Spain appears to be most improving economy during the year among the biggest in Europe.

The IMF maintains growth of 2.1% for 2018 and places Spain at half a percent above the average expansion forecast for the eurozone.

FRENCH ELECTIONS AND RESULTS

Markets waved goodbye to Easter holidays and returned to normality on Tuesday, a normality marked by political tensions. French elections are imminent, with the first round pitting Emmanuel Macron against Marine Le Pen. The CAC 40 fell 1.59% on Tuesday.

There are very few macro references this week, but the publication of results takes precedence during the week. Last week saw reporting from major Wall Street firms such as JPMorgan, Wells Fargo and Citigroup, with this week seeing more results in the US and Europe. Today, Goldman Sachs disappointed, while Bank of America beat forecasts from analysts.

TECHNICAL ANALYSIS

“A fifth consecutive fall for the Ibex,” said José María Rodríguez, Bolsamanía technical analyst. “Despite that, the losses must be considered quite light considering they were little more than 2% from annual highs, and they are now being corrected.”

“In fact, we can’t discard rebounds in the short term even considering losses in the next few days, at least to the support level of between 9,800-10,000 points, where we have the upper gap from the 16 March session.”

Rodríguez added that “if we look at the big banks in our country, we have important zones of support for Banco Santander at 5.35 euros, BBVA at 6.50 euros. If we see either of these heading towards the support it’s likely that the rebound is close.”