Seleccion eE
Spain and Portugal stocks off to slow start in 2012
Stock indexes in Spain and Portugal were the only two in Europe to close January in the red. The Ibex 35 entered February at 8,509 points and with accumulated losses of 0.67% on the year, developments which have little to do with other European countries. The recent EU pact, which sets Spain?s maximum annual debt/GDP ratio at 0.5% and includes mechanisms for automatic adjustments and sanctions, was certainly the fuel behind Germany recording its best January since 1975. German stocks rose 9.5% last month.
The Spanish economy continues to show signs of weakness. Ailing banks, affected by large amounts of money being diverted for provisioning, are still the main burden on the Ibex 35, which has not topped 9,000 points since October of last year. These signs of weakness were reinforced last week when Fitch followed in S&P's footsteps and cut Spain's credit rating and the Spanish economy posted -0.3% growth figures for Q3 2011, making it clear that recession is no longer a possibility but a reality. The recession will be confirmed officially next quarter.
Still, some see great opportunities within these negative figures. "The reaction in the stock markets shows that there is some appetite for risk and that investors have begun the year with minimal risk in their portfolios. This profits those who invest money after each time the markets fall," said Miguel Ángel Paz, an analyst from Unicorp. In the meantime, IAG (the conglomerate made up of ArcelorMittal and Acerinox) and Bankinter are the most bullish stocks on the Ibex 35 so far this year.
Due to doubts about whether the financial sector can restructure successfully or comply with the EU's capital requirements within the stated terms, the European banking industry is in 2012 one of the four most bullish, sustained by stimulus received from the European Central Bank (ECB). The ECB will carry out on February 29 the second and presumably the last sale of unlimited funding to Eurozone banks that are trying to exceed liquidity requirements by two and in some cases three times what was requested of them previously.
International stock markets were more pleased with the EU's latest agreements. The Brazilian Bovespa and Chinese Hang Seng indexes posted January gains greater than 10%, while the Japanese Nikkei 225 had its best January since 1999 after rallying more than 4% and posting its best manufacturing figures in six months.