Altitude sickness. That is how the human body responds to a lack of oxygen at high altitudes. This disorder is suffered by mountain climbers who go above 2,400 meters. Above 7,000 meters it can be fatal.
The Ibex 35 is trying to stay alive above the 7,000 level, but the distance is measured in points, not in meters. Yesterday, it was nearly lost this support level once again after a 1.29% decline that made it fall back to 7,027.10 points. But things could have been worse. At one point during the trading day the index fell by 2.3% to 6,955 points
Spain's main stock index feels it in its core that Spain is the current epicenter of the European sovereign debt crisis. In the past few sessions the ups and downs of the Ibex, as much the highs as the lows, are much more volatile than other indices in Europe due to lack of confidence in the Spanish economy.
Doubts have lingered mostly because of rumors spread in Germany about the creation of a fund designed specifically to bail out Spanish banks and in doing so avoid spreading contagion to other European nations. Also adding to the volatility is Banco Santander's announcement that its net earnings were 1.604 billion euros in Q1 2012, 24% less than the same period last year. The decline in profits was due to the 3.127 billion euros in solvency guarantees that were provisioned during the quarter. The market responded to the news by slashing Santander's stock price by 3.38%.
Still, one can learn a positive lesson from the Ibex 35's current level. An analyst from Citi points out one of them: "If indeed a major turnaround in the macro view is expected, we think that the massive sell-off in the peripheral markets, particularly Spain, has been excessive, which opens the window to a light recovery in equities."
Is a recovery possible?
So far in 2012 the Ibex 35 has fallen 18%. At this rate it is the third-worst performing stock market index in the world. In this context, the question is whether to give up on this year or hang on to the belief that the Ibex can finish the year ahead. Only twice before has the Ibex done this after falling below the low from the year before.
