Spanish stocks fell Monday after no political party emerged with a majority in Sunday elections, while weak oil prices weighed on shares across the rest of the European continent.
How did markets perform?
The Spain IBEX 35
led losses for regional indexes, falling 0.9%. On Friday, it had closed up 0.1%.
The Stoxx Europe 300
gave up modest gains to slip 0.3%, after a gain of 0.2% Friday. The euro
was changing hands at $1.1162 from $1.1149 late Friday in New York.
In the U.K., the FTSE 100
was flat following Friday’s decline of nearly 0.1%. The pound
rose again 0.2% to $1.2941 after climbing 0.2% Friday.
France’s CAC 40
fell 0.4%. At Friday’s close, it had risen 0.2%. Germany’s DAX
slipped 0.3% on the heels of its 0.3% jump Friday.
In Italy, the FTSE MIB
fell 0.4%, following Friday’s 0.1% increase.
What’s moving the markets?
Spain’s ruling Socialist party took the largest share of votes in elections Sunday, but that did not constitute enough to form a government without entering into a coalition. They are expected to join a group of smaller parties led by Podemos, a party firmly on the left of Spain’s political spectrum. However Reuters reported that the Podemos leader cautioned supporters that forming a coalition “will take much time and I would ask for your patience.”
In addition, the election saw the emergence of the far-right Vox party, which captured 10% of the vote for 10 seats in parliament. It was the first significant victory for a far-right party since the country’s dictatorship ended in the 1970s.
“We expect a prolonged standstill, at least until the May regional and European elections. But we continue to think that political instability will have only a modest effect on the performance of the Spanish economy,” said analysts at Oxford Economics, in a note to clients.
Oil prices stepped lower again on Monday, extending a selloff from late last week after U.S. President Donald Trump said he had personally intervened to pressure the Organization of the Petroleum Exporting Countries to lower prices of the commodity. Those losses extended to the heavily-weighed oil sector.
U.S.-China trade talks continue in Beijing this week, and then back to Washington D.C. on May 8. The reassuring tone from the U.S. Treasury was countered with a degree of sabre rattling from an anonymous source who told Bloomberg that President Donald Trump would walk away from the negotiating table if he was not satisfied.
China kicked off a busy week of economic developments Saturday with news that recovery in key sectors had sparked a 13.9% year over year increase in industrial profits in March. The rebound, reported by the National Bureau of Statistics, was significant coming after a slump in that figure in January and February.
This week’s economic reports will include both a U.S. Federal Reserve meeting on Wednesday and the Bank of England on Thursday.
Which stocks are active?
Tracking those oil prices lower, France’s Total SA
fell 1.1%, while BP PLC
fell 0.5% and Italy’s Enel SpA
Shares of Dutch technology firm Koninklijke Philips NV
climbed 2.1% after it reported strong first quarter earnings based on both cost-cutting and sales increases. Net income in the quarter rose 31% and the group reaffirmed its guidance through 2020.
British Airways parent International Consolidated Airlines Group
was 2.6% higher after an upgrade by UBS from neutral to buy, with a price target of 705 pence. The company will report earnings May 10.
Deutsche Bank AG
fell 1.1% after Credit Suisse downgraded the financial group to underperform from neutral. Analysts took a tough line on what they called “no plan B” following lackluster earnings and the collapse of the Commerzbank AG merger discussions.
“Despite DBK’s weak profitability, it declined (for now) to offer any strategic update to improve returns. We think it will continue to lose market share in trading as it needs to continue to cut expenses amid elevated funding costs and improve its leverage ratio,” the analyst said.
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