Spanish election result sends markets sliding but here's why there's nothing to worry about

AFP/The Local
AFP/The Local - [email protected] • 29 Apr, 2019 Updated Mon 29 Apr 2019 13:57 CEST
Spanish election result sends markets sliding but here's why there's nothing to worry about

Europe's stock markets slid Monday on Spanish vote uncertainty and weak eurozone data.


Oil prices extended losses, having shed three percent on Friday after US President Donald Trump said Saudi Arabia and others in OPEC had agreed to his request for higher crude output.

The focus in Europe was firmly on Spain, which faces weeks of coalition talks after Prime Minister Pedro Sanchez's Socialists won snap elections on Sunday without a majority, splitting the right-wing bloc but letting ultra nationalists into parliament.

The results raise the spectre of another period of instability for Spain, with Sanchez depending on alliances with hostile rivals.   


With the country set to return to the polls on May 26th for regional, local and European Parliament elections, a new government is not likely to be formed before June.

In early afternoon deals, Madrid's benchmark IBEX 35 index of major companies was down 0.9 percent, making it the worst performer among leading European indices.

"The IBEX is underperforming the rest of the market which is not entirely unsurprising," Oanda analyst Craig Erlam told AFP.   

"Obviously the prospect of higher taxes and a less market-friendly government is not ideal for stock markets."   

Elsewhere, London and Frankfurt each fell 0.3 percent while Paris was down 0.4 percent in value.

Sentiment was also hobbled by news that economic confidence in the single currency area sank in April to hit the lowest level for more than two years.   "The need for a coalition in Spain -- and a socialist one at that, much to the disappointment of investors -- helped drag the IBEX lower," said Spreadex analyst Connor Campbell.

"Combine that with news that economic confidence in the eurozone is at a two-year low, and there was little reason for the region's indices to continue the kind of positive run that has been a fixture for most of April."

But data showed that the IBEX has traditionally fallen in the aftermath of every single election result in Spain since 1993 and therefore was nothing to be alarmed about. 


READ MORE OPINION: 'Election result brings welcome reassurance for Brits living in Spain'


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