- The most positive thing is that Angela Merkel has managed to form a coalition government in Germany
- In Italy, the instability seems guaranteed after results that predict uncertainty
After the plummet last week and last month, the Ibex 35 has risen a 0.63% up to 9,590.80 points, despite the complicated political scenario that is opening in Italy after the elections’ result. The positive note is that investors balance it out with the ‘yes’ from the SPD in Germany that has allowed Merkel to form a government once again.
- 11.154,600
- 1,56%
In the Ibex the highest riser has been Cellnex (+3.9%), followed by Grifols (+2.3%) and Red Eléctrica (+1.7%). The electric sector has been one of the main motors of the index: Endesa has risen in value 2.2%, followed by Iberdrola (+2.1%), Gas Natural (+2%) and Enagás (+1%).
Also, Telefónica (+1.4%) and Repsol (+11%) have also had a good behaviour, a little bit more discreet in the case of Inditex (+0.3%), that has lost favour of the analysts whose results on March 14 will be key to the market.
In red Mediaset España (-1.2%) and Meliá Hotels (+1%), followed by ArcelorMittal (-0.5%), ACS (-0.3%), Bankinter (-0.3%), Técnicas Reunidas (-0.3%) and BBVA (-0.1%) have been the only values in red.
ITALY AND GERMANY
Nevertheless this important ‘but’ in Italy and the fact that there are no majorities comes from the strength of ‘North League’, the xenophobe and anti-European party that surpassed Berlusconi’s ‘Forza Italia’ in the center right coalition (it has had 36% of support).
The scenario gets complicated because the coalition could be broken. But furthermore if the center right imposes itself, for Europe it would be catastrophic news that a government that doesn’t believe in the Union rules Italy.
Therefore, the analysts warn this morning that the “spectacular” result of the North League allows among other things, to form a government with “Five Stars Movement”, which is the scariest option for Europe and the markets.
“A lot of what happens depends on the Italian president, Sergio Mattarelli. He will decide after long consulting who will he give the first chance to form a coalition. For that he needs to follow the recommendations of the party leaders. The key options would be a grand coalition of center right and center left against the ‘Five Star Movement’ or a government led by ‘The Five Star Movement’ . “The risk of calling new elections probably after the summer holidays is significant”, point out the Berenberg experts.
Nevertheless it looks like investors are already used to the Italian political reality being chaotic. Aside from what’s happening in Italy, the opposite is happening in Germany this Sunday, when the SPF voted in favour of a grand coalition government between their party and Angela Merkel.
The analysts warned that the Germany held the key and although they predicted the ‘yes’, they warned that a vote against that would have been a hard blow for Europe since Germany was not used to an unstable political situation.
CHINA AND THE ECB
With this scenario, a very intense week kicks off for the markets, Germany and Italy still hold the spotlight but also China (XIII Popular National Assembly starts today).
Also the central banks come into the picture with a meeting from the ECB. It’s predicted that the ECB will give more details on their plans to withdraw incentives. The market speculates with September will be the month where the sales of assets will end.
As for the agenda of the day, the services PMI for February in Europe have been worse than expected. It has remained at 56.2 versus the 56.7 estimated. And the January retail sales in the EuroZone have fallen 0.1% in January.
