Spanish stocks fail to join global rally after election

AP News
Posted: Dec 21, 2015 8:37 AM
Spanish stocks fail to join global rally after election

LONDON (AP) — Global stock markets posted solid gains Monday at the start of a trading week that's likely to see trading levels depressed by Christmas. Spanish stocks fell sharply after an election saw the ruling party lose its overall majority amid a groundswell of support for two upstart parties.

KEEPING SCORE: In Europe, Germany's DAX was up 0.6 percent at 10,672 while France's CAC 40 rose 0.3 percent to 4,639. The FTSE 100 index of leading British shares was 0.7 percent higher at 6,099. U.S. stocks were poised for solid gains too with Dow futures and the broader S&P 500 futures up 0.8 percent.

SPAIN ELECTION: One market that wasn't faring well Monday was Spain's IBEX, which was down 2.8 percent after Sunday's election saw the far-left Podemos and the business-friendly Ciudadanos parties win a number of seats. The ruling conservative Popular Party received the most votes but fell far short of a parliamentary majority and is at risk of being booted from power.

THE CONTEXT: Although Spain's economy has been growing strongly over the past year, its public finances remain strained amid unemployment levels of around 20 percent. Though Spain didn't need a financial bailout like others in the 19-country eurozone, such as Greece and Portugal, the Popular Party government has been pursuing relatively tough budgetary policies and wide-ranging economic reforms. The fear in the markets is that the election results may reduce the impetus for austerity and reform.

ANALYST TAKE: "We could now be facing an era of political paralysis and instability in Spain," said Craig Erlam, senior market analyst at OANDA.

FED FADING: The market impact of the Federal Reserve's decision last week to raise interest rates for the first time in nearly a decade has faded. On Friday, U.S. stocks plunged as many traders booked profits accumulated when the Fed finally ended the uncertainty over its intentions. The Dow dropped 2.1 percent that day alone.

SANTA RALLY? With the trading week curtailed in much of the world because of Christmas, moves in the market can be more pronounced than usual.

THE QUOTE: "Today's calendar is relatively light, and with liquidity getting thinner over the course of the week, the potential for exaggerated moves is very real," said Chris Beauchamp, senior market analyst at IG. "The default direction is still likely to be up, given past performance."

ASIA'S DAY: The Shanghai Composite Index gained 1.8 percent to 3,642.47 and Hong Kong's Hang Seng advanced 0.2 percent to 21,791.68. Tokyo's Nikkei 225 shed 0.4 percent to 18,916.02, while Bangkok and Singapore also declined. Seoul's Kospi advanced 0.3 percent to 1,981.19, while. Sydney's S&P/ASX 200 was unchanged at 5,109.00.

ENERGY: Benchmark U.S. crude fell 53 cents to $34.20 per barrel in electronic trading on the U.S. Mercantile Exchange. Brent crude, used to price international oils, lost 73 cents to $36.15 per barrel in London.

CURRENCIES: The euro was steady at $1.0871 while the dollar rose 0.2 percent to 121.35 yen.