Sparks fly but fire doused

31st January 2008, Comments 0 comments

Fears of a recession in the United States and caution ahead of the Federal Reserve's decision on interest wiped out gains in the Spanish stock market yesterday in a session dominated by merger and acquisition talks in the energy sector.

31 January 2008

MADRID - Fears of a recession in the United States and caution ahead of the Federal Reserve's decision on interest wiped out gains in the Spanish stock market yesterday in a session dominated by merger and acquisition talks in the energy sector.

The blue-chip Ibex 35 index closed down 0.22 percent at 13,217.10 points after moving within a range of 13,117-13,381 points. The Madrid general index shed 0.12 percent to 1,432.49 points. Open-market deals in the continuous market amounted to EUR 4.3 billion.

The latest US GDP figures stirred renewed concerns about the health of the world's largest economy, which grew only 0.6 percent in the last three months of last year, when forecasts pointed to growth of around 1.2 percent. For the whole of 2007, the US economy grew at its lowest pace in five years.

As is normally the case, investors also decided to lighten up ahead of the Fed's decision. The poor GDP figures heightened the chances of a 50-basis point cut, and the US central bank duly met that expectation after the European markets closed.

The highlight of the Spanish bourse was a report that EDF and ACS are in talks for a possible takeover bid for Iberdrola, Spain's second-largest electricity supplier. This set the whole power sector abuzz.

Iberdrola closed up 3.58 percent while its renewables unit Renovables added 3.68 percent. Unión Fenosa led blue-chips higher with a gain of 5.49 percent. The Financial Times reported that ACS and EDF planned to divide Iberdrola up between them, with ACS getting Renovables, which would be merged into Fenosa.

Fashioner retailer Inditex felt the brunt of the US GDP figures, falling 3.84 percent, while bourse heavyweight Telefónica shed 1.98 percent.

[Copyright EL PAÍS / Adrián Soto 2008]

Subject: Spanish news

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