23 January 2008
MADRID – Fear continued to be the dominant note at the opening of yesterday’s session in the stock markets, with the Spanish blue chip Ibex 35 down 5.45 percent at below 12,000 points.
By the end of the session and after the US Federal Reserve announced a 75-basis-point cut in interest rates, the Spanish benchmark index was up 1.68 percent at 12,839.70 points, and apparently out of danger.
The technical situation of the Spanish bourse was critical in the first few hours in the face of a shift in analysts’ perceptions of the crisis. If there is a recession in the United States, analysts believe the Ibex 35 could move between 10,500 and 12,200 points. This sparked a fresh wave of indiscriminate selling, which caused the Ibex 35 to drop to 11,937.20 points, 25.31 percent below its level on 12 December.
The subsequent recovery in the stock markets stopped the selling pressure in its tracks and helped the Ibex 35 claw back 700 points, or 6 percent, in no time, thereby attracting yet more buyers.
The US Federal Reserve’s decision to cut the cost of borrowing to 3.50 percent while measures on how to reactivate the economy are debated was well received in Europe, but not so much in the United States, where it was viewed as an indication of the magnitude of the problem.
The drop in earnings announced by Bank of America undermined the confidence of investors, who appear more concerned with the precarious state of health of the US financial system than with the immediate evolution of the economy.
Turnover in Spain’s continuous market remained almost at the same levels as the previous session, despite the number of different options on offer to investors.
[Copyright EL PAÍS / RAFAEL VIDAL 2008]
Subject: Spanish news