MADRID – Stock markets across the globe seem to have settled into a comfort zone in which the only doubt investors have is whether the US Federal Reserve is going to cut interest rates today by 25 or 50 basis points.

Most of the indexes posted such modest gains that some observers viewed the session as a mere exercise of going through the motions, although the situation in the Spanish bourse was somewhat different due to legislative changes affecting electricity companies.

The Spanish blue-chip Ibex managed to close in positive territory, but once again lagged behind the rest of the European markets. Yesterday’s gain of 0.08 percent kept the benchmark index within the broad sideways pattern of trading seen over the past few weeks. Whether this persists rests with the decision the Fed makes this afternoon. So far, the range has been set at support at 15,600 points and resistance at 15,950 points.

At this stage of events, while everyone believes there will be a rate cut, there is a lack of consensus about how big it will be. This points to opposing readings of what the final outcome ends up being. The majority expects a cut of 25 basis points, which would indicate that things are bad, but within limit. If the cut is 50 basis points, then investors might have to take on board the idea that the US economy is in a really bad state.

On the domestic front, electricity stocks suffered big losses in the wake of new rules governing the treatment of the costs of CO2 emissions. This was offset by gains in the bank sector and Telefónica, which ended up saving a session marked by the almost complete absence of significant economic indicators.

Turnover in the continuous market was on the lowish side at EUR 4.1 billion.

[Copyright EL PAÍS, SL./ RAFAEL VIDAL 2007]

Subject: Spanish news