Touché Trichet

7 December 2007

MADRID – The Spanish stock market was motoring ahead quite nicely yesterday until European Central Bank chief Jean-Claude Trichet stuck a spanner in the works.

The blue-chip Ibex 35 had moved above 15,900 points, but Trichet’s cutting remarks on inflation in his news conference after the ECB’s monetary policy regular monthly meeting made investors think twice about pushing the market higher. Trichet said the bank was raising its inflation forecasts for this year and the next, thereby dashing hopes for a rate cut. At the same time the ECB also cut its growth forecasts for the euro zone.

As a result, the Ibex 35 started to come off led by market heavyweights and was just off its lows for the day by the close.

As expected, the ECB left its key lending rate unchanged at 4.0 percent at its governing council meeting.

The Ibex 35 closed down 0.67 percent at 15,695.90 points after trading in a range of 15,667-15,901. The Madrid general index lost 0.64 percent to 1,702.90. Open-market deals in the continuous market dropped to EUR 3.9 billion with the banks closed for a public holiday.

In the rest of Europe, Frankfurt dropped 0.05 percent, Paris lost 0.26 percent, while London was down 0.13 percent on profit-taking as the Bank of England expected cut interest rates.

Among the market leaders, Telefónica shed 1.65 percent, Santander was off 0.07 percent, BBVA fell 0.27 percent, while Iberdrola lost 0.57 percent.

Biopharmaceutical firm Zeltia continued Wednesday’s rally on the back of rumours rival Novartis was lining up an imminent takeover bid. The stock added a further 1.23 percent yesterday. Commercial television stocks were in favour, with Telecinco up 1.28 percent and Antena 3 adding 1.17 percent.

Subject: Spanish news