Uncle Ben to the rescue

28 February 2008

MADRID – The Spanish bourse languished in the doldrums for much of yesterday’s session until market friendly remarks by US Federal Reserve Chairman Ben Bernanke, who hinted at a further rate cut, sparked a late rally.

Early on, the domestic bourse had to contend with Brent crude moving to record levels of over USD 100 per barrel as the Bank of Spain reported a more pronounced slowdown in the economy at the start of the year.

When news of a 33.9-percent fall in new US home sales in January was released, all seemed to be at a loss until Bernanke spoke. In testimony to Congress, the Fed chief said downside risks to economic growth remain the key focus of monetary policy rather than inflation.

News that the regulator of government-sponsored mortgage-finance giants Fannie Mae and Freddie Mac was lifting caps on their purchases of mortgages and provided a cheer for investors.

The Ibex 35 index closed up 0.13 percent at 13,454.30 points after moving within a range of 13,255-13,505 points. The Madrid general index also added 0.13 percent to 1,456.97 points. Open-market deals in the continuous market amounted to EUR 3.5 billion.

In the rest of the euro area, Frankfurt gained 0.17 percent, while Paris fell 0.09 percent. London lost 0.18 percent.

Colonial slumped 7.65 percent after investors cold-shouldered a complex, condition-strewn takeover bid for the property company by a Dubai sovereign wealth fund.

Iberia added 3.80 percent as the airline reported stronger-than-expected earnings. Unión Fenosa put on 0.57 percent after the power utility increased earnings 55 percent, while wind-turbine maker Gamesa added 3.43 percent ahead of its 2007 results release today.