Electoral noise heightens plunge in Spanish bourse

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Ibex 35 leads European stock markets lower, as US recession threatens.

16 January 2008

MADRID - European stock markets, lead by the Ibex 35, nose-dived yesterday as  data released suggested the US economy could be teetering on the brink of recession.

US retail sales for December dropped 0.4 percent, the first decline in six months, as resilience on the consumer front weakened. Full-year sales for 2007 were the weakest in five years.

Citigroup was a further source of woe. The US banking giant reported its largest ever quarterly loss in the last three months of the year as the US subprime mortgage crisis spread its tentacles.

Spain suffered more than most as its own economic worries gather force, with spiralling inflation and a slowdown in the key construction sector as a massive housing boom screeches to a halt. While the government recently trimmed its forecast for GDP growth for next year to 3.1 percent from 3.3 percent, it is widely felt that figure is still overly optimistic.

The uncertainty unleashed by the subprime crisis and accompanying liquidity crunch has been exacerbated in the case of Spain by approaching general elections, the outcome of which are too close to predict. The economy has emerged as the eye of the political storm ahead of the 9 March poll, with the opposition Popular Party using the latest negative indicators as a cudgel to beat the ruling Socialists.

The stock market yesterday served as the barometer of the increased political noise on the economic front, with the Spanish blue-chip Ibex 35 plummeting 3.37 percent in the wake of sharp falls on Wall Street. By contrast, Germany was down 2.14 percent, Paris 2.83 percent and London 3.06 percent.

[Copyright EL PAÍS / A. SIM 2008]

Subject: Spanish news

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