Investors forget fears

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The Spanish stock market yesterday underwent another sharp shift, this time upward, which threw into question the criteria used for making investment decisions.

25 January 2008

MADRID - The Spanish stock market yesterday underwent another sharp shift, this time upward, which threw into question the criteria used for making investment decisions.

The blue-chip Ibex 35 ended the session up a record 6.95 percent, which left it above 13,100 points, and put it technically on the path of a significant rebound unless sentiment shifts again.

Nothing changed on the economic front from the previous day in which the ECB expressed reluctance to lower interest rates in the face of a worrying scenario. But in these days, valuations are made and decisions taken in a flash. That is to say, investors move from one thought to another in no time.

It is to be hoped the Ibex 35 consolidates above 13,000 points in the next few sessions, as this has become an important reference level for long-term investors still present in the market.

Corporate earnings have been in line with expectations and so far hardly anyone has dared to predict a fall in business activity of the magnitude forecast for the economy as a whole.

In the end run, it is a question of whether the 18-percent drop the Ibex 35 has suffered from the relative highs it posted in December constitutes an adequate correction for what is now expected of the economy. On an international level, there is no doubt about the US Federal Reserve's readiness to pull the US financial system out of a crisis and stimulate spending, but the question is whether it has acted quickly enough.

The latest indicators underscore the weakness of the US economy, with existing home sales falling in December. On the other hand, businessmen are reasonably upbeat about the German economy.

[Copyright EL PAÍS / RAFAEL VIDAL 2008]

Subject: Spanish news

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