Doubts in the Stock Exchanges before the new strategy of the central banks

Inside the Madrid Stock Exchange. / ef

The Ibex-35 opens aimlessly above 8,100 points, with investors also pending the cross between the euro and the dollar

Clara Dawn

The European stock markets begin a new day aimlessly with investors trying to digest the conspiracy of central banks to fight inflation and, in the case of Europe, avoid a future sovereign debt crisis.

The Ibex-35 lost 0.16% to 8.1662 points after the emergency meeting of the European Central Bank (ECB), which yesterday ended with a brief statement in which the body announced that it will begin to design a new tool to avoid the unjustified rise in risk premiums in peripheral countries.

Everything points to a new decaffeinated QE, but it will be necessary to see the details to understand if the organization has the capacity -not only by volume, but also legal- to carry out a plan of this type.

Analysts at Link Securities indicate that, with inflation skyrocketing, "creating an 'ad hoc' debt purchase program, which entails increasing the money supply in the Eurozone, is difficult to defend."

In addition, they consider that the countries of the north of the region are not going to admit a program that does not entail conditionality. "In other words, in order to attend it, the countries must commit to the deadline and form to reduce their imbalances, something that their political leaders do not believe they are willing to accept given the high political cost that this entails."

Despite the initial increases, caution is still very present on the floor, especially since Wall Street futures are in the red after a day of increases in response to the Fed's decision to raise interest rates by 75 basis points. The biggest rise since 1994, when Alan Greenspan commanded the US central bank.

Investors are also closely following developments in the debt markets. The ECB's commitment to prevent financing costs from skyrocketing in the most indebted States, such as Spain or Italy, has made it possible to somewhat relax the tension experienced these days in sovereign bonds.

Thus, the interest on the Spanish ten-year bond remains below 3%, at 2.86%, while the yield on the bund falls to 1.61%. Both references, however, are at high levels compared to just a few months ago, with the Spanish risk premium at 122 basis points, from the 137 at which it was trading before the ECB meeting.

Beyond equities and fixed income, the evolution of the different monetary policies leaves a clear protagonist that investors should pay attention to: the cross between the euro and the dollar. With the ECB rate hike, the greenback has been strengthening in recent months, with a more notable rebound in recent weeks that leaves the cross between the two currencies at 1,038 dollars.

Some voices already point to the inevitable arrival of parity between the two currencies, something that in the short term could be welcomed with optimism given the benefits that a 'cheap' currency can have on exports. But beware, a weak euro in the medium term could bring huge problems for the region's economy. Especially in the energy bill, because we must remember that Europe imports a good part of the oil it uses. And this is negotiated and paid in dollars.

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