The ghost of a recession shakes the stock markets and sinks the Ibex 35 by 2.48%

EFE

The Spanish selective loses the level of 8,000 points and falls to March lows Only Cellnex, Colonial, Solaria, Telefónica and Red Eléctrica close in positive

07/05/2022

Updated at 7:30 p.m.

Investors are no longer confident of a soft landing for the economy and suspect that the change in monetary policy promoted by the main central banks, including the European Central Bank (ECB), will carry the price of a recession of unknown depth. With this panorama, in the absence of great references, and seeing that the Dow Jones has been in the red since the beginning of the session with declines of more than 2%, the Ibex 35 has lost the level of 8,000 points and has fallen by 2.48 %.

With practically all its values ​​in negative, only Cellnex has been saved, which has closed with a rise of 1.56% of its shares, Colonial (+0.08%), Redeia (Red Eléctrica) that have revalued +1, 09%, Solaria (+0.15%) and Telefónica (+0.16%). At the other extreme, the falls of Repsol (-5.78%), Sacyr (-5.38%), Banco Sabadell (-5.63%), Aena (-4.83%) and Bankinter (- 4.79%).

All this, in line with what happened in the main European markets. Frankfurt has fallen by 2.91% compared to 2.68% in Paris and 2.99% in Milan, one of the most affected places along with Lisbon (-2.89%). The Eurostoxx 50 has fallen to 2.68%. In parallel, the Dow Jones registers falls of around 2% and the Nadaq fell almost half a point in the middle of the session.

Nor does it help much that this Tuesday the euro has marked its lowest level against the dollar since December 2002, given the growing drumbeat of recession in the Eurozone and the ECB's little ambition. Specifically, this Tuesday it has changed to 1.0285 dollars and has already accumulated a depreciation against the dollar of more than 9% so far this year. Another bad omen, in today's Spanish Treasury auction, Spain has paid interest to investors for the 6-month bills. What had not happened since September 2015. Specifically, a marginal interest of 0.134% compared to -0.055% in the auction on June 7.

Goodbye "soft landing"

In the opinion of Joaquín Robles, an analyst at XTB, "investors are beginning to change their mentality and no longer trust a soft landing, with interest rate hikes that cool demand to match supply." On the contrary, this expert has highlighted that inflation continues to rise and energy costs continue to skyrocket. For Robles, "expectations are going to get worse and people are consuming less, as well as companies." This analyst does not hesitate to speak of "a change of discourse" in the central banks and, ultimately, "of a slowdown in economic growth."

"We expect sharp falls in the second half of the year and that the economy enters a recession, not technical, but deep," he summarized. For the XTB analyst, the main indices (Nasdaq, S&P 500...) will suffer losses of "around 30-35% accumulated during the second part of the year until they reach pre-pandemic levels." In line with this, he recalled that the stock market had been registering increases in recent months.

For Javier Niederleytner, professor of the Master in the Stock Market and Financial Markets at the Institute of Stock Market Studies (IEB), we are facing "a situation of discouragement among investors, which the longer it lasts, the worse effects it will undoubtedly have on the economy." This expert has introduced a relevant nuance: "We are facing an inflation of supply and not of demand," he pointed out. In this sense, he has concluded that restrictive monetary policies are effective for demand inflation, "but not supply, since a disproportionate rise in interest rates can lead us to an economic recession."

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