Thin holiday market liquidity has spurred a nice rebound in share prices on Monday after uncertainty surrounding Spain’s election result caused a lower open across Europe. Spain’s IBEX 35 stock index dived to its worst day in three months whilst Spanish bond yields spiked as investors reacted to the country’s uncertain political future.
There is no clear majority after Sunday’s election in Spain since a coalition between PM Rajoy’s People’s Party and the liberal Ciudadanos would not be enough to form a majority. There’s a chance a socialist government could take charge if Rajoy can’t form an alliance of parties in the next few days.
A socialist government in Spain would not be the end of the world and the recent experience from Portugal suggests bond yields would likely normalise after the initial shock. More broadly, the Spanish election result is another sign of anti-establishment feeling in Europe brought on by discontent particularly amongst the youth and unemployed which were hit hardest during the 2008 financial crisis.
Brent crude has made a fresh 11-year low, the lowest levels since 2004. The energy sector is the weakest component of the FTSE 100 but a rebound off the lows for oil means shares of BP (L:BP) and Shell (L:RDSa) have edged back into the positive. Another high profile stake sale from an investor in BG Group (L:BG) is weighing on BG’s shares.
News that ITV (L:ITV) is considering a sale to US cable operator Comcast Corporation (O:CMCSA) has catapulted shares towards the top of the UK equity benchmark. Rival media conglomerate Liberty Global (O:LBTYA) recently upped its stake of ITV to 9.9% but has denied intensions to attempt a takeover. The possibility of a bidding war is a big positive driver for ITV shares heading into 2016.
US markets look set for a rebound from the huge two-day rout at the end of last week. The performance of the energy sector is likely to be a key driver as investors deal with year-end thin liquidity and portfolio repositioning.
The force is strong for Walt Disney Company (N:DIS) at the moment after its Star Wars franchise broke cinema opening weekend records in the US, a possible positive catalyst for Disney shares on Monday.
USA pre-opening levels
S&P 500: 14 points higher at 2,019
Dow Jones: 110 points higher at 17,238
Nasdaq 100: 40 points higher at 4,554
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