There is a vacuum of leadership across major European capitals. The sell-off across European equities would suggest investors are fretting that the political problems ware here to stay. The no-confidence vote in Spanish Prime Minister Mariano Rajoy sent Spain’s benchmark IBEX index skidding lower.
After days of digesting the possible destructive force of a populist government in Italy, European investors now need to contend with a leadership crisis in Spain. Spaniards seem disenchanted by the corruption charges and Catalonia is still reeling from Madrid’s heavy-handed approach to its bid for independence. Rajoy’s days look numbered. We’re expecting yet another Spanish snap election.
Germany’s DAX did an okay job as a haven in a fateful day for shares in Europe’s periphery. The index fell, but not nearly as much other indices. The euro plunged new depths to a six-month low on the unravelling of Southern Europe’s two major governments. As a silver lining, the weaker euro did seems to encourage some international interest in German shares like Vonovia (DE:VNAn) and Deutsche Lufthansa (DE:LHAG).
The combination of economic growth at a five-year low and a ‘Fantasy’ Brexit saw the British pound rollover again. Sterling’s losses unwound all the previous day’s gain from better April retail sales figures. The unresolved issue of the Irish border and its repercussions for whether Britain will be part of Europe’s customs union is less fantasy than dreaded reality. Smurfit Kappa (LON:SKG) and Whitbread (LON:WTB) led the gainers while the downturn in oil prices meant oil majors BP (LON:BP) and Royal Dutch Shell (LON:RDSa) were the biggest drag.
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