Fragmented Election Result Unleashes Spanish Market Selloff

Spanish stocks have posted some of the largest losses in European trading in the wake of the failure of the country’s ruling party to achieve a majority in Sunday’s election.
The deeply fragmented nature of the outcome is having an early impact on the markets, with most Spanish stocks mired in the red on Monday morning. Banking shares took the brunt of the spanish selloff, with Banco Popular Español SA shares tumbling by 5.8 percent, CaixaBank SA falling by 5 percent and Banco de Sabadell SA dropping by 4.4 percent. Big hitters Banco Santander SA and BBVA SA slid by 2.7 percent and 2.4 percent respectively.
Meanwhile, Spain’s IBEX 35 index slumped by 2 percent to hit 9,552.90, below most of Europe, which traded with clear gains. Investor unease over Spain’s economic future was signalled by a rise of 9 basis points on 10-year government bond yields, taking the total to 1.781 percent.
Currency watchers considering the impact of the weekend’s events on their Forex trading strategies should bear in mind that whatever coalition arises in the waked of the splintered vote will now depend on Spain’s two youngest parties, the anti-austerity far left Podemos and the liberal Cuidadanos, which have emerged as the two major destabilisers in this election.
It may be hard to determine just how to trade Forex under these uncertain conditions. Conor Campbell, financial analyst at Spreadex, stated “It’s like the Greek election saga in a minor key, one that poses a host of new problems for a country that has spent the last few months gradually sinking to the bottom of the Eurozone’s unofficial performance chart.”
In a note, analysts at Rabobank declared “Dependent on how long political uncertainty lasts and what is the eventually outcome, Spanish politics have the potential to remain a source of unease for the Eurozone.”