The stock market closes its worst week since March due to fear of more rate hikes

2023-07-07 18:37:58

Barely five days after considering the stock market crisis of the pandemic to have been overcome after reaching the level that it said goodbye to back in February 2020, the Spanish Stock Market has closed what has been its worst week since the banking crisis in March, when they fell various entities such as Silicon Valley or Credit Suisse. The fluctuations have dominated the market these days with a final tip of 0.4%, which has led the Ibex-35 to drop more than 3.6% since last Monday. It has gone from the top of 9,600 points, a level that it has not seen for three years, to suddenly return to 9,200.

And the explanation –although the behavior of the parquets rarely responds to a single cause– lies in the uncertainty that the central banks have once again generated with their policy of raising interest rates. The European Central Bank (ECB) will predictably raise them at its meeting at the end of the month. It will be another 0.25 points to 4.25%. What happens in September – the next meeting of the organization – is “an open question”, as indicated by the vice president of the monetary institution, Luis de Guindos. Frankfurt sees signs of weakening in European subjacent inflation, which is the most resistant to falling. But it is still early to stop dead.

In the case of the North American Federal Reserve (Fed), the economy is still showing no signs of exhaustion after the rate hike that has led it to have the price of money above 5%. The unemployment data known yesterday pointed to a new reduction in unemployment, whose rate remains stable, at a minimum, at 3.6%. But markets fear that if central banks keep tightening the screws, there will come a time when economies falter. And if that door is opened, they do not know to what extent and for how long there will be a crisis.

For this reason, sales follow one another on the Stock Markets and are directed towards the public debt market, whose yields (what the investors demand from the States for their indebtedness) is increasing. The latest Treasury auctions in Spain also certify this , with a committed interest close to 4% in the case of one-year bills.

And as always there are winners and losers. Among the first, the banks, the most benefited by a rise in rates. All have improved their revaluations in recent days. On the opposite side are companies weighed down by expectations that their cost of financing will continue to rise, especially if they are highly indebted. Iberdrola led the falls with a cut of more than 4% and others such as Telefónica dropped more than 1%.