The stock market continues to fall after the ECB’s decision

2023-10-26 18:17:42

The ECB’s decision to pause interest rate increases after a cycle of 10 consecutive increases has not finished encouraging investors, who have been anticipating the institution’s move for weeks.

In any case, and after losing close to 1% in the most tense moments of the session, the Ibex-35 managed to minimize losses at closing to 0.24%, although without managing to recover 9,000 points. “Given that inflation continues to resist in several sectors of the economy, it is likely that the ‘higher rates for longer’ mantra will be with us for some time,” manager Janus Henderson indicates.

The truth is that the stock markets could have closed higher if it had not been for other factors, such as the publication of the preliminary GDP for the third quarter in the United States. The reference has shot up to 4.9%, well above what was expected, which which has reactivated the possibility that on the other side of the Atlantic, the Federal Reserve (Fed) could sustain some additional interest rate increase.

Against this backdrop, investors have chosen to wait and watch the bulls from the sidelines, in a frenetic day in which business results have also been the protagonists. In fact, Banco Sabadell was crowned at the top of the table by rising more than 6% to 1.10 euros per share after surprising with a record profit that exceeded 1,000 million euros, 44% more, in addition to announce an improvement in shareholder remuneration.

The banking sector as a whole recovered positions with a new rise in debt interest, which shows that the pause in the increase in interest rates will not imply, by any means, that financing will become cheaper overnight. In fact, the yield on the ten-year Spanish bond rose again to 3.96% yesterday.

However, the rise in these values ​​only served to cushion the red numbers presented by other listed companies, such as Inditex or Aena, which fell around 2% at the close, placing them among the most bearish of the session.

“At the moment, and despite the oversold nature of many securities and most indices, we see it as difficult for a stock market recovery to occur, at least in the very short term,” warn Link Securities analysts.

Now, the entire debate will focus on when the long-awaited rate cuts will arrive, although everything indicates that we will have to wait until at least well into 2024. “The ECB will be pressured from an economic point of view, by confidence indicators, the conditions for granting credits and a decrease in loans that point to a significant weakening of domestic demand,” indicate Ulrike Kastens, from the DWS manager. «In the medium term, this will open the door to adjustments in interest rates. “We continue to expect a first rate cut at the end of the second quarter of 2024,” she points out.

Meanwhile, in the raw materials market, the price of oil remains downward, with falls of 1.5% for the Brent barrel, the benchmark in Europe, to $88.75, while the West Texas Americans are around $84.