Live Markets: Spain's election unlikely to derail economic path

Hermes International SCA

05/10/2026 12:20

Adds new blog entry
STOXX 600 up 0.3%
Major bourses mixed
Spanish PM calls early election
Wall Street futures lower
Welcome to the home for real-time coverage of markets brought to you by Reuters reporters. You can share your thoughts with us at markets.research@thomsonreuters.com
     
SPAIN'S ELECTION UNLIKELY TO DERAIL ECONOMIC PATH
Spanish markets have largely shrugged off the political noise coming out of Madrid on Monday. 
Spanish PM Pedro Sanchez called an early election, set for November 29, after the fragmented parliament rejected the government's housing decrees last week.
The main opposition People's Party is ahead in the polls, suggesting a change of government is probable, but Capital Economics believes that the election is unlikely to alter prospects for the economy. 
"We expect it to continue to outperform, keeping the public debt ratio on a downward trend," said Harry Chambers, Europe economist at Capital Economics. 
While Spain ES10YT=RR has not been immune to the recent swoon in the bond market - the 10-year spread to Germany DE10ES10=RR widened by 15 bps last week - its bonds have not been sold at the pace of those in France FR10YT=RR or Italy IT10YT=RR.
"Given that we expect the economy to continue expanding at a healthy pace and the debt ratio to keep falling, we think that Spain’s government bonds will continue to fare relatively well, even if they do get caught up in periodic bouts of market turmoil," Chambers added. 
For banks, Citi said investors will focus on whether a new government could change the state's approach to its Caixabank shareholding, its opinion on banking sector consolidation, and the banking levy framework. 
"Initially, we do not view the election announcement itself as a material earnings event for Spanish banks," Citi equity analyst Borja Ramirez Segura said. 
The broker added that a hypothetical PP-led government without support of Catalan separatist parties could be perceived as more supportive of banking consolidation.
     (Samuel Indyk)
*****
     
EARLIER ON LIVE MARKETS: 
BRAZIL ETF SOARS AFTER PRESIDENTIAL VOTE CLICK HERE
TACTICAL OPPORTUNITY IN EUROPE'S BANKS CLICK HERE
WHY (US) STOCKS CAN KEEP DEFYING YIELDS CLICK HERE
MUTED OPENING CLICK HERE
EUROPE BEFORE THE BELL: MIXED START, EYES ON THE BOND MARKET CLICK HERE
THE EURO HAS A FRANCE PROBLEM CLICK HERE