Dax, IBEX Remain Supported After Spain CPI Inflation, ECB Meeting Accounts
The German Dax resumed the upside this week after the retreat, while the Spanish index Ibex 35 surged more than 10% yesterday.
German Dax 40 Resumes Uptrend
The German elections saw the established conservative parties emerge victorious, with the Alternative for Germany (AfD) party securing 20% of the vote for the Bundestag. This result suggests that the conservatives will form a coalition government. Despite some political uncertainty, the DAX 40 index responded positively to the election results, showing bullish momentum this week.
The index had dropped last week after reaching all-time highs, but it found support near the 50-day simple moving average (SMA), indicating a recovery fueled by optimism about the formation of a new German government.
Additionally, the peace agreement between Russia and Ukraine has sparked hopes for a more stable economic environment, which has helped boost investor confidence in European stocks. This optimism was further supported by Nvidia’s results, which surpassed market expectations, and progress in the U.S. House of Representatives regarding President Donald Trump’s tax cut agenda.
Spanish Index Ibex 40 Chart Daily – Making New Record Highs
As a result, the Spanish stock index, IBEX 35, also hit a record high of 13,332 points, marking an impressive 11.13% gain.
In the banking sector, major Spanish banks saw positive movements, with Santander increasing by nearly 1%, BBVA rising by 0.7%, Caixabank up by more than 1%, and Sabadell gaining 1.2%. However, several non-financial stocks experienced declines. Telefónica dropped by 0.44%, Repsol fell by 0.62%, Cellnex decreased by 0.43%, and Inditex also saw a decline of 0.43%. Despite these mixed results, the overall market sentiment remains positive, driven by geopolitical and economic developments.
ECB Releases Accounts of January 2025 Monetary Policy Meeting
- The disinflationary process was progressing as expected, though inflation remained above the target in the near term.
- Confidence in a sustained and timely convergence toward the inflation target had increased.
- However, uncertainty persisted due to:
- Potential upside risks to energy and food prices.
- A strong labor market and high negotiated wage increases, which required caution.
- Possible actions from the U.S. administration that could slow global economic growth.
- Oil and gas prices, while fluctuating, did not indicate a major deviation from staff projections.
- Monetary policy was still viewed as restrictive, though risks to inflation were seen as balanced.
- Some evidence suggested an upward shift in inflation risks since December, though services inflation and wage growth were expected to slow in line with projections.
- A risk of inflation undershooting was noted, alongside concerns that the December economic outlook may have been too optimistic.
- Signs of downside risks to the economy were emerging, yet a consumption-driven recovery within a few quarters was still considered plausible.
- Maintaining the deposit facility rate at 3.00% for too long could excessively suppress demand.
- A higher neutral rate suggested that policy rates were approaching a level where they might no longer be deemed restrictive.
The ECB remains cautiously optimistic about disinflation but acknowledges lingering risks, including wage growth and global economic uncertainty. While inflation risks appear balanced, the potential for either a slowdown or an acceleration remains. Meanwhile, Spain’s inflation data suggests that price pressures are stabilizing but remain persistent in some sectors. The ECB will likely continue to monitor inflation trends closely before making any significant policy changes.
Spanish Inflation Data – February 2025 (Preliminary, INE)
- Headline CPI: Rose 3.0% year-on-year, in line with expectations and slightly up from 2.9% in January.
- Harmonized Index of Consumer Prices (HICP): Increased 2.9% y/y, slightly above the 2.8% forecast, matching the prior month’s figure.
- The slight increase in inflation was largely driven by:
- Food prices, which continued to rise due to lingering supply chain disruptions.
- Energy prices, which remained volatile amid geopolitical uncertainty.
- Services sector, where strong demand and labor costs kept price pressures elevated.
- Core inflation remains a key focus, as price pressures from non-energy and non-food items will determine future policy responses from the ECB.
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