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SPAIN’s stock market, IBEX 35 has only crossed the 15,000 point barrier once in its history.
The country’s benchmark share index closed on August 13 at 15,021 point, the same levels as the last time it was at that level nearly 18-years ago during the peak of 2007 property boom.
The milestone was achieved in the midst of Spain’s notorious house bubble. It burst one year later, triggering a deep economic recession.
Oscar Puente, the Transport Minister, insisted this time that the rise was built on solid soil.
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He wrote, “The IBEX 35 has exceeded 15,000 points in the history of the IBEX for a second time.”
The first time was in 18 years, when the housing bubble was bursting. Currently, our economy is not a bubble but a solid foundation. “It is another indication of Spain’s excellent performance”, he said.
IBEX is up more than 1% in the last week, and has gained almost 30% this year. It’s one of Europe’s best performing markets.
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After ten days of consecutive gains, it closed Friday at 15,277, the highest score since 2007.
The rally in Spanish shares is part of a larger global rally. Analysts at Société Générale highlighted the rare combination of falling interest rate expectations and strong corporate profits as key drivers.
Investor optimism has increased after US inflation data confirmed bets that the Federal Reserve will cut rates in September. Markets now price in two to three rate cuts by the end of the calendar year.
A positive mood is also fueled by the resilient earnings, reduced trade concerns and the hopes for a ceasefire agreement in Ukraine. The VIX volatility index, often dubbed Wall Street’s ‘fear gauge’, has dropped to its lowest level of the year.
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But Société Générale warned of ‘possible excess optimism’, noting that the scale of expected US rate cuts has never before occurred without a sharp drop in company profits.
The index, which combines 35 of Spain’s largest companies, peaked in late 2007, and briefly touched $16,000 in intraday trade before the global financial crisis struck.
The rally today marks the first time that Spanish stocks have reached such highs since then.
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