The stock markets of Europe lose 2.5% this Monday: the Ibex 35 risks 8,600 points

Bad start to the week in equities from the Old Continent. Sales have been clearly imposed just as they have done on the Asian markets this morning (Japanese Nikkei 225: -2.2%). Losses were already over 2% after the initial bell tolling and soon widened to more than 3 percentage points. However, they have ended up being less strong than could be expected after the Foreign Minister, Sergey Lavrov, has lowered the tension between Russia and the United States regarding the crisis on the Ukraine border.

However, the fear of the possible consequences of an aggressive monetary policy (or hawkish) in the US, strengthened after the latest statements by the president of the Saint Louis Fed, has prevented a more peaceful close. Across the Atlantic, Wall Street is trading mixed.

The EuroStoxx 50, taken as a reference, has come down to 4,000 points today, marking annual minimums. In the same way, the Spanish Ibex 35 has fallen to 8,500 units.

The losses seen this Monday at times in the European markets have not been very far from those registered on January 24, the worst day (so far) so far in 2022. Then the Ibex suffered a 3.2% cut and the EuroStoxx, just over 4%.

Joan Cabrero, technical analyst and advisor to Ecotrader, warns that the Ibex has put the bullish guideline to the test that has been guiding the promotions from the minimum that the Spanish selective marked in December.

“The maintenance of this guideline, which runs through the area of ​​8,550 points, and the support of the 8,500 it depends that there is no deterioration in its short-term bullish possibilities and we have to speak of weakness,” warns the expert.

The risk is not something ‘exclusive’ to the Spanish stock market. The EuroStoxx 50 has also put pressure on its support in the 3,980-4,000 points. If it falls below at the close of a day, the continental indicator will give way to “a more corrective than consolidative scenario,” Cabrero warns.

With an eye on bonds…

“In a session in which the macro agenda appears empty, investors in Europe will continue to await the news that becomes known about the evolution of the Ukrainian crisis, while keep an eye on the behavior of bond yields“, Link Securities analysts explained first thing in the morning.

Ten-year German paper interest (bund) has dropped sharply, reaching throughout the morning below 0.20% in the face of larger debt purchases. The US ten-year bond (T-Note), which last week climbed to 2%, has even reached the edge of 1.9%.

In Spain, the decade-view bond yields above 1.18% and the risk premium, which measures the spread with German debt, exceeds 100 basis points for the first time since the summer of 2020.

…and on the Ukrainian border

“The clear rise in the valuation of fixed income (that is, falls in yields) acts as a refuge asset in the face of fears of a possible conflict with Ukraine since despite, for the time being, inflationary pressures“, assures Pedro del Pozo, director of financial investments at Mutualidad de la Abogacía.

The losses on the stock market and the rise in interest on bonds are proof of the concern about the growing tension on the Ukrainian border in the face of rumors of an imminent invasion of the European country by Russiaemerged from the US and rejected by Moscow.

US President Joe Biden and his Russian counterpart, Vladimir Putin, spoke on Saturday. “The conversation ended without conclusive results,” they point out from Renta 4. Tomorrow Putin will meet with the German chancellor, Olaf Scholz, to try to resolve the situation through diplomatic channels.

This Monday the Russian Foreign Minister, Sergei Lavrov has suggested to the country’s president, Vladimir Putin, that Moscow continue through diplomatic channels. A proposal with which Putin has shown “agreement”, according to reports Bloomberg.

Specifically, Lavrov has conveyed to Putin that the United States has presented concrete proposals to reduce military risks on the Ukrainian border, although the responses of the European Union (EU) and the NATO military alliance had not been satisfactory in his opinion, according Reuters.

“happen [la invasión rusa de Ucrania] in the next few days or not, we will have bags and other risk assets in retreatwhile volatility, raw materials and bonds are on the rise”, states the Income Analysis Department 4.

The oil market is the risk asset that serves as an exception in the face of the Ukrainian crisis: this morning has marked maximum since 2014. Specifically, the barrel of Brent, a reference in Europe, has climbed above 96 dollars in the first hour. The North American West Texas (WTI) has touched 95 dollars a barrel. And more and more analysts see black gold above 100 dollars in the short term.

As if this were not enough, investors are still awaiting any news or indication from the largest central banks, especially the US Federal Reserve (Fed), whose minutes will be published on Wednesday. “Therefore, the ‘manageable key’ remains the Fed and the ‘unmanageable key’, Russia”they think from Bankinter.

“We continue to be trapped in a tense wait, this week much more tense,” these experts conclude.