Spain’s stock market tumbles after election results; Banks take a big hit on thin trading with U.S. holidays - General

sherif 2015.05.25 18:03 #2701

Not much of a movement today due to the US holidays.

thenews 2015.05.25 19:16 #2702

The big reason everyone is so worried about Spain’s election result

A new day has clearly dawned for Spanish politics and on Monday, financial markets were grappling to understand it and what lies ahead for the country.

Spain’s main stock index XX, -2.56% lost over 2% on Monday, dragging what few other markets were open down as well. That included Greek stocks GD, -3.11% dealing with another ripple for their own well-known debt problems. The big losers in Spain were the banks, which took a big hit on a thin day of trading with other markets on holiday.

Losses could build for Spain and trickle down to other markets on Tuesday when the U.K. and Germany return, as well as Wall Street stocks.

Spain’s ruling Popular Party was hoping to ride Sunday’s regional and municipal elections to success on the economic recovery story. Growth is expected to come in around 3% this year for the fourth-largest eurozone economy, but that statistic was viewed as cold comfort to a population that continues to endure an unemployment rate above 20%.

Frustration over years of recession and austerity measures, alongside a steady flow of corruption investigations for members of the Popular Party and the Socialists, exploded into results for the upstart parties of Podemos, which translates as “We can” and Ciuidadanos, which means ‘Citizens’. In short, Prime Minister Mariano Rajoy’s Popular Party saw the worst result in 20 years, which comes ahead of a general election that many expect will be called in November.

And that’s part of the worry for markets right now.

“What is most worrying is not so much the incursion of Podemos and Ciudadanos into many regional parliaments as that was expected by most polls, but more important the need to seek compromise and reach coalitions, something new to the Spanish political life,” said Predrag Dukic, senior equity sales trader at CM Capital Markets, in Madrid.

“This in turn could lead to uncertainties which the markets don’t like. If we extrapolate yesterday’s results to the coming general election, Spain could be very difficult to govern,” says Dukic.

And after months and months of crisis in Greece, some fear that Spain could turn into that country, said analysts. Dukic said the outside world doesn’t really understand Spain’s new parties, though horse-trading in politics doesn’t have a great history here. Smaller, nationalist parties have often had more power than voters gave them, he said, and those interests would be forgone to reach decisions, something the country doesn’t need right now.

“Most analysts think Syriza and Podemos are similar parties. While this is partially true, it is also true that Podemos have moved significantly to the center over the past few months to be more votable and closer to reality,” he said.

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Hugo Tiago Teixeira Aboim O Neill 2015.05.26 06:29 #2704

Yesterday session the EURUSD did not move much due to worldwide bank holiday but still manage to make a doji pattern on the 50-day moving average. A break below 1.0972 the 50-day moving average may trigger a dive to a Fibonacci retracement (61.8) at 1.0853.

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Veselka Nikolova 2015.05.26 16:21 #2705

The pair recorded another day of decline during yesterday's session after trading in a relatively narrow range. The daily limit values were reached respectively at 1.1009 and 1.0959. Overall the EUR depreciated by 25 pips to a closing price of 1.0977. Perspectives remains negative, which probably will lead the pair to 1.0810.

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thenews 2015.05.26 17:33 #2706

EUR/USD: Traders Sell First, Ask Questions Later

Last week, we discussed 3 technical reasons that EUR/USD support at 1.1050 support could give way, but even we were caught off guard by the ferocity of the selloff over the last week. The world’s most widely-traded currency pair started last week all the way up at 1.1450, but in less than a week and a half, EUR/USD has shed nearly 600 pips to trade all the way down at 1.0870 as of writing.

Fundamentally speaking, the big drop is not attributable to any single catalyst; rather, a series of factors are conspiring to drive the euro lower and the dollar higher. On the east side of the Atlantic, the euro has come under pressure amidst escalating fears that Greece will not be able to secure another bailout ahead of next week’s big debt payment date to the IMF. The struggling Mediterranean country will meet with its creditors Tuesday and Wednesday, but expectations for an imminent deal are low. Earlier Tuesday, European Commission President Jean-Claude Juncker accused Greek Finance Minister Yanis Varoufakis of obstructing the negotiations, stating “He is not helping the process. Mr Varoufakis is the finance minister of a country that has to confront huge problems and he doesn’t give the feeling that he knows that.” Of course, traders have been along for this ride before, with Greece and its creditors always reaching a last-minute deal allowing them to kick the can down the road for a few months, but as long as the cloud of uncertainty surrounds the region, the euro will struggle to rally.

On the other side of the Atlantic, tepid signs of a spring thaw in US economic activity and signs that the Fed are still planning on raising interest rates this year have helped the buck regain its mojo. Tuesday’s Durable Goods Orders were ho-hum, but the New Home Sales report showed continued strength in the housing sector while Friday’s Core CPI reading was the strongest in over two years. Meanwhile, both Fed Chair Janet Yellen and Vice Chair Stanley Fischer have publicly stated that they expect the Fed to raise interest rates at some point this year. While a June rate hike is almost certainly off the table, September remains in play, especially if Core PCE (the Fed’s preferred inflation measure) starts to mimic the recent strength in CPI.

Technical View: EUR/USD

The strong selloff in EUR/USD since the start of last week suggests that the long-term downtrend may be resuming after a sub-50% retracement in April and early May. Friday’s big Bearish Engulfing Candle*, along with the break back below key previous-resistance-turned-support at 1.1050, set the bearish tone heading into this week, and with rates peeking below the 61.8% Fibonacci retracement of the previous rally, more downside is possible this week. As for the secondary indicators, the MACD is about to cross below its “0” level, signaling a shift to outright bearish momentum, though the oversold Slow Stochastics hint at a pause or near-term bounce over the next few days.

Bringing all of the above together, it would not be surprising to see some near-term consolidation or a brief counter-trend rally in EUR/USD this week, but as long as the pair remains below the 1.1000-50 zone and Greece’s debt situation remains unresolved, traders will continue to sell first and ask questions later.

*A Bearish Engulfing candle is formed when the candle breaks above the high of the previous time period before sellers step in and push rates down to close below the low of the previous time period. It indicates that the sellers have wrested control of the market from the buyers.

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