The IBEX 35 index has continued soaring and is hovering at its highest level since January 2010. It has jumped by almost 110% from its lowest level in March 2020, mirroring the performance of other global indices.
ECB interest rate cuts
The IBEX 35, which tracks the performance of the biggest Spanish companies, has risen by over 20% this year. This rebound coincided with that of other popular European indices like the German DAX and Italian FTSE MIB.
The rally happened as the European Central Bank (ECB) and other global central banks started cutting interest rates. In Europe, the ECB has delivered three rate cuts this year, and analysts expect it to do the same next week.
The ECB’s cuts are because there are signs that the European economy is slowing. Data released this week showed that the manufacturing and services PMI numbers remained below 50 in November. A PMI reading of less than 50 is a sign that sectors are not doing well.
Spain has been a better performer this year, helped by the surge in the tourism sector. The manufacturing PMI was 53.1 in November, slightly lower than the median estimate of 53.9. Similarly, the services PMI came in at 53.9 during the month.
The IBEX index has also done well because of the actions of other central banks. In the United States, the Fed has cut rates two times this year, bringing the total cuts to 75 basis points.
In Switzerland, the Swiss National Bank (SNB) has delivered several rate cuts this year, a trend that may continue.
Stocks tend to do well when central banks are slashing interest rates because it leads to a rotation from the bond market.
Additionally, unlike companies in France’s CAC 40 index, those in the IBEX are not exposed to the struggling Chinese economy.
Top IBEX index performers
Most companies in the IBEX 35 index have done well this year. IAG stock price has jumped by 91% this year, making it the best-performing company in the IBEX 35 index this year.
IAG is a giant company that owns popular brands like British Airways, Iberia, Vueling, and Aer Lingus. It has done well this year as demand for its services rose, pushing it to resume dividend payouts to investors. IAG’s rally has mirrored that of other airline companies like United Airlines, Delta, and United.
Spanish banks have also helped the IBEX 35 index continue rising. Unicaja Banco shares are up by 47% this year, while Banco de Sabadell has jumped by 72%. Sabadell has rallied after BBVA launched a hostile takeover for the company.
The other top-performing companies in the IBEX index this year are Inditex, Ferrovial, Caixabank, Logista, and Aena.
On the other hand, the worst performers in the IBEX 35 index are Solaria, Grifols, Naturgy Energy, Repsol, and Inmobilaria Colonia.
IBEX 35 index analysis
IBEX chart by TradingView
The daily chart shows that the IBEX 35 index has been in a strong uptrend in the past few weeks. It has now rallied above the key resistance level at €12,036, its highest level this year. Moving above that level saw it invalidate the double-top chart pattern.
The index has moved above the 50-day and 100-day Exponential Moving Averages (EMA). Also, the Relative Strength Index (RSI) and the MACD indices have continued rising in the past few days.
Therefore, there are rising odds that the index will continue rising as bulls target the key resistance at €12,453, the upper side of the ascending channel. A break above that level will point to more gains to €12,500.
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