Draghi’s words provoke a turnaround in the markets after a convulsive week
- The statements of the president of the ECB have reversed the trend of the markets, after a ten days especially uncertain.
- The markets interpreted the announcement as the preamble to an aid mechanism with which to relieve pressure on Italian and Spanish debt.
- The result was a collapse of the risk premium, which closed the week with a drop of more than 100 basis points.
- The global rise of the Spanish stock market this week has been 5.94%.
A score of words have been enough to alleviate the storm that has ravaged these days to the debt markets , and to promote the green closing of the Spanish stock market.
This Thursday’s statements by the president of the highest European monetary entity, announcing that he will do “whatever it takes” for the survival of the euro, have reversed the trend of the markets. And they have cooled the temperature of risk premiums , in the case of the Spanish, fell this Thursday to the level of 610 basis points, after reaching an intraday maximum of 649 points , its highest level since the creation of the euro.
And all thanks to a gesture, a phrase composed of abstract terms, but with tangible consequences : “In this mandate, the European Central Bank is prepared to do whatever it takes to preserve the euro and, believe me, it will be enough,” he said. Mario Draghi this Thursday in London.
The euphoria unleashed in the markets was immediate, as investors interpreted the announcement of the Central Bank as the preamble of an imminent aid mechanism with which to relieve the pressure on the Italian debt and, above all, the Spanish debt.
The turnaround is due to an abstract phrase but with tangible consequences The result translated into a collapse of the risk premium -which measures the extra cost demanded by investors to buy Spanish debt instead of German debt- that has culminated this Friday with a reduction of more than 100 basis points since the end of Tuesday, when the session ended at the highest point since the arrival of the euro: 638 points.
To the statements of Draghi, has added the communique issued on Friday jointly by the governments of France and Germany , in the same line of determination, have said they are “determined to do everything” necessary to “protect the eurozone” .
After a telephone conversation, the German Chancellor, Angela Merkel, and the French President, François Hollande, have given their support to the Spanish Government, which has insisted these days on the need to quickly implement the decisions taken at the European Council of 28 and June 29 .
Precisely, the Spanish Minister of Economy, with the German holder of Finance, Wolfgang Schäuble, and with the French, Pierre Moscovici, came out in defense of the Spanish economy and urged the European authorities to materialize the program of aid to the bank.
A request that seems to be closer, following the statements of European leaders who have helped close in green. This Friday, the Ibex-35 has maintained the upward trend until closing at 3.91% and reaching 6,618 points.
The global advance of the week was 5.94%, despite the fact that on Tuesday it lost 6,000 points for the first time since 2003 .
The weekly brooch has also come from the debt market, because the return on the 10-year bond has fallen this Friday to 6.74% , while the risk premium has dropped to 535 basis points. Specific data that respond to imprecise terms, although decisive, and that open the door to possible respite in the next days.