Wednesday, April 21We Break the News

Spanish Stocks at 1-Week High, German Business Climate at Near 2-Year High, UK February Car Production Worst in Over a Decade, Sterling Edges Higher on Friday, Remains Close to 7-Week Low

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Spanish Stocks at 1-Week High
The IBEX 35 rose 0.8% to around 8,474 on Friday, its highest level since March 19th and in line with its European and global peers. Banks were among the top performers as market sentiment was supported by prospects of a global economic recovery despite concerns about a prolonged pandemic and the still slow vaccination campaigns. On the economic data front, Spanish GDP stagnated in the fourth quarter of 2020, following a higher-than-expected 17.1% quarterly jump in the third quarter, as restrictions to curb a second wave of Covid-19 weighed on private consumption. Meanwhile, the Spanish economy shrank by 10.8% in 2020, in a marginally less severe contraction than the previously reported 11% but still the worst annual decline on record. On the corporate front, Bankia shares rose more than 3% on its last day as a listed company, before its merger with Caixabank and the replacement by Fluidra as of March 29th.

German Business Climate at Near 2-Year High
The Ifo Business Climate indicator for Germany rose to 96.6 in March 2021, the highest level since June 2019 and comfortably above market expectations of 93.2. Companies became optimistic regarding developments over the coming months (100.4 vs 95.0 in February), while their assessments of the current situation were also better (93.0 vs 90.6). The survey also showed that export expectations have exploded due to strong demand from the US and China.

UK February Car Production Worst in Over a Decade
Car production in the United Kingdom fell 14% year-on-year to 105,008 units in February of 2021, representing an 18th consecutive month of decline and the weakest February performance in more than a decade as the impact of the coronavirus pandemic, in particular shuttered UK showrooms, new customs processes and global supply chain constraints continued to influence output. Production for the domestic market fell 34.9%, compared with a less severe 8.1% drop in exports. Overseas orders still accounted for by far the majority (83.2%) of all cars made in the month, with most of these (53.9%) heading into the EU, demonstrating once again the importance of harmonious trading relationships with the sector’s largest and closest market. February shipments to the US and Asia combined amounted to 30.9% of all UK car exports. Figures highlight critical importance of reopening UK car showrooms on April 12th, despite new lockdown measures coming into force in many parts of Europe.

Sterling Edges Higher on Friday, Remains Close to 7-Week Low
The British pound bounced back to $1.378 on Friday, after touching on Thursday its weakest level since February 5th, on the back of upbeat economic data from the UK showing retail trade rose firmly in February even as non-essential shops remained in a coronavirus lockdowns. Earlier this week, Britain’s consumer price inflation fell to 0.4% in February, well below market expectations; while a flash PMI survey showed the private sector activity grew sharply in March, brightening the outlook for the economy. Last week, the Bank of England left monetary policy unchanged and failed to signal any increase to the central bank’s bond-buying in the coming months. Sterling hit a three-year high of $1.41 in late February, supported by hopes for a quicker economic recovery in the UK due to the continued success of the vaccination rollout program coupled with massive fiscal and monetary stimulus packages.

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