Spanish Bulls continue to run despite adverse headwinds.
Los toros Españoles – the Spanish bulls – continue to run, despite dismal economic news. Stock prices have persistently climbed and Spain’s ten-year bond yield declined to 4.93 percent on January 25, after reaching 7.62 percent on July 24, 2012. The optimists are willing to overlook the ongoing flow of – what should be – disappointing data:
On January 13 the International Monetary Fund released its World Economic Outlook Update, which indicated that Spain’s GDP will be negative 1.4 percent during 2012 and during 2013, Spain’s GDP will contract by 1.5 percent on a year-over-year basis.
The Markit Spain Services PMI for December had mixed news. Although services PMI remained in contraction, the headline Business Activity Index – which is based on a single question asking respondents to report on the actual change in business activity at their companies, compared to the previous month – rose to 44.3 in December, compared with 42.4 in November, for the highest reading since March.
On the other hand, the Markit Spain Manufacturing PMI dropped to 44.6 in December from 45.3 in November. December was the twentieth straight month of worsening business conditions.
On January 24, Spain’s Ministry of Economics disclosed that during the fourth quarter of 2012, 363,300 jobs were lost – 14,000 more than during the same period in 2011. Spain’s unemployment rate increased one point to 26.02 percent and the total number of people out of work rose to 5,965,400.
For more bad news, the complete picture can be reviewed by way of the December 2012 Spanish Economic Report, published by the Spanish Economy Ministry.
Not to be discouraged, the Spanish bulls continue to run. The chart for the iShares MSCI Spain ETF (NYSEARCA:EWP) appears below. Trading activity for EWP was significantly more bullish on January 25 than the activity for Spain’s IBEX 35 Index. EWP skyrocketed by 1.98 percent on a day when the IBEX 35 Index rose by only 0.68 percent. EWP’s Relative Strength Index is solidly in the “overbought” range at 74.27 (Chart courtesy of Stockcharts.com).
The chart for Spain’s IBEX 35 Index (below) also depicts bullish trading action, with the January 25 closing level at 8,724 – moving well above its 50-day moving average of 8,181. The Relative Strength Index is just crossing into the “overbought” range at 70.56 (Chart courtesy of Stockcharts.com).