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IBERIAN DAILY 20 MARCH (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: INDRA, REPSOL.

Crude oil prices continue to climb with stock markets down
It was a session of strong corrections in Europe in both equity and bonds in view of the increased tension in the Middle East with growing concerns that Central Banks will be forced to tighten the monetary policy to contain inflation. In the STOXX 600, all sectors ended with drops, led by Basic Resources and Retail vs. the lower drops of Energy and Utilities. On the macro side, the ECB unanimously left rates unchanged at 3.50/3.75% but C. Lagarde left the door open to raise rates if they identify second-round or contagion effects in inflation expectations. The BoE also left rates unchanged unanimously at 3.75%, outlining that they will make a move if inflation does not converge towards the 2% target. In the US, March’s Philadelphia Fed index climbed for the third consecutive month to the highest level since September’25. New home sales fell, as opposed to expectations, to Oct’22 lows, weekly jobless claims also dropped unexpectedly and January’s building permits rose more than expected. In geopolitics, D. Trump warned that he does not plan to send troops to Iran while Israel pledged not to bomb Iran’s energy infrastructures and Isarel’s PMI outlined that the war will end much sooner than the people expect.
What we expect for today
European stock markets would open with gains >+0.5% after oil prices eased. Currently, S&P futures are flat (the S&P 500 ended +0.43% higher vs. the European closing bell). Asian markets are rising (China’s CSI 300 +0.22%, Japan’s Nikkei closed and South Korea’s Kospi +0.5%).
Today in the euro zone we will learn January’s trade balance.


COMPANY NEWS

INDRA. EM&E deal falls through, and Angel Escribano remains Chairman for the time being. OVERWEIGHT
Yesterday IDR announced that it is no longer pursuing the move with EM&E after the latter announced that it has withdrawn from the deal. Meanwhile, Angel Escribano will stay on as Chairman of IDR, although according to the press, this weekend he will meet with the Govt., which will keep the stock under a cloud of uncertainty (Escribano is the second-largest shareholder with a 14.3% stake, with an industrial profile and backed by several funds and shareholders, behind only the SEPI, which holds 28%). Negative news (yesterday IDR fell -12%), as this is an asset with a strategic fit to strengthen IDR’s Defence business, which will have to seek out new targets to grow inorganically, while at the same time developing a strategic plan (without EM&E) that is expected by June’26. We maintain our OVERWEIGHT recommendation due to the very strong tailwind from the increased defence spending in Spain (and Europe), as seen in the FY2025 results (defence backlog +281% to € 11.34 Bn, 8x sales).