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IBERIAN DAILY 20 JUNE (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: NATURGY, OHLA.

Geopolitical and trade pressure
The risks that the US takes part in the war between Israel and Iran and that the trade agreement with Europe is less favourable than initially expected resulted in new corrections in European stock markets. Thus, in the STOXX 600 most sectors ended in negative territory (only 3/20 closed with gains), with Energy and Pharma being the best performers vs. Travel&Leisure and Construction that saw the biggest drops. On the macro side, the BoE left rates unchanged at 4.25% (6 votes vs. 3 in favour of a -25bps cut), but suggesting greater easing due to a weaker job market although adjustments will be gradual and cautious in view of higher energy price expectations as a result of the Middle-East conflict. In Spain, the government refused to increase the defence spending to 5% of GDP through NATO, cutting it to 2.1%. In Japan, May’s inflation rose more than expected, with the core figure rising to 3.7% YoY, a high since Jan’23. In China, the PBoC kept reference interest rates for 1Y and 5Y loans unchanged at 3.0% and 3.5%, respectively. In trade matters, the EU is seeking to reach a similar trade agreement to the one reached with the UK after the US Trade Secretary, H. Lutnick, ruled out cutting minimum reciprocal tariffs from 10%, whereas Canada has placed tariffs on steel and aluminium. On the geopolitical front, Donald Trump has given himself a two-week extension to make a final decision on intervening in the Middle East conflict.
What we expect for today
European stock markets would open with slight gains of around +0.50%. Currently, S&P futures are down -0.2% (the S&P 500 was closed yesterday but S&P 500 futures ended unchanged vs. the European closing bell). Asian markets are unchanged (China’s CSI and Japan’s Nikkei are flat but the Hang Seng is climbing +0.9%).
Today in the UK we will learn May’s retail sales, in the euro zone the minutes from the ECB meeting held in June, May’s M3 and June’s consumer confidence, in the US May’s leading indicator and June’s Philadelphia Fed index.