Investors shrug off Sánchez’s potential resignation amid prolonged uncertainty in Spain resembling Italy

Political drama is a constant in every month, as highlighted in a recent editorial by The Economist regarding the actions of the Spanish President, Pedro Sánchez, who is dubbed as the “drama king.” Despite this, the market remains unfazed by political noise and prefers to stay on the sidelines. A private bank in Spain noted that clients have not expressed concern about the political situation in the country, even as Sánchez prepares to make a decision next Monday on his resignation.

The Spanish stock market experienced fluctuations in a recent session, with the Ibex 35 closing slightly negative below 11,000 points. Notable gains were seen in certain companies like Banco Sabadell, which reported a 8% increase in quarterly results. The situation in Spain is compared to that of Portugal, where the Prime Minister resigned last November amidst corruption accusations. The market responded with a 2.5% drop in the PSI 20 index.

Investment banks have labeled the political scenario in Spain as “Italian-style” due to high instability. Business leaders express concern about legal and political uncertainty impacting the economy. Legislative changes, including tax laws and regulatory measures, have created an atmosphere of uncertainty for investors. International relevance in the investment landscape has waned, leading to apprehension among fund managers.

Despite the political turmoil, the market remains relatively stable with no major fluctuations. Investors have shown a preference for conservative, fixed-income products amidst global uncertainties. The Spanish risk premium remains low, and the debt market has seen minimal impact from recent events. Overall, the market remains calm despite political drama and international issues.