IBEX35 unmoved by Chinese Tariffs

6月19日

The Ibex will not initially suffer from the Chinese veto on domestic wool, and the tax increase on meat imports. It will do so later. And I will explain why, the index does not weight anything in food, only services, finance, and energy. When Banco Santander and BBVA, the textile company Inditex, the telecoms Amadeus and Telefónica and Iberdrola move, the index moves. What is not going to be seen in this index is the almost 100,000 pig farms that are going to be affected by the increase in the cost of exports to China. Spain is the leading exporter of pork products to China.


A mainly Andalusian business of more than 1000 million per year for a dozen companies that are in danger, added to the 600 million that Catalonia earns or the 320 million of Aragon or the 90 million that Murcia acquires. The Iberian product is a highly valued product in the Chinese market for its quality and is currently one of the strategic markets for Spanish pork and French brandy, as well as other Andalusian products of solera, being the tenth market for Andalusian products and having triple sales thanks to price increases in January. In other words, Chinese business last year represented around 3,000 million euros for Spain. Andalusian companies exported 1,100 million and from Huelva in particular 900 million of copper and metals and other minerals used in the manufacture of photovoltaic panels, electric vehicles, etc., according to Andalucía Trade. Not only that, but oils and manufactured copper are also exported. As well as the agri-food sector, including fruits and citrus fruits, and other types of health foods and nutritional supplements, and of course the luxury sector, architecture and others will be affected.

Already since 2022 the wool veto has forced breeders to manage 9000 tons instead of the 14000 tons that were sold in 2021 according to Interovic data. The problem for Spain is that China, quietly can buy wool from Australia and the bet on synthetic fibers or cotton, have made the sum of the global demand in free fall has made China to have reticence at a sanitary level, but also because of the lack of demand, something that affects Spanish producers. This trend on wool may affect the textile market if a way out of this tr

Given that the IBEX35 lives in its mostly dotcom bubble, the ones that can see the displaced effect of these vetoes and demand reductions in China are the Banks and energy companies, as well as textile companies like Inditex if they do not put a solution to it. A severe drop in food production, bovine textile production and leather production could be reflected in many aspects in different regions and in brands of great power in the indicator. This added to the fact that companies such as Vodafone, one of the strongest telecommunication companies in the country, have been adding "Ere after Ere" since 2013, showing a labor market that fights more for experts in space computing and engineering than for people in more everyday areas, could affect the entire Spanish GDP.

Today, the 19th holiday on WallStreet, we will detect that the European market and in particular the Ibex slows down its movements at a time when it is trying to seek consolidation at the 11,000 points recovered yesterday. Activity levels are likely to be reduced this day, following the lull in risk premiums that has diverted the markets' attention to the rise in crude oil. Yesterday's closing benchmarks having the S&P500 and Nasdaq kissing highs again driven by their tech giants, despite signs of weakness in US retail sales data, has only reinforced the Fed in its sentiment to implement cuts. Meanwhile, European markets seem ecstatic about yesterday's bullish benchmark and with an eye on the "Big Bet" from the ECB and the Fed that seem to be dancing to the same tune. Today, the Bank of England's rate information is of relevance and tomorrow we will see if the interest rate decisions of the euro zone, Switzerland and the United Kingdom. European risk premiums, as we were saying, have given a temporary respite, with France's being the highest.


If we look at the chart, we can clearly see that the current high is at 11,476.05 points set on June 7. And currently the index is fighting in the zone of 11,082 points. If we look at the price bell it is the strongest trading zone at the moment even though it shows a four-pronged bell and two especially prominent ones, being the one with the highs relevant at the moment. Looking at the RSI it is oversold at 45%, so a new attempt to seek higher highs by the bulls would not be uncommon. However, we must take into account the economic situation indicated before with the tariff and sanitary vetoes by China to Spain, because they can do a lot of damage to the economy and this can be reflected in the companies that we have highlighted.


Ion Jauregui - ActivTrades Analyst


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