IBEX Hit On Election Outcome, SGBs Mixed Vs. Peripheral Paper

Spain’s ruling socialist party outperformed pre-election polls in the national elections, after narrowing the gap ahead of the vote, while the right-wing VOX underperformed.

• While the centre-right People’s Party won the most seats of any party, the right-wing bloc fell short re: securing a majority.
• PSOE leader Sanchez will remain PM until a government can be formed, with the left-wing bloc also lacking the votes to form a coalition.
• That leaves the smaller regional parties, who hold a wide array of political desires, as the potential kingmakers, although the variance in their goals and general political leanings may mean that another election must be conducted.
• Wires have noted that the Teneo advisory firm ascribe a 45% chance of Sanchez forming a ruling coalition, while assigning the same odds to another election being needed.
• Spain’s IBEX 35 equity index futures shed 1.2% early on, vs. the 0.4% losses observed in the benchmark Euro STOXX 50 futures, as a mixture of the uncertainty and the outperformance of the left-wing bloc pressures the contract.
• When it comes to peripheral spreads, SPGBs outperform their BTP equivalents, but widen a little vs. PGBs.
• Expect more colour on the Spanish political situation from our political risk team in due course.