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Following almost two years of contraction, it is a welcome sign that Spain is finally trying to turn a corner after its flash gross domestic product data showed growth. Unfortunately, any bullish sentiment this might have had on the Spain 35 has been eroded by the worse-than-expected EU consumer price index inflation figure.
With the European Central Bank embarking on a wait-and-see policy, it is debatable whether the markets can be that surprised as market conditions saw many commodity prices cool.
Although Spain’s GDP figures have continued to show strength, this has not been replicated in all of the economic data that it has posted. Earlier in the week, Spanish unemployment crept back up to almost 26% when it had been expected to fall. With one in every four unemployed, it will be difficult for the other barometers to maintain any recovery.
Individually, the index has been hit by Banco popular Espanol SA posting first-quarter figures that are down by 40%. Subsequently, shares in the €11.5 billion bank have fallen by almost 4%.
The Spain 35 is still some way off its year highs, but it will struggle to exceed these with internal unemployment levels remaining high and Ukraine woes still hanging over the markets. There could still be a little more on the upside but, ultimately, testing bulls convictions looks to be likely.