Spanish stocks lead Europe lower after election deadlock

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Spanish stocks fell sharply on Monday after inconclusive election results left the country on course for weeks or months of political uncertainty, while markets elsewhere in Europe edged lower. 

The Ibex 35 index fell 1.2 per cent at the European market open, leading fallers in the region, after the country’s right and left failed to secure a clear path to forming a government over the weekend. 

The region-wide Stoxx 600 lost 0.3 per cent at the opening bell, while France’s Cac 40 fell 0.4 per cent and Germany’s Dax gave up 0.2 per cent. 

Investors awaited the eurozone’s flash composite purchasing managers’ index, a measure of manufacturing and services activity in the region, which is expected to have come in at 49.7 this month, marking a second successive month of contraction.

Later in the week, the European Central Bank is expected to announce another quarter percentage point increase in its benchmark deposit rate, currently at 3.5 per cent. 

Across the Atlantic, the US Federal Reserve is also expected to lift its key interest rate by 0.25 percentage points this Wednesday, from the current target range between 5 per cent and 5.25 per cent. 

Investors and economists were nonetheless divided over whether the rise will mark the end of the central bank’s 16-month-long monetary policy tightening campaign, after US inflation data earlier in the month showed that consumer prices rose at the slowest pace since 2021. 

Contracts tracking Wall Street’s benchmark S&P 500 rose 0.1 per cent, while those tracking the tech-focused Nasdaq 100 added 0.2 per cent ahead of the New York open.

Wall Street equities sold off at the end of last week, after a string of disappointing earnings reports triggered a decline in the high-flying technology sector. 

Investors will pay careful attention to industry heavyweights Microsoft and Alphabet, due to report tomorrow, followed by Meta on Wednesday, to gain more insight into the large-cap group that drove much of the Wall Street rally since the start of the year. 

In Asia, China’s benchmark CSI 300 index dropped 0.4 per cent while Hong Kong’s Hang Seng lost as much as 2.3 per cent. 

As China’s economy has struggled to recover from three years of severe Covid-19 lockdowns, investors will be hoping for more stimulus measures from the country’s officials at the widely anticipated Politburo meeting this week.