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the market environment

20

Annual Report 2014 BME

2014 has been positive for Spanish securitiesmarkets,

especially in terms of trading, liquidity and financing,

with figures at record highs. Despite the significant

level of activity, the year was marked, since from June

onwards, market prices performed erratically, char-

acterised mainly by the progressive deterioration of

global economic expectations, especially those of the

Japanese economy, the large Emerging Economies

and particularly those of the central nucleus of the

eurozone. Despite this, the IBEX 35 reported annual

growth of 3.66%. If we include the effect of the divi-

dends, the percentage would increase by five points.

Before considering Spanish stock market data, we

will discuss both the positive and negative factors

explaining faltering price performances in 2014.

A priori, in a climate of the progressive stabilisation of

the financial sector: monetary conditions with a long-

term interest rate at historic lows (1.3% at 10 years);

with the Spanish spread down 100 basis points on

last year and 500 points down on two years ago and

with the euro depreciated against the dollar (-10% in

the year); with oil prices 30% cheaper than 12 months

ago and with consolidated economic growth, it would

seem sensible to expect that Spanish stock market

indexes would have shown stronger rises in 2014

than those reported but, in the end, the uncertainties

weighed more on investors.

Cautionprevailed in thefinal part of the year

In the last four months, doubts regarding the strength

of economic growth in Europe, Japan and China and

in the emerging countries, plus a scenario of persis-

tent falling inflation in economic climates in which

monetary expansion must pull with greater strength

in the opposite direction, has meant that demand is

not responding tomonetary stimuli with the expected

strength, especially in terms of investment. Caution

has increased in recent months vis-à-vis the expecta-

tion that the negative influx on GDP growth of the still

extremely high public and private debt volumes will

prolong its contractive effects longer than expected.

Both the geopolitical tensions and the conflict over

sovereignty in the Ukraine with the series of sanctions

imposed on trade with Russia by the EU, the wors-

ening of tensions in the Arab world or the widespread

social discontent expressed in different areas of the

world (Europe, Brazil, Mexico, Hong Kong, etc.) with

the dominant forms of political governance, provoked

greater prudence in markets which have lived with

the simultaneous and accelerated decline in petrol

prices and of the euro with respect to the dollar since

the summer.

Also, the effects are not yet clear of the release

between the expansive signs in withdrawal of the

US Federal Reserves and the decision of the ECB to

widen the spectrum of actions aimed at ensuring that

The Spanish economy

is once again on the

upturn. The spread is

nearly 100 basis points

at the end of 2014.

Foreign capital is once

again being strongly

invested in Spanish

companies. Progressive

decline in the global

economic outlook in the

second half of the year.

the investment flows and financing of the economy

begin to circulate with normality after so many years

of obstruction. In any case, such actions reflect the

recognition on the part of the monetary authorities

that the growth rate of the economies does not

appear to be sufficiently consolidated and that there

is a risk of chronic stagnation and very low inflation

for a long period. Also, other countries and economic

areas have applied expansive monetary measures to

check the relative cooling of their economies (China)

or to try to beat deflation and stagnation (Japan).

Fears of a widespread cooling of the global economy

and a possible deflationary scenario led, during

several weeks of October, to tensions on world debt

markets which were overcome by the trust which

investors have continued to place in policies imple-

mented by the Central Banks.

ECONOMIC CLIMATE AND

GENERAL PANORAMA