Shalom Life | April 23, 2014

Spain Drags Bay Street Down

Cold winds from the Iberian Peninsula

By: Yosef Tastassa

Published: December 15th, 2010 in Business » World

Spain Drags Bay Street Down

Spain's credit rating

As we said in Shalom Life before, the European Union can handle the Greek and the Irish economic crisis, but it probably won't be able to handle Spain if the country will face a large scale financial abyss.

The reports from Greece and Ireland are positive and the Irish government approved yesterday the terms and conditions for the rescue package it will receive from the IMF and the EU.

This is the end of the report for the good news. Now it's time for some economic uncertainties that we all do not like.

Downgrading Spain?

Moody's rating agency announced that it may decrease the Aa1Spanish credit rating by one or even two levels. These are not good news at all and Moody's announcement created a little tidal wave. Madrid IBEX lost 1.18 per cent and most European markets ended in the Red territory.

The tidal wave arrived to North America as well. Bay-Street started a stable morning but it ended by losing 51 points (0.38 per cent). The dreams of 14,000 point before the end of the year are not as close as many think.

Both sides of the Atlantic Ocean

It's a small world and news arrives from one side of the world to the other side in a fraction of a second. Investors who understand the Spanish potential hurried to pull their money from risky assets and will probably wait for a couple of days with their eyes focused on the EU response to Moody's announcements.

The impact in Bay Street

The Metal and Mining sector that was the locomotive of the TSX Index for the last three months withdrew yesterday by 1.7 per cent. It's explained by the fact that a large scale recession in Europe may lead to a decrease in the demand for metals and other mining products.

The Health Care sector kept surging despite the news and the Index added 1.28 per cent yesterday. The stability in the financial sector continues and it may surge amid a successful 4Q reports in January.

The Irony

Spain is a beautiful country. When being in it, the visitor is exposed to a very rich history, much of it is Jewish.

When we think of Spain, one of the first things that we think of is the Corrida, or the traditional Spanish "Bull Fighting". The country may be very "Bullish" in its history and its tradition, but according to Moody's the "Bulls" are about to hibernate and the bears are soon coming for a very long visit in Madrid.

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