Take 5 and come back tomorrow (14/6/24) Markets Politics Hotels IAG SCYR Inflation

None of what follows is investment advice.

Market environment: Producing results- (Asia-Pacific markets decline with European and US futures showing modest gains) – Asia-Pacific markets declined led by China with US producer prices supporting a slowing inflation narrative. European and US futures show modest gains.

Response to the crisis: Everyone is equal, but some are more equal than others- (The Treasury commits to recognising the “singular nature” of Catalonia (Cinco Dias p23) – Improving the finances of Catalonia was a requirement of the agreements by which PM Sanchez secured enough support to fill his current job. In order to minimise the political cost outside Catalonia, any concessions have to be dressed up as being due to Catalonia’s “singular nature”. But it will be difficult to dismiss out of hand the claim by other regions to also have “singular natures”. This is likely to lead to an overall increase in the cost of regional financing that is unlikely to be matched by an equivalent spending restriction at the central government level. At least in the case of Catalonia, the “singular nature” is clearly visible. The main singular nature of Catalonia at the present time is that Catalan parties hold the essential votes to keep PM Sanchez in power

Hotels/IAG: Quality not quantity- (According to a Google/Deloitte report Spain will be the country with the highest number of tourists in 2040 (Cinco Dias p8) – According to the report Spain is set to overtake France and the US to reach 110m tourists. While having growing number of visitors is obviously positive, it would perhaps be better to concentrate on increasing the weight of higher value added tourists and widening the tourist season, given that Spain is experiencing indications of saturation at some points/times.

Sacyr: Only upside in the Canal - (Launches the trial phase of the €1.8bn lawsuit against Panama over the Canal contract overcosts (Expansion p10) – According to Sacyr the amounts contested have been fully provisioned, so the decision, expected for 1Q25, can only produce positive accounting effects.

Inflation: Up again - (YoY inflation rises 0.3pp to 3.6% in May with tourism prices sharply up (Expansion p22) – The May inflation numbers are in line with the advance published at the end of that month, and are, thus, unlikely to surprise. The main takeaways in the media are that tourism prices are rising strongly (tourism packages +17.7%, hotels +9.4%) while food prices, despite still showing sharp rises, are slowing down (+4.4% in May vs. +4.7% in April). Overall, inflation continues to put pressure on consumers’ purchasing power.