Take 5 and come back tomorrow (18/9/24) Markets Utilities Renewables Media BBVA SAB GDP

None of what follows is investment advice.

Market environment: Making the cut – (Asia-Pacific markets were steady with European markets flat and US futures mildly up) – Asia-Pacific markets were flat as investors awaited the US interest rate decision (expectations of a 25-50bp cut). European markets were steady with US futures moderately up.

Response to the crisis: There is virtue in being on the side of the poor – (The Madrid high court invalidates the Madrid low emission areas due to the obligation it imposes to renew vehicles (El Economista p31) – The ruling of the Madrid High Court is not only important due to its direct effect but also because the core of the reasoning seems to be that the fight for climate change should not result in excessive demands from those less well off (in this case due to the need to have modern vehicles to access certain “emission free” areas of Madrid). If this principle were to be more widely applied, it would certainly introduce limitations to the pace of “ecological transition” in energy, with the economic impact having to be more closely weighed against the beneficial effect on the fight against climate change.

Media: Blood is thicker than water – (Government offensive to control media and modify electoral activity (Expansion p8) – The Cabinet approved the “Democratic Regeneration Plan” as expected. This includes efforts to increase transparency of media ownership as well as public advertising in media in order to ensure “a fairer distribution” in the interest of “true information”. The reform will also strengthen the judicial oversight against “defamation”. On the electoral side, the reform centres on forcing candidates to participate in debates and greater transparency on financing and opinion polls. The main negative in the above respect is the Government talk of “pseudo-media”, which seems to imply a differentiation between good and bad media (according to what criteria?) which could be reflected in the distribution of institutional advertising.? All of this would be much more credible if it were not widely seen as being a response (justified or not, largely depending on the politics of the observer) to recent reporting by “pseudo-media” regarding the activities of the PM’s relatives.

BBVA/Sabadell: FOMO - The Stock Exchange Commission (CNMV) is pending the decision by the Competition Authority (CNMC) in order to authorise the BBVA bid for Sabadell (Expansion p16)/ The BBVA Chairman rejects an improvement in the bid price and warns shareholders of the risks they run if it were to fail (Expansion p16) - The impact of the BBVA bid for Sabadell on competition has always been the main sticking point of the deal. This is why the decision of the Competition Authority is key. In the meantime, warnings from the bidder about negative consequences for the shareholders of the target, should the bid not succeed are part of the game. In this case, much would depend on the perception of whether the recent Sabadell performance has been supported by the existence of the bid or not. This is always difficult to say. But in a falling Euro interest rate environment, geographical diversification, such as that offered by BBVA, might prove more attractive.

GDP: Cesar’s wife – (Bank of Spain raises its GDP growth forecast for 2024 by 0.5pp to 2.8% but sees consumption and investment weakness (Expansion p32) – The upward revision to Bank of Spain’s GDP growth forecasts is mainly newsworthy due to the fact that it comes immediately after the appointment of Mr Jose Luis Escriva (former Digital Transformation minister) as Governor of Bank of Spain. It is perfectly possible that Bank of Spain would have arrived at the conclusion that a significant upward review was needed. But the fact that the review is given a higher profile than usual highlights the risks to the credibility of Bank of Spain as a result of the circumstances of the new Governor’s appointment. Caesar’s wife should be above suspicion.