Take 5 and come back tomorrow (4/3/25) Markets Politics BBVA SAB Utilities TEF
None of what follows is investment advice.
Market environment: Uncertainty is taking a toll on markets – (Asia-Pacific markets declined as do European equities with US futures flat) – Asia-Pacific markets declined following the sell-off in the US as American tariff moves have increased the risk of a global trade war, despite initial Chinese restraint. European equities decline due to fears that the EU will be next in having higher US tariffs applied, while US futures are mostly unchanged.
Response to the crisis: Cheap but risky – (The Junts pro-independence Catalan party negotiates the transfer of powers over immigration to the Catalonia regional government (Expansion p26) – It is not clear that the transfer of power over immigration to a regional government would comply with Spanish or European law, but it is a strong demand on the part of Junts (which needs to keep up in the eyes of potential Catalan voters with its pro-independence competitors ERC and Alianca Catalana). The main positive is that this kind of non-financial concession would have less of a negative impact on the overall public sector finances, but at the expense of potentially lifting the risk premium attached to a future break up of Spain, as control over immigration and borders are usually the prerogative of sovereign states.
BBVA/Sabadell: Nothing certain but death and taxes – (The tax on the banking sector reduces the synergies in a potential merger between BBVA and Sabadell from €750m to €365m (OK Diario) – The calculation behind the above statement is that the €750m estimated by BBVA was pre-tax and that taxed at 30% and subject to a higher tax on banks (as it is now applied on a scale, with the top 7% rate applied to a larger part of the margin rather than the 4% attached to Sabadell alone) the figure drops to €365m, and that if the two banks are allowed to merge (which the Government has said it would not allow) and no further synergies are eroded by Competition Authority (CNMC) conditions. This leaves very little ground to up the price and, therefore, increase the chances of success of the bid.
Utilities: No obligation – (The holders of rights from the green auctions held since 2021 give them up (Cinco Dias p3) – This refers to the fact that most of the winners of the right to sell at a fixed price for 20 years in the three auctions held since 2021 have declined to register in the appropriate registry and have preferred to sell in the open market, even if this meant losing the guarantees provided. This would seem to point to the auctions having been badly designed, as the system has not benefited from the lower prices that would have resulted from application of the fixed prices.
Telefonica: Lead, follow or get out of the way – (The Telefonica chairman urges the EU y and its member countries to allow mergers in the telecom sector (Expansion p4) – The idea seems to be that consolidation would allow for lower competition and an increase in prices, with the resulting higher cash flows being channelled towards investment.? Other than the fact that this would represent endorsing an implicit cartel, it remains to be seen what role would Telefonica play in a consolidating European telecom sector, as its significant leverage would seem to rule it out as an acquirer, and it seems unlikely that a Government that has blocked the acquisition of Talgo twice would countenance the loss of control over such a strategic company (currently partly government owned).