Take 5 and come back tomorrow

First of all, let’s be clear. The following is not investment research/advice.?And, as such, it involves no investment recommendations. These are my thoughts on Spanish equity issues, which I find relevant. I share them freely (and not just as regards price). As always, I am only trying to help. Please read the rest of the “discomplainer (*)” at the end of the article.

Market environment: Tech problems - (Asia-Pacific markets declined with futures for Europe and the US both down) – Asia-Pacific markets declined after disappointing US tech earnings increased risk aversion, while awaiting the ECB and Bank of England decisions. Futures for both Europe and the US are down.

Response to the Covid-19 crisis: The lesser evil? - (The Government lines enough support to approve the changes to labour market reform without the need for the ERC and PNV votes) – The Government seems assured of enough support to ratify the changes introduced to labour market reform in today’s vote. If approved in the end, the changes are likely to fully satisfy no one, as they would be too much for some (opposition, employers) or too little for others (the Government itself and its parliamentary allies). The deciding factor would seem to be the need to deliver “something” in order to keep the European Recovery Fund money flowing. However, there is nothing to prevent the Government reopening the issue in the future, once the money is in the bag. The problem with the lesser evil is that it may not prevent a larger one in the future.

Telefonica: Trying to connect you - (Vodafone accelerates contacts for a large transaction in Spain) – Vodafone is under pressure from activist investors to take part in sector consolidation in several European markets including Spain. It helps that regulators have started to accept that consolidation might be needed in order for higher investment to take place. The most likely combination would seem to be that of Vodafone’s Spanish subsidiary with MasMovil. This said, the impact on other players would also depend on the conditions applied to any transactions.

Hotels: Still playing catch-up - (Spain received 2.9m foreign tourists in December vs. the 0.649m of December 2020, while total spending by foreign tourists amounted to €3.542bn vs. €0.697bn) – The December tourism figures show a significant improvement vs. 2020, highlighting the impact of the relaxation of travel restrictions. However, this still leaves the FY 2021 number of tourists (31.1m) 62.7% below the pre-pandemic 2019 figure. Much the same is true of FY 2021 tourism income (€34.816bn) which is still 62.1% below 2019 levels. As (if) the pandemic dissipates, we are likely to continue seeing a considerable rise in tourist numbers/income, with hopes pinned on a recovery before the summer high season.

Macro: Good, but not that good - (Registered unemployment rose 17,174 MoM in January while affiliations to Social Security fell by 197,750) – The Ministries of Labour and Social Security did their best to present the January registered employment figures in the best light possible. This meant comparing the January numbers with past Januarys in the case of registered unemployment (lowest rise in January in 25 years) and ignoring the non-seasonally adjusted numbers in the case of affiliations to Social Security. Looking at the figures on a seasonally adjusted basis shows registered unemployment falling by 75,210 MoM vs. the -40,382 of December, the -98,061 of November and the -80,065 of October. And affiliations to Social Security rising by 71,948, a slight improvement on the +70,814 of December, but still well behind the +109,451 of November and the +102,474 of October. Still improving, but not as much as presented.

*The above information has been read/understood/summarised/evaluated/copied as well as I could to provide a guide to Spanish equities, given available timing/intellectual constraints, and I accept no liability for misreading and/or mistranslating the original copy as set out in my previous article (which I urge you to check, as I am only trying to point you in the right direction, I hope). As for what you may decide to do, after reading the above, please contact your legally approved provider of investment advice on Spanish equities.?