Spain’s exchange traded fund (ETF) shot up 11% last week week despite rumors that it had asked the European Union for economic aid. Could this reflect a fundamental shift in the Spain ETF or was it just a good run?
Paul Day of Reuters reports that Spain’s official response to the rumors of a bailout request is that they are false. “This is a lie. There’s no rescue. There’s nothing asked for, nor will there be. I don’t know where they got this from,” said a spokesperson for Spain’s economy ministry.
The rumors started with a report by FT Deutschland, which claimed that the E.U. was preparing to activate an aid package in case Spain requested one. [Euro ETFs and Jim Rogers: Time to Buy?]
A European Commission spokesperson commented that there was no official aid request from Spain at the moment. “We are not preparing anything- it is speculation,” said Amadeu Altafaj.
Other reports gave more confidence in Spain. On Thursday, Spain saw solid demand for its new 3-year benchmark bond, giving confidence to July’s redemption of $19.6 billion. The 10-year Spanish/German government bond yield narrowed by two basis points, reflecting rising confidence in Spain’s economy. [Euro ETFs in the Bargain Basement.]
But few think the troubles are over.
The World Bank still sees Spain’s situation as very serious, reports the Tehran Times. One of the biggest issues is Spain’s massive unemployment, which at nearly 20%, is the highest in the eurozone. On a positive note, the World Bank does think Spain’s fiscal austerity measures – to slash the deficit from 11.2% to 3% of GDP by 2013 – is a move in the right direction. [Europe’s Fiscal Mess.]
Wherever Spain goes from here, the ETF clearly has a long march ahead before it touches the 200-day moving average. At the moment, it’s about 18% below the key mark.
For more stories on Spain, visit our Spain category.
- iShares MSCI Spain Index (NYSEArca: EWP)
Sumin Kim contributed to this article.