The iShares MSCI Spain Index Fund (NYSEArca: EWP) slipped 2% on Monday as the ETF was hit by fresh economic fears and a Standard & Poor’s downgrade of several Spanish banks.
The fund sold off on news that Spain fell into recession in the first quarter for the second time in less than three years. The Spanish economy contracted 0.3% in the first quarter of 2012, MarketWatch reports.
Spain’s unemployment rate stood at 24% in the first quarter, the highest level since the early 1990s. Last week, S&P lowered its credit rating on the faltering European country by two notches. Spain is the Eurozone’s fourth-largest economy. [Spain, Europe ETFs Shrug Off Credit Downgrade]
On Monday, S&P downgraded 11 Spanish banks.
“The wheels are very clearly coming off,” Jefferies economist David Owen said in a Reuters report. “It wouldn’t surprise me to see a very significant decline in GDP both in the second and third quarters this year, and it’s still reasonably easy to envisage GDP to be down about 1.5% this year.”