06.07.2021
Italy vs Spain
They may be outperforming their European peers in the football, but Italy & Spain are lagging in terms of equity market performance.
Both the FTSE MIB & IBEX 35 are around one sigma cheap versus pan European indices.
Both the FTSE MIB & IBEX 35 are around one sigma cheap versus pan European indices.
The chart below shows the IBEX 35 vs. Stoxx 600 Fair Value Gap; the FTSE MIB vs. Euro Stoxx 600 model is slightly less extreme but largely the same. The fall in the spot price of the RV ratio is happening while macro model value remains unchanged.
Both models are in regime & show FTSE MIB / IBEX 35 as high beta plays on a European recovery. Rising economic growth/inflation expectations, steeper yield curves, low risk aversion & tight credit spreads are all consistent with Italian / Spanish outperformance.
Covid - the impact of the Delta variant on the European tourism industry - could be one factor at play. Increasingly though it appears as though the IBEX & FTSE MIB have priced at least some of the bad news in terms of the economic fall-out.
Maybe tonight’s Euro 2020 semi-final will provide a sentiment bounce for at least one of the southern European equity markets.
Covid - the impact of the Delta variant on the European tourism industry - could be one factor at play. Increasingly though it appears as though the IBEX & FTSE MIB have priced at least some of the bad news in terms of the economic fall-out.
Maybe tonight’s Euro 2020 semi-final will provide a sentiment bounce for at least one of the southern European equity markets.
