The IBEX 35 Rises on the Eve of the Fed Rate Cut

Intro

The IBEX 35, the benchmark stock index for Spain, rose on Tuesday, October 25, 2022, ahead of the Federal Reserve's widely anticipated interest rate cut. The index gained 0.6%, or 52.60 points, to close at 8,922.40.

The Fed is expected to cut interest rates by 25 basis points later today, in an effort to boost the economy. The cut would be the third this year, and would bring the Fed's target range for the federal funds rate to 1.50%-1.75%.

Analysis

The IBEX 35's rise on Tuesday came as a surprise to some analysts, who had expected the index to trade lower ahead of the Fed's decision. However, the index was buoyed by gains in the banking sector, which benefited from the prospect of lower interest rates.

The largest gainers on the IBEX 35 were Banco Santander, which rose 1.5%, and BBVA, which gained 1.2%. The gains in the banking sector were also supported by a report from the European Central Bank, which said that the eurozone economy is growing at a faster pace than previously thought.

The IBEX 35's gains were not limited to the banking sector. The index was also boosted by gains in the energy and telecommunications sectors. Repsol, the Spanish oil and gas company, rose 1.1%, while Telefonica, the Spanish telecommunications company, gained 0.8%.

Conclusion

The IBEX 35's rise on Tuesday suggests that investors are optimistic about the prospects for the Spanish economy, despite the ongoing uncertainty surrounding the Fed's interest rate decision.

The Fed's decision is likely to have a significant impact on the IBEX 35 in the coming weeks. If the Fed cuts interest rates as expected, the index is likely to continue to rise. However, if the Fed surprises markets and decides to keep interest rates unchanged, the IBEX 35 could come under pressure.