Spanish official raises hopes of Spanish bailout; Greece and Troika continue negotiations

James Hughes, Chief Market Analyst at Alpari said: “Shares traded higher yesterday on hopes that Spain are close to requesting a bailout and improved corporate earnings.

A Spanish official indicated yesterday that Spain are considering requesting a bailout. This is just the latest in a number of reports recently that Spain are close to requesting a bailout. There were some that suggested it may come as early as this week with the EU summit on Thursday and Friday, however that now looks increasingly unlikely.

Moody's affirmed Spain's investment grade credit rating last night, claiming the ECB's new Outright Monetary Transactions reduced the chances of Spain losing market access. The ratings agency were expected to downgrade Spain this month to junk status. This means that both S&P and Moody's now have Spain one notch above junk and on a negative outlook.

There were reports yesterday that talks between Greece and the Troika had broken down over negotiations around labour reforms. This is one of the final points that are still to be negotiated so I don't expect it to drag on for long. Greece need the money by the end of November so I expect them to accept the Troika's demands eventually. 

It is also thought that the cuts and reforms being discussed are being developed under the assumption that Greece will have an extra two years to hit their targets. This would provide huge relief for Greece who have already been in recession for five years.”

Note: The content of this text comprises personal opinions and ideas and should not be taken or misunderstood as investment advice.

Lenka Sobotková | Account Specialist | AMI Communications