IBEX 35 index forecast for October 2022

European equity markets are advancing this trading week as expectations that central banks could soon slow down monetary policy tightening. The main reason behind this is fears that global interest rates are reaching levels that could risk recessions.

Reserve Bank of Australia surprised financial markets by hiking the interest rate by a modest 25 bps, below the 50 bps expected, being the first to halt the ultra-aggressive monetary policy. Steve Sosnick, a chief strategist at Interactive Brokers, said:

We’re seeing a bit of an unwind in circumstances that had everybody in a panic last week. Today, the psychology is that we’ve seen the worst of the rate hikes behind us.

Spain’s IBEX 35 index has advanced 3.14% this Tuesday, but despite this, macroeconomic data continues to paint a gloomy picture.

The European Union’s statistics office Eurostat reported this Tuesday that the Producer Price Index rose by 43.3% YoY in August, driven mainly by continuously rising energy costs.

Eurozone producer prices jumped 5.0% on a monthly basis, while the economists polled by Reuters had expected a 4.9% monthly rise and a 43.1% annual increase.

As for the whole of Europe, rising inflation is a threat to the Spanish economy even though Spain’s Economy Minister Nadia Calvino on Monday raised the government’s gross domestic product growth outlook for 2022 to 4.4%, from a previous expectation of 4.3%.

Inflation numbers suggest that the European Central Bank is not nearly done with efforts to bring down inflation, and the upside potential for Spain’s IBEX 35 index remains limited.

The near-term fate of the country’s economy will depend on how to offset the headwinds of geopolitical uncertainty amid the Ukraine war, supply chain disruptions, and the rising cost of living.

Technical analysis

Spain’s IBEX 35 index has recovered from its lows reached last Friday and closed the day at 7,696 points. The price has moved above the 10-day moving average, which is certainly a positive sign; still, investors should have in mind that the risk of another decline still persists.

If the price falls below the 7,500 support level, the next target could be 7,200 points. On the other hand, if the price jumps above 8,000 points, the next target could be 8,200 points.

Summary

European equity markets are advancing this trading week as expectations that central banks could soon slow down monetary policy tightening. Spain’s IBEX 35 index has advanced 3.14% this Tuesday, but despite this, macroeconomic data continues to paint a gloomy picture.