Stock market recovers levels last seen in April

Borrowing costs ease as risk premium falls below 500 points

The Spanish stock market bounced back on Thursday, with the Ibex 35 posting gains of 4.05 percent. That took it over the 7,400-point mark, to close at 7,417; its highest since April.

Meanwhile, Spain’s risk premium — the spread between the yield on the benchmark 10-year bond and its German equivalent — dropped below 500 basis points for the first time since July 4, the day before the European Central bank announced it was dropping interest rates to a historic low of 0.75 percent.

Comments made by Mariano Rajoy on Tuesday were interpreted by investors as signs of the prime minister’s greater willingness to comply with the demands of the European Central Bank (ECB) in order for it to come to Spain’s rescue. The effect of his words was felt the same day as the risk premium began to fall.

On May 16 of this year, Spain’s risk premium broke the 500-basis-point level for the first time, and on May 29 it closed above that figure. Since then, the indicator has remained at the same levels that saw the interventions of Greece, Portugal and Ireland.

The biggest scare for Spain came on July 24, when the spread between the yield on the Spanish 10-year bond and its German equivalent reached 638 basis points. While Thursday’s news was positive, the pressure on Spain’s borrowing costs are still at dangerous levels.

The rest of the European markets also closed up, with Milan putting on 1.87 percent, the German Dax 0.65 percent and London 0.03 percent.

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