Bourses hit by LatAm currency concerns

The blue-chip Ibex 35 index on Friday suffered its fifth consecutive day of losses as investors reacted to the volatility of the currencies of emerging markets, particularly the Argentinean peso.

The falls on Friday were more marked than in previous sessions this week, with the Ibex 35 falling back below 10,000 points as investors factored in the potential impact of the depreciation of Latin American currencies on the earnings of large companies with a presence in the region, such as Telefónica, BBVA, Endesa, Gas Natural and Día, among others. The rest of the European markets also suffered but not to the same extent as Spain.

Spains benchmark index eventually closed down 3.64 percent at 9,868.90 points.

“The markets have been hit for three reasons: the worsening of the situation in Argentina, overnight losses in Asia after the release of disappointing economic data out of China and profit-taking after the prolonged previous rally,” Bankinter’s research department said.

Emerging market currencies plunged overnight, with the Argentinean peso suffering its biggest daily fall since the financial crisis of 2002 after the country’s central bank said it would not intervene to prop up the currency.

BBVA also suffered a double hit in the shape of the fall of the Turkish lira. The bank controls 25 percent of the Turkish lender Garanti.

As major exporters of raw materials to China, Australia’s dollar also came in for punishment, falling to its lowest level against the dollar in three-and-a-half years. The dollar itself was also hit because of the doubts sewn about the global recovery by the latest figures out of China. The yen, the Swiss franc and the euro were the beneficiaries.

Spanish government bonds were also affected, with the risk premium rising to the levels it stood at on January 2.