Spain’s Efforts Boost European Equities

(eToro Blog) Yesterday, the Spanish government presented its proposed budget for the 2013 fiscal year along with still more austerity measures, steps seen as necessary for the government to get the okay for a bailout when they officially make that request of the Troika. Under the plan, spending will be cut by 8.9% and an increase in the country’s sales tax could result in a revenue increase to €175 billion. The government is also planning to pass several dozen new laws within the next six months, as well as establish a committee to oversee government spending.

The Spanish finance minister Luis de Guindos said that he had not yet been apprised of the terms and conditions that might be imposed in return for the financial assistance. The head of the European Commission said that the Spanish government appeared to be going above and beyond what would likely be asked of them, and that they appear to be in line with recommendations given by the E.U. in July.

Later today, the results of the Spanish banking system stress tests will be released and will be used to determine how much funding Spain’s banks will need; in June, the European Union had pledged to provide as much as €100 billion.

Also happening today, French president Francois Hollande will present his 2013 budget, and like Spain’s it will also include spending cuts the likes of which France has not seen in decades. In order to meet its deficit target for 2013, France must trim €30 billion from the budget or find other revenue sources; according to Hollande, it will be the toughest budget in thirty years.

Yesterday, all of the European indices rose following the Spanish budget plan announcement; the German DAX gained 13.51 points to close at 7,290.02 while the French CAC40 rose 24.48 points to close at 3439.32. Spain’s IBEX closed lower to 7,842.30, however.

On OpenBook, sentiment for the French index, the CAC40, is primarily bearish with 79% of traders selling against only 21% buying. A short while ago OpenBook trader Neuronette from France, however, gained 49.1% on a long position in the index, though immediately thereafter the trader placed an order to sell. Trader f1jwy2011 gained 18.70% on a long position yesterday, while a closed short today earned 1.29%. The trader’s portfolio consists of commodities, currencies and indices, and over the past week, the 2.9% allocation in the French index earned 10%. As of this writing the trader has 46 followers and 1 copier.

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