It is a time for good wishes and positive forecasts about the evolution of financial markets when the year begins. Now that we are four months into 2017, it is time to assess whether these expectations have been met. Spanish banks have delivered the best stock-market performance relative to other domestic sectors, especially compared with their European peers, and with European markets rising. The share price of Spanish banks has moved closer to their theoretical book value, but it is still below it.
What explains the strong stock market performance? The president of the German Association highlighted two facts at their congress: interest rates at historic lows set by the ECB and excessive banking regulation. It is precisely the potential changes in these factors, the expectations of a shift in monetary policy direction and the end, or at least a pause, in financial regulation, that have driven the European banking sector upward to a greater extent.
But is this positive performance due solely to this? Economic data has been better than expected in Europe (and much better in Spain), and inflation has surprised on the upside.
