Spanish assets likely to suffer

In the recent polls in Spain, the financial markets were hoping for election results which would allow PPCs government to be formed. These results will come as a disappointment, with the Spanish assets set to suffer from the next day.

Nonetheless, the results could have been markets negative. A PSOE Podemos majority would have created uncertainty about the future policy path and the outlook for the Spanish economy. There woukd be a limited longer out damage thus.

"The longer-term outlook is no doubt hit as well by a weak government, but the magnitude of the hit will depend on the ensuing policies. In light of the election promises made by the two parties, however, there is little reason to be too hopeful", says Nordea Bank in a research note.