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Investors turning bullish on Spanish and French equities – more to come?


Investors are starting to turn bullish on Spanish and French stocks with Spain in particular attracting attention. The Spanish IBEX 35 has been in a short term bearish trend pattern, while the French CAC 40 has been quite the opposite.

The CAC 40 has in fact been in pretty bullish shape over the last six months having broken trend 29 January and established a solid upward momentum pattern that has only run out of steam in late June.

Spectrum Markets, the pan-European trading venue for securitised derivatives, has published its SERIX European retail investor sentiment data for June, noting strong bullish sentiment on the Spanish IBEX 35 index, and continued improving sentiment towards France’s CAC 40.

IBEX sentiment turned sharply bullish

Sentiment on the IBEX turned sharply bullish last month, with its SERIX value leaping from a bearish 98 in May to 119 in June. This came as the Bank of Spain upgraded its growth forecast for the year to 6.2% after signs that the impact of COVID-19 is waning and employment figures are starting to improve as the economy reopens.

The Spectrum European Retail Investor Index (SERIX), uses the exchange’s pan-European trading data to shed light on investor sentiment towards current developments in financial markets. The index is calculated on a monthly basis by subtracting the proportion of bearish trades from the proportion of bullish trades, to give a single figure (rebased at 100) that indicates the strength and direction of sentiment.

Trades where long instruments are bought and trades where short instruments are sold are both considered bullish trades, while trades where long instruments are sold and trades where short instruments are bought are considered bearish trades.

Spain benefits from high levels of government support

“Spain has maintained a relatively high level of government support for key sectors throughout the pandemic, particularly in areas like hospitality and tourism, and these look well placed to rebound as demand recovers. Alongside this, payments from the EU recovery fund and a steady low-interest scenario could provide an additional boost,” notes Michael Hall, Head of Business Development at Spectrum Markets.

Meanwhile retail investors look to be softening their stance towards France as the SERIX on the CAC has risen steadily from a historic monthly low of 85 in February, to reach 95 in June.

France still in bearish territory

“We’re still in bearish territory with France, but sentiment has clearly been improving over time, no doubt driven by the country’s encouraging economic data, vaccine success and further easing of lockdown policies,” Hall explains.

During June, 63.8 million securitised derivatives were traded on Spectrum, with 31.5% of trades taking place outside of traditional hours (i.e. between 17:30 and 9:00 CET). 86.5% of this activity was on indices, 7.2% on commodities, and 6.3% on currency pairs, with the top three traded underlying markets being OMX 30 (27.6%), DAX (27.5%) and NASDAQ 100 (13.1%).

Looking at the SERIX data for the top three underlying markets, the OMX reversed some of the bullish momentum seen this year dropping to 94 in June, while the DAX remained stable just inside bearish territory, falling from 99 to 98. Sentiment on NASDAQ meanwhile dropped sharply to 91, down from 102 in May.

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This article does not constitute investment advice. Make sure you do your own research or consult a professional advisor.

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