El País newspaper published a list of papers that allegedly represented secret extra payments to the Popular Party (PP) leaders done by their former treasurer. Some interpreted them as corruption in the party governing, others as tax evasion and some found clues of illegal financing, all of them involving Spanish prime minister Mariano Rajoy. But in the US media repercussion was moderated, if any. The day after, US investors’ favorite media, The Wall Street Journal, mentioned the news only in its eight page.
Investors didn’t pay much attention, either. They were digesting latest not-that-bad unemployment figures and enjoying the rally in the stock market: Dow reached 14.000 points, after weeks of rally. No Eurodrama, no Washington fighting…
But this Monday, Spanish political scandal reached US investors’ heartbeat. All indexes were down around 1% and finished their long rally. Analyst say they went down because they follow their Europeans counterparts mood. They sailed the same wave that made European stocks went down, and that wave contained in it both Spanish’s PP troubles and Italian political instability derived from the banking scandal surrounding Monte dei Paschi.
“The Spanish scandal in combination with the upcoming political elections in Italy is likely to increase the perception of political risk in the region,” Nomura economists wrote in a research note, mentioned by CNNMoney.
The euro also went down, so did trust on Italian and Spanish bonds. It is not that the problems with the euro are on full mode after Spain and Italy developments, but memories of last year troubles made some way into the European recovery.