IBEX 35 Heads Lower on Renewed Virus Fears as Omicron Variant Spreads Across EU

IBEX 35, Coronavirus, Omicron Variant, Global Growth – Talking Points

• IBEX 35 rounds out worst month since March 2020 with a drop of 1.78%
• Omicron variant has reignited fears of lockdowns, travel restrictions
• The Spanish Benchmark sits at a key support level following Tuesday’s session

The IBEX 35 Index rounded out a dismal month on Tuesday by finishing 1.78% lower, as fears continue to grow regarding the Omicron Covid variant. November’s decline is set to be the largest monthly decline since March 2020, when risk assets across the globe sold off as Coronavirus spread. November’s tumble of 8% still dwarfs the decline of over 22% in March 2020. While vaccines have helped ease pressure on risk assets, the Spanish equity benchmark has still underperformed its continental peers.

While it is still early days in the battle against the Omicron variant, the possibility of increased transmissibility poses a severe threat for the Spanish economy. With cases already detected in Spain, it is only a matter of time before the variant spreads elsewhere. Omicron’s emergence comes at a time when market participants were busy navigating supply chain bottlenecks and rampant inflation. Omicron at this point may add to near-term uncertainty, which has been reflected in price action over the last few sessions.

IBEX 35 Index Daily Chart

Chart created with TradingView

With the fundamental construct coming under pressure with the emergence of the Omicron variant, the Ibex 35 has fallen to a key support level at 8,250. The index notably put in a bottom at this level during the July pullback. Should this level hold, market participants may look for price to search out the massive gap that was created during Friday’s leg lower. A break of 8,250 could see a test of the 0.618 Fibonacci retracement at 8,171, with clean air below that to 8,000.

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— Written by Brendan Fagan, Intern

To contact Brendan, use the comments section below or @BrendanFaganFX on Twitter