Agricole- Spain to be on focus next week

Investors’ focus will likely remain on Spain next week, for a couple of reasons.

1. the full detailed results of the independent bank stress tests are expected to be unveiled, with recent press reports suggesting that actual capital needs by banks could end up well below the total EUR100bn official credit line available, potentially below EUR70-80bn.

2. Moody's is due to conclude its ratings review by the end of the month. The threat of a rating cut into junk territory may have abated with ECB’s OMT available under conditions and lower borrowing costs as a result, but clearly those are not the only factors the agency takes into account while recent re-widening of peripheral spreads still reflects the market’s nervousness.

S&P representative recently declared that it was "unlikely that the Spanish rating would go down to non-investment grade in the near future". The Spanish government will present its 2013 budget on Thursday (27 September) which aims to cut the country's deficit down to 4.5% of GDP next year. Among possible measures, the wealth tax which was reinstated last year is expected to be toughened by lowering the minimum threshold to EUR108k. The budget is a good occasion to pave the way for a rescue plan with the EU authorities, hence a particular attention should be paid on structural reforms, as requested by the EU, rather than new taxes and spending cuts.

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