Take 5 and come back tomorrow (8/5/24) Markets Economic growth BBVA SAB NTGY Real Estate

None of what follows is investment advice.

Market Market environment: Seeking good results - (Asia-Pacific markets declined with European and US futures pointing mildly down) – Asia-Pacific markets declined as investors sought reassurance regarding the outlook for corporate results. European and US futures point mildly down.

Response to the crisis: Let’s agree to disagree is not a good investment plan - (The Governor of Bank of Spain says that the lack of political consensus threatens growth (Expansion p34) – A lack of political consensus results in uncertainty that is not positive from the point of view of the long term investments that would benefit growth. However, reaching that consensus is difficult in the current fragmented and polarised political climate. Still, it is the Governor’s job to raise the alarm.

BBVA/Sabadell: Cash may be expensive - (Investors expect BBVA to improve its bid for Sabadell by 10-15% including partial payment in cash (Expansion p19)/BBVA could have to carry out a capital increase if it bid for Sabadell in cash (Cinco Dias p4)/BBVA only has available €5bn to improve its bid for Sabadell in cash, while the latter would only accept an all-cash bid for €12bn (El Economista p5)/Investment banks estimate at €1.7bn in cash the margin that BBVA has to improve its bid for Sabadell (El Confidencial)/ The Bank of Spain governor says that the increase in concentration of the banking sector has to be analysed (Expansion p19)/The plan for a merger of BBVA and Sabadell divides the Government’s political allies (El Confidencial) – BBVA does not seem to have much room for maneuver in order to improve its bid price in cash if it wants to avoid carrying out a capital increase and see the potential for buybacks restricted. And Sabadell seems to prefer cash. It should also be borne in mind that the bid also faces political obstacles with opposition to it from the Deputy Prime Minister and the Government’s Catalan allies (at a delicate time given the upcoming regional elections and the subsequent negotiations for formation of a government).

Naturgy: Pricing a volatile situation - (Puts the finishing touches to a €3bn agreement to purchase natural gas from Algeria (Expansion p3) – What is being negotiated is the price for past and future years, which is complicated given the volatility of natural gas prices in the market. Further complications arise from Spain’s foreign affairs policy (mainly the recognition of Moroccan sovereignty over the Spanish Sahara) and the bid for Naturgy by the Taqa UAE company. In this context, being able to negotiate a mechanism for purchase prices with its second largest supplier would be a clear plus.

Real Estate: Up even in down years - (According to Idealista average house prices rose 5.9% in April, with 9 provincial capitals reaching record levels of price (Expansion p25) – The price rises have reached double digits in ten provincial capitals, mainly the larger cities and those on the Mediterranean. The sharp price rises are notable given the decline in demand, partly due to financing costs. But even if demand is lower new supply is not enough to cover it. This is a problem, given that if interest rates decline demand might revive.environment: Seeking good results - (Asia-Pacific markets declined with European and US futures pointing mildly down) – Asia-Pacific markets declined as investors sought reassurance regarding the outlook for corporate results. European and US futures point mildly down.