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Analysts at Rabobank note that the Spain’s governing Socialist party (PSOE) has performed better than expected in the weekend election, though it has fallen short of reaching an outright majority.

Key Quotes

“The PSOE won 29% of the vote and 37 more seats than in the previous election suggesting that PM Sanchez has a strong chance of forming a coalition in the coming weeks, possibly without the support of the Catalan separatists who rejected his 2019 budget earlier in the year.   Notable in this election is the emergence of the nationalist party Vox.   This is the first far right party to have a sizeable parliamentary representation since the death of Franco, but the number of seats (at 24) fell short of expectations.   Even so, it split the rightwing vote to the cost of the centre-right People’s party which lost half of its seats.”

“Over the coming days and weeks the markets will be looking for progress in coalition talks, but Spain’s recent good growth data appears to have dulled the market’s sensitivity to Spanish politics.”