Finance
Spain's ratings upgrades add to sunny outlook for markets bull run
Published by Global Banking & Finance Review®
Posted on September 30, 2025
4 min readLast updated: January 21, 2026
Global Banking & Finance Review®
Company
Published by Global Banking & Finance Review®
Posted on September 30, 2025
4 min readLast updated: January 21, 2026
Spain's credit ratings upgrades bolster its market outlook, with IBEX 35 leading in performance and strong economic growth forecasted.
By Joice Alves and Javi West Larrañaga
(Reuters) -Spain has enjoyed its place in the sun in markets for several years now with a buoyant economy and robust corporate sector, and with its creditworthiness getting a triple upgrade it looks set to widen its lead over its stagnating euro zone neighbours.
Spain's stock market has routinely been one of Europe's stronger performers thanks to its heavy weightings of banks. While wealthier France and Germany have struggled with political upheavals and investor concerns about long-term spending, Spain has quietly outperformed on virtually every metric, seemingly unaffected by a global slowdown and U.S. tariffs.
"The country is perceived as more stable politically with the more powerful economic growth, even stronger than Germany," said Nabil Milali, portfolio manager at Edmond de Rothschild Asset Management.
"This is a powerful driver of sustained asset outperformance," he said.
1/ THE RALLY HAS LEGS
With a 30% surge in 2025, Spain's blue-chip index IBEX 35 is just below its 2007 record high and is the top-performing developed-market index of 2025, beating even the U.S. indexes and their seemingly unstoppable artificial intelligence stocks.
Barclays analysts say there's room for more. The IBEX has not topped its pre-financial-crisis high, while earnings momentum is growing fast and positioning is far from crowded.
Morningstar data shows Spanish equities have seen net outflows this year of 845 million euros compared with Germany's 11.35 billion-euro net inflow and the record net 20.287 billion euros that has gone into Dutch equities, home to chip-equipment maker ASML.
A stellar performance by banks has helped power the rally. An index of Spanish lenders has surged 81% in euro terms, outpacing the euro zone banking index's 60% gain.
Edmond de Rothschild's Milali said Spain's relatively cheap bank stocks are a great way to get exposure to the economy.
The IBEX is also one of Europe's cheapest indexes, trading at 12.5 times forward earnings, compared with Dutch equities at 16 times.
2/ BONOS ARE BUENOS
A net 23.385 billion euros ($27.40 billion) has flowed into Spanish fixed income this year, making it the most popular major European market of 2025. Runner-up Germany has seen 14.923 billion euros in inflows, according to Morningstar.
The 10-year Bono-Bund spread, a premium investors require to hold Spanish debt over German, is the smallest since 2009.
In a notable first, investors now demand more compensation to lend to France than Spain, punishing the euro zone's second-largest economy for not controlling its finances.
"I still prefer Spain over Europe," said Evelyne Gomez-Liechti, multi-asset strategist at Mizuho, citing its growth, lower debt and fiscal consolidation. Spanish deficits are forecast to fall below 3% of GDP, while France's remain nearer 6% - twice the European Union's preferred ceiling.
Spain's debt-to-GDP ratio, which reached 120% during the pandemic, is now around 100% and falling, while those of the U.S., France, Germany and Britain are seen rising over the next five years, IMF figures show.
3/ TURBO-CHARGED ECONOMY
Spain's economy is forecast to outpace its euro zone peers, thanks to its young population, booming post-pandemic tourism, strong labour market helped by immigration, EU funding and cheaper energy. Spain is also less reliant on natural gas imports.
This month, the government raised its 2025 growth forecast to 2.7% from 2.6%, versus Germany's 0.2%, France's 0.8% and Italy's 0.5% estimates.
4/ RATINGS, POLITICS
Moody's and Fitch lifted their Spanish long-term sovereign credit ratings on Friday to "A3" and "A" respectively, citing strong growth and declining unemployment.
S&P Global upgraded its rating earlier this month to "A+" from "A", citing a private-sector-driven improvement in Spain's external finances, supported by high savings and robust exports. In contrast, it cut France's AA- over the political chaos and high debt-to-GDP ratio there.
5/ FOREIGN DIRECT INVESTMENT
In 2024, foreign direct investment in Spain rose 15% while it fell 14% in France, 13% in Britain and 17% in Germany, an EY report showed in May.
($1 = 0.8533 euros)
(Reporting by Joice Alves in London and Javi West Larrañaga in Gdansk; Editing by Amanda Cooper and Hugh Lawson)
A credit rating is an assessment of the creditworthiness of a borrower, indicating the likelihood of default on debt obligations. It helps investors gauge the risk associated with lending money.
Gross Domestic Product (GDP) is the total monetary value of all goods and services produced within a country's borders in a specific time period, used as a broad measure of economic performance.
Foreign direct investment (FDI) occurs when an individual or business invests in assets or business operations in another country, often to establish a lasting interest in the foreign economy.
The IBEX 35 is the benchmark stock market index of the Bolsa de Madrid, representing the 35 most liquid Spanish stocks traded on the exchange.
Asset outperformance refers to an investment's return exceeding that of a benchmark or index over a specific period, indicating superior performance compared to the market.
Explore more articles in the Finance category
