Spanish Stocks Lead EU Markets in YTD

Spanish equities have major European Union (EU) peers recently. The IBEX 35 is up 10.32% YTD, making it the region’s best-performing benchmark as of today, 11 February.

Germany’s DAX follows with a 10.25% gain, ranking second among Europe’s top indices. Italy’s FTSE MIB (+8.94%) and France’s CAC 40 (+8.47%) also remain in positive territory, according to early morning data on 11 February at the time of writing.

In general terms, the EU markets are registering a strong start to 2025, with broad-based gains across major indices.

The EURO STOXX 50 is up 10.25% YTD, well ahead of the S&P 500’s 3.14% gain, despite global uncertainty following Donald Trump’s recent return to the White House.

Why the IBEX 35 Led EU YTD 2025 Surge

Spain’s economy was one of Europe’s strongest in 2024.  According to sources, it is the best-performing rich-world economy based on GDP growth, inflation, employment, fiscal policy, and stock market performance.

This economic strength has carried into 2025, as reflected in the positive YTD performance of the country’s main index.

A key driver of the IBEX 35’s gains is its banking exposure, a sector that is performing strongly YTD. Spanish lenders have rallied following the European Central Bank’s (ECB) rate cut to 2.75% in January amid a stagnant EU economy. Could further reductions be on the horizon?

As a result, major Spanish banks have posted strong YTD gains, according to early morning data at the time of writing, Tuesday, 11 February:

• Banco Sabadell [SAB.MC]: +26.85%

• Banco Santander [SAN.MC]: +25.42%

• BBVA [BBVA.MC]: +22.22%

• Unicaja [UNI.MC]: +17.68%

• CaixaBank [CABK.MC]: +16.23%

• Bankinter [BKT.MC]: +10.2% (Source: Yahoo Finance)

A Positive Outlook for Spain’s Economy in 2025

According to EU data, Spain is projected to grow 2.3% in 2025, slowing from the 3.0% forecast for 2024. Despite the deceleration, it is still expected to outpace the European Commission’s 2025 projections for Germany (0.7%), France (0.8%), and Italy (1.0%).

CaixaBank Research expects Spain’s economy to remain strong in 2025, though growth will moderate. 

Agriculture, manufacturing, and tourism may slow as past shocks fade while technology, professional services, and pharmaceuticals gain momentum. Meanwhile, the bank said lower interest rates should also boost construction and real estate. (Source: CaixaBank Research)

Possible Challenges Ahead for Spain in 2025

Spain’s economy is projected to grow 2.3% in 2025, but several challenges could weigh on this outlook. BBVA Research highlights risks linked to global trade uncertainty and domestic investment weakness. (Source: BBVA Research)

The potential for higher US tariffs on EU imports raises concerns about Spain’s export performance, particularly in key manufacturing sectors. Domestically, the slow rollout of Recovery and Resilience funds has limited their expected impact on private investment, while housing supply constraints continue to pressure affordability and labour mobility.

Additionally, according to BBVA Research, tourism growth is set to slow following an exceptional post-pandemic rebound, and the auto industry remains vulnerable amid sluggish EV adoption and rising Chinese competition. 

Meanwhile, political and fiscal uncertainty could cloud business sentiment, especially as the government navigates fiscal consolidation, according to the bank.

Conclusion

Spain’s banks enter 2025 with strong tailwinds, driven by lower interest rates and resilient economic performance. As a result, the IBEX 35 leads EU benchmarks YTD, reflecting investor confidence in the country’s momentum.

Yet risks persist. Global trade uncertainty, weak investment, and sectoral challenges—including slowing tourism and a persistent housing shortage—could weigh on growth. US tariffs could add further pressure.

The ECB’s policy path remains key for Spanish banks. As 2025 unfolds, can financial firms sustain their stock market leadership and keep pushing the IBEX 35 upward, or will global uncertainty stall the rally?

*Past performance does not reflect future results.