FirstFT: Spanish polls end with no clear mandate to govern

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Spain was plunged into political uncertainty yesterday night as both the right and left failed to secure a clear path to forming a government even though the opposition People’s party won the most seats in parliament.

The deadlock leaves the EU’s fourth-largest economy in limbo and opens the door to weeks or months of messy negotiations over voting alliances — or repeat elections, as occurred in 2015-16 and 2019.

Defying the odds, Socialist prime minister Pedro Sánchez put up enough resistance to prevent Alberto Núñez Feijóo’s PP from securing a conservative parliamentary majority in alliance with the hard-right Vox party.

Although Sánchez’s party did better than polls had forecast and won two more seats than in 2019, he fell short of the outright majority needed to take office even with the support of his existing allies.

A jubilant Sánchez nonetheless told supporters outside his party headquarters that “the reactionary bloc of the People’s party and Vox have been defeated”.

Here’s what else I’m keeping tabs on today:

• Economic data: Germany reports retail sales for last month, while S&P Global has its manufacturing and services purchasing managers’ indices for France, Germany, Italy, the UK and the US.

• Macron in the Pacific: French president Emmanuel Macron begins his tour of the region this week with a visit to the French territory of New Caledonia.

• Israel: Lawmakers are due to vote on the first plank of Benjamin Netanyahu’s controversial judicial overhaul, a day after the prime minister was taken to the hospital to have a pacemaker fitted to his heart.

• Results: Julius Baer, Moneysupermarket, Philips and Ryanair report.

Five more top stories

1. One of Germany’s most powerful regional leaders has called to restrict the right to asylum in the country’s constitution. Michael Kretschmer, prime minister of Saxony, blamed the stunning rise of far-right politicians on a recent surge in illegal immigration. Read his full interview with the Financial Times.

2. Exclusive: UK regulators have shelved a three-year probe into the former boss of NMC Health, the FTSE 100 company that collapsed in 2020 after an alleged multibillion-dollar fraud. Prasanth Manghat had been under investigation by the Financial Conduct Authority over possible breaches of market abuse rules, including market manipulation and insider dealing.

3. The $1.4tn US junk loan market has been hit by 120 downgrades in the quarter to June, amounting to $136bn — the highest total since the depths of the Covid-19 crisis in 2020, according to a JPMorgan analysis. Companies that loaded up on this type of debt when borrowing costs were ultra-low during the pandemic now face daunting repayments amid much higher interest rates. Read the full story.

4. Russia’s actions in its war on Ukraine is casting a shadow over a summit with African leaders in St Petersburg this week. A Kenyan official called Moscow’s move to quit an export deal for Ukrainian grain a “stab in the back . . . that disproportionately impacts countries in the Horn of Africa already impacted by drought”. Here’s more ahead of Thursday’s gathering.

5. China’s finance regulator has been courting some of the world’s largest buyout groups including Blackstone, Carlyle and KKR to keep investing in the country. Financial authorities held a first-of-its-kind symposium with groups that manage US dollar funds on Friday, and the Ministry of Commerce met representatives from foreign companies. Here’s why Beijing is trying to lure foreign investors.

The Big Read

The Chinese military is waging what defence experts call a grey zone campaign, increasing its presence closer to Taiwan one step at a time while remaining below the threshold of what could be considered an act of war. For all the global attention on the prospect of a potential invasion, some fear Beijing’s so-called salami-slicing tactics are slowly changing the status quo.

We’re also reading . . . 

Chart of the day

Recent data has shown the UK economy to be unexpectedly resilient. A sharp decline in inflation, strong retail sales last month and a better than expected economic performance in the second quarter suggest Britain is becoming less of an outlier among its peer countries.

Take a break from the news

Oppenheimer director Christopher Nolan sits down with Christopher Grimes for Lunch with the FT to discuss streaming, Hollywood strikes and why his new atomic bomb biopic is a “cautionary tale” in the age of AI.

Additional contributions by Benjamin Wilhelm and Gordon Smith