The Fed is ready to raise rates and start cutting its balance sheet. The confirmation came from the reading of the minutes of the board meeting of 3-4 May. During the summit, most of the members of the monetary committee underlined the need to proceed "soon" with a new increase. Furthermore, from June the plan to gradually reduce the balance sheet of the Central Bank from the current 4.500 billion dollars will take effect. It will be a gradual operation: every month the quantity of assets that will be allowed to expire will be announced. Initially, the amount will be very low, to then be reviewed on a quarterly basis.
The prospect of a rate hike in June (considered probable by 95% of observers) did not slow down Wall Street: the S&P 500 index reached a new all-time record of 2.404,4 points. But other events are pressing: today the OPEC summit in Vienna will have to confirm the cuts in oil production for 9 months, all the more necessary to avoid the collapse of prices in the face of China's difficulties, underlined by Beijing's first downgrading since 1989. Finally, there is the unknown Trump (increasingly in the crosshairs of investigators investigating Russiagate), today in Brussels for a first test on the complicated relations between the US and allies.
POSITIVE ASIA. OPEC AGREEMENT ON CUTS TODAY
In this complicated context, the markets have chosen the path of prudence. Chinese stocks hold after Moody's downgrade. Shanghai rises by 0,1%. Yesterday, following the announcement of the US agency's decision, it had lost 1,3% before recovering during the session. All other stock markets in Asia Pacific also rose: Hong Kong +0,5%, Seoul +0,9%, Mumbai +0,5%. Tokyo is starting to close with an increase of half a percentage point.
The US stock market reacted with a moderate rise to the data in the FOMC minutes. The Dow Jones rose 0,36%. NASDAQ +0,40%. The S&P500 index, +0,25%, recorded the fifth consecutive rise. Worth noting is the decline of Tiffany (-8,7%) after the collapse in sales. The other big name in the sector, Signet Jewelers -7,2% also fell sharply.
Oil slightly down, Wti down 11 cents to 51,31 dollars and Brent down 22 cents to 53,93 dollars on the eve of the Vienna summit. Saudi Arabia's Energy Minister Khalid Al-Falih said the world's largest producer is ready to back a 9-month extension on the 1,8 million b/d supply cut. The goal, he stressed, is to prevent prices from falling below $50. Kuwait does not rule out a deeper cut. In Piazza Affari Eni lost 0,4%, Saipem -0,8%.
DRAGONS: EU RATES WILL NOT GO UP. MILAN -0,2%
Closure slightly down for the European stock exchanges. Today several stock exchanges in Northern Europe will be closed for the Ascension holiday. In Milan, the FtseMib index closed the session down by 0,2%. Paris and Frankfurt were also slightly down, both closing at -0,3%. Rebound in London (+0,4%) after Tuesday's drop.
Mario Draghi, speaking in Madrid, confirmed the ECB's expansive orientation: interest rates will begin to rise only at the end of the bond purchase programme, said the ECB president in his first speech after Angela Merkel's words on the euro "too low".
"In a union of several countries such as the euro area - the banker replied - the purchases of securities are inevitably more difficult to calibrate and implement, and it is more probable that they produce side effects".
The chief economist of the European Central Bank, Peter Praet, is on the same wavelength: “The pressures on underlying inflation still give insufficient indications of a convincing upward trend, in the face of domestic pressures, especially those of wages, which remain weak ”.
However, observers are convinced that in the June meeting the ECB will concede something to the hawks, but it will not go beyond the cancellation of the reference to the "possible downside risks" of the economy or the modification of the guidance. For now there won't be the dreaded tapering.
TREASURE, TODAY THE EXCHANGE, TOMORROW THE AUCTIONS
End of session with a negative sign on the Italian secondary which slightly loses ground on Germany. The 2,138-year was trading at 174%. The widening of spreads against the Bund – two basis points for the Italy/Germany gap over ten years (to XNUMX basis points) – is particularly felt by Portuguese securities.
In the Ecofin Council meeting, Lisbon yesterday asked the EU for authorization to repay 10 billion in debt to the International Monetary Fund in advance, on which it pays relatively high interest, to go and refinance itself on the market at lower costs. The prospect is therefore for greater collection needs between now and the end of the year.
The pressure on the Greek paper continues after yet another stalemate on debt restructuring at the monthly meeting of the Eurogroup. The result of the reopening of the 2,45-year Bund was positive for the German market: 0,39 billion placed at an average rate of 0,36% (XNUMX% in the previous auction).
The month-end auctions are underway, preceded today by the second exchange operation of the year, the first ever implemented on an Italian BTP. The Treasury is offering the repurchase of up to 3 billion BTP Italia bonds expiring in November 2017 in exchange for four BTPs and a CctEu. Tomorrow will be the turn of Ctz and Btpei (maximum of 3,5 billion of the new Ctz in May 2019 and up to 1,5 billion of BtpEi in 2028 and 2014), while on Monday the six-month Bot goes to auction for 6 billion. It closes next Tuesday with the medium-long term offer.
THE FLIGHT OF THE BPM BENCH CONTINUES. BLACK SMOKE FOR POP VICENZA
The increasingly serious unknown of the bailout of Venetian banks it did not affect the solidity of the banking securities sector. The focus of attention continues to be Banco Bpm, +4% on the wave of expectations for the sale of Project Rainbow, a portfolio of non-performing loans worth around 750 million euro with underlying real estate, the offers should be around 250 -300 million euros, therefore up to approximately 40% of the nominal value.
Also in evidence is another former popular bank, Credito Valtellinese, +8% on market bets on a close bancassurance agreement with a partner in the large caliber sector. The other banks were positive: Unicredit unchanged, Intesa -0,2%, Ubi +1,7%.
Negative outcome of the meeting between the top management of BPVI and Veneto Banca and the European competition management. The Commission is firm in its position and demands a billion additional resources from private individuals to give the go-ahead for the bailout. The emergency summit at the Treasury will be held today, with the heads of the two institutes present. The rescue of the Veneto banks, an operation worth 6,4 billion, already provides for a contribution from private capital consisting of the capital increase paid by Atlante and the conversion of subordinated bonds. The hypothesis of a new system intervention sees many banks against it, as highlighted by the CEO of Intesa, Carlo Messina: “With these institutions – he said – private individuals have already lost or are losing money; at this point it is necessary to guarantee the possibility of making them safe through a public intervention which has now been under construction since December last year”.
The insurance companies contrasted, with Generali losing 1,6% and Unipol up 2,5%. Brilliant Soul (+2,9%).
HE HOLDS FCA. LAWYERS: CASE DIFFERENT FROM VOLKSWAGEN
Automotive companies are still under fire in Europe (Stoxx index -0,7%). Daimler lost 1,9%, falling to its lowest level since the beginning of the year: yesterday the police searched the Stuttgart office in search of documents for the investigation into emissions.
Fiat Chrysler (-0,5%) limited the damages after the US Department of Justice filed a lawsuit against the automaker over diesel engine emissions. The title, after a declining start, reset its losses in the early afternoon and then returned to the red again. Banca Imi, Icbpi, Mediobanca Securities, Banca Akros confirmed the positive recommendations on the stock.
Robert Giuffra, lawyer of FCA, but also representative of Volkswagen on the case of rigged emissions, explained yesterday during the court hearing that "the case on manipulated emissions which involves 104 Jeep Grand Cherokee SUVs and Ram-branded pickups with diesel engines from FCA cannot be too comparable to Dieselgate which sees the Volkswagen group under accusation ". Giuffra stressed that, unlike what happened at the beginning of the dispute involving Volkswagen, FCA has already proposed a software modification with which it can solve any engine-related issue without penalizing the performance or value of the car.
THUD OF FERRAGAMO: SALES EXPECTED TO FALL IN CHINA
The sharp fall of Ferragamo (-5,1%) should be noted. In a Parisian event by Kepler Cheuvreux, the management of the Florentine company was particularly cautious on the profitability prospects (Gross margin) for 2017. There is also concern about the stability of sales in China, after Moody's downgraded Beijing's rating . Ferragamo makes about 31% of its sales with Chinese customers, including direct sales in the territory of the People's Republic (14%), Chinese tourists in Macao and Hong Kong (7%) and Chinese tourists traveling in Europe and the USA.
Utilities were negative: Enel fell by 0,9%, Snam -1,4%, Terna -1,4%. Positive Telecom Italia, +0,8%.
