American GDP collapses, confidence in the euro area sinks, but the stock exchanges are celebrating, because there could be an effective cure for Covid 19 and this seems to be the best medicine for the economy too.
European stocks closed sharply higher, pushed in the afternoon by Wall Street, which travels with the wind in its sails, after the announcement that the antiviral Remdesivir Phase 3 Semlic of the US Gilead Sciences (+4,35%) showed "data positive". The decisive rebound in oil contributes to the climate of confidence, with investors looking to the progressive reopening, to the hope of a cure, to the imminent moves of the central banks. The Fed will make its decision tonight, while the ECB is expected tomorrow. Despite the growth in US weekly inventories, Texan crude rose 28,7% to 15,88 dollars a barrel; Brent +11,7%, 22,86 dollars a barrel.
The European Stock Exchanges therefore closed at session highs: Frankfurt +2,67%%; Paris +2,22%; Madrid +3,17%; London +2,67%. The climate was the same in Piazza Affari, which regained 18.067 points, +2,21%, despite the demotion suffered yesterday by Fitch which, surprisingly, brought Italy's rating to BBB- (with stable outlook), only one step above junk bonds. The blow weighs on bonds and on the spread between Italian and German ten-year bonds: 225 basis points, +2,79%, after a wider expansion at the opening, with the BTP yield stable at 1,76%. The decision also made itself felt on the primary.
This morning the Treasury placed government bonds at auction with rising yields: 3,75 billion euros of ten-year bonds were assigned with rates rising to 1,78% from 1,48%, demand equal to 1,31 times the amount offered. Also sold were 10-year BTPs, maturing in 2026 with a residual life of 6 years, for €1,5 billion at a rate of 1,36% and €745 million in CCTEUs, maturing in 2024, with a yield of 1,38%. On the other hand, the macroeconomic picture is frightening, especially for a country with gigantic debt like Italy.
In the USA the recession seems official: the first reading of the GDP for the first quarter of the year is -4,8% (against expectations for -3,5%) and consumer spending, on which two thirds of the US GDP depend , down 7,6% from +1,8% in the fourth quarter. This is the first decrease since the first three months of 2014, when the economy contracted by 1,1%, and the biggest drop since 2009. The forecasts are for a very dark second quarter, with a drop in GDP up to 30 %.
Even in Europe there is little to be happy about. According to the Diw economic institute, the German economy will contract by more than 6% this year and the coronavirus recession will be deeper than that caused by the 2008 financial crisis. According to Diw, Europe's largest economy has probably contracted in 2% in the first quarter and will record a 10% decline in the April-June period as large sectors of the economy have been shut down since the outbreak of the epidemic.
In a situation of this kind, economic sentiment is falling to the ground both in the euro area and in the EU: writes the Commission by publishing the ESI indicator which fell to -27,2 points and -28,8 respectively. It's the sharpest monthly drop since 1985, and far surpassed March's record low. The indicator of employment expectations (EEI) was also in free fall in April, plummeting to the lowest level ever recorded, -30,1 points in the euro area and -31,2 points in the EU.
On the markets, however, the idea that Covid can be treated and the recovery of oil are a nice injection of confidence.
In Piazza Affari, energy stocks are among the most popular stocks: Tenaris +5,85%; Saipem +5,56%; Eni +3,14%; out of the main Saras basket +11,7%. Purchases also flow to Buzzi +6,3%; Recorded +5,86%; Telecom +5,75%; Leonardo +5,43%. On the latter stock, Fidentis brought the recommendation to Buy from Hold. Brilliant session for Exor +3,88% and Fiat +3,66%. Asset management is still in evidence, while the banks archive a session marked by uncertainty with a slight increase.
In red Diasorin -2,93%. Snam loses its shine, -0,17%, in cash yesterday after the declarations of the Minister of Industry, Stefano Patuanelli, who opened the hypothesis of a merger with Terna, +1,77%. The two companies respectively own most of the Italian power and gas pipelines and the operation could be facilitated by new equity interventions by Cassa Depositi e Prestiti.
The euro is up against the dollar, with the exchange rate around 1,0854. Gold in fractional decline, $1716,80 an ounce.
