The day of truth has arrived for the ECB. Indeed, for the policy of low interest rates that fuel the rise in share prices across the planet. Markets are watching with increasing attention the upcoming appointment of the Fed chairman, the hawk John Taylor or the dove Jerome Powell, even if Donald Trump does not rule out a confirmation of Janet Yellen. In London, the first rate hike in ten years is expected (and feared), especially after the latest economic data.
But the mother of all decisions will be the one that the ECB directorate will take this morning. Predictions fluctuate for an adjustment ranging from 20 to 40 billion per month. Instead, it is taken for granted that the Qe will also continue in 2018. As usual, the signals coming from Mario Draghi's press conference will be very important. In particular. The emphasis that will be placed on the possibility of reopening the purchase tap "in case of need".
Simplifying as much as possible, it can be estimated that the more gradual the reduction of purchases through QE, the more positive the reaction of the bond market will be. In the event of confirmation of the purchases for 2018, a further recovery of the Btp/Bund spread in the 1,9% area is not excluded. But Draghi will have to worry about containing the widening of the gap between US yields and the Eurozone which has reached record levels: on maturities from two to ten years, the US/Germany spread fluctuates between 230 and 195 basis points, in favor of US Treasuries.
THE BUND RISES TO 0,5%, T BOND AT THE HIGHEST SINCE MARCH
The tensions on the eve are at the basis of the increase in yields on the US 2,475-year T bond, which rose to a maximum of 0,50% (the highest for seven months) while in parallel the German Bund with the same duration grew to 2,40%. Overnight, the yield fell to 1,1833%. Meanwhile, the euro rose to XNUMX against the dollar.
FROM TOKYO TO SHANGHAI, ASIA ON THE GO
The Tokyo Stock Exchange rally resumes (+0,3%). Hong Kong -0,1%. Seoul -0,1%. Mumbai -0,2% At the end of the Chinese Communist Party Congress, the CSI 300 index of the Shanghai and Shenzen lists rose by 0,7%. The latest sign of President Xi Jingping's overwhelming power comes from the composition of the Politburo: among the seven chosen, as per tradition, there is not a manager around 50 years of age, designated to take over the leader's legacy. In short, Xi will remain in office for a long time.
AT&T AND BOEING HOLD THE DOW JONES BACK
US stocks were down sharply, pushed down by disappointing data from AT&T -3,9% and Boeing -2,8%, which revealed higher-than-expected costs for the aircraft's in-flight refueling programme.
The Dow Jones index fell by 0,48%, in line with the Nasdaq (-0,52%) and the S&P 500 (-0,47%). Positive macro data: orders for durable goods grew by 2,2% on a monthly basis in September. Sales of new homes in the United States also did well, increasing by 18,9% in September compared to August.
SAIPEM CORRECTS AFTER THE RALLY
Oil prices contrasted: the WTI lost 29 cents to 52,18 dollars and Brent rose by 7 to 58,4. the hypothesis is circulating that Saudi Arabia and Russia want to extend the agreement to cut oil production until the end of 2018. In Piazza Affari, Saipem fell by 3,8% after +10,8% on Tuesday on the wave of quarterly results and confirmation of 2017 guidance. Barclays raised its target price to 4 from 3,8 euros and Natixis to 3,4 from 3,29 euros. Eni is also bad -0,8% in a depressed context for oil companies also on other European markets.
ARABIA DESIGNS OASIS TECH: 500 BILLION DOLLARS
In Riyadh, in front of an audience of 3.000 investors, the heir to the Saudi throne, Mohammed bin Salman announced the creation of Neom, a new economic zone with a high rate of technological innovation on the banks of the Red Nar. It will be a $500 billion investment, partly backed by the Saudi sovereign wealth fund, which will grow to $400 billion. In part from private capital arriving from abroad. "The economic take-off - he said - is fundamental for the growth of a moderate Islam".
SCHAEUBLE'S LEGACY: ZERO DEBTS
While awaiting the ECB, it is worth noting the start of negotiations for the birth of the new German government. CDU-CSU, Liberals and Greens agree on one point: no new debts, no opening up to credit requests for the rest of the Eurozone. Bild publishes the photo of the party for Wolfgang Schaeuble organized by ministry employees; all dressed in black around the words "zero debt".
MILAN IN RED. LONDON FEARS RATES RISE
In Milan, the index falls by 0,81% to 22.446 points, the first decline after three consecutive sessions of increases. The other price lists in the Eurozone are also down: Madrid -0,51%; Frankfurt -0,46%; Paris -0,37%. The worst European market is London, -1,05%, due to the rise in the pound after the better-than-expected third-quarter GDP data. The prospect of the first rate hike in ten years is taking shape.
Slightly rising yields for government bonds in the Eurozone on the eve of the most delicate event of the year: 0,49-year German Bund up 10%, highest since the beginning of August; 2,03-year BTPs barely moved at 230%. On maturities from two to ten years, the US/Germany spread fluctuates between 195 and 2027 basis points, in favor of US Treasuries. The yield premium between the Italian and German 156-year August 155,3 bonds closed at 9 after a plunge to a low of XNUMX, a new record since XNUMX August.
TODAY THE CTZ AUCTION. 8,5 BILLION BTP ARRIVES
After the German placement in the morning – 2,385 billion euros of 0,48-year bonds assigned at an average rate slightly up to 3% – investors are preparing for the triple appointment of the Italian auctions at the end of the month. We start today with a total of between 4,25 and 6 billion Ctz and Btp indexed over ten years, to continue on Friday with XNUMX billion six-monthly BOTs.
On the Mts gray market, the new October 2019 Ctz traded at -0,08% compared to the historic low of -0,22% of the September placement on the May 2019 share. Next Monday, October 30, the Ministry of the Economy will make available of investors an amount between 7 and 8,5 billion euros in the reopening of five and 10-year BTPs together with the new CctEu April 2025.
MPS CLOSES AT 4,55. THE SATISFACTION OF PADOAN
“The work of these months has been understood and appreciated by the markets. The shareholder expresses support for the management which must now bring the Bank back to producing profits”. This is the reaction of the Ministry of Economy staff after Monte Paschi's return to Piazza Affari. The stock closed at 4,55 euros after having opened at 4,11 and having risen in the middle of the session until it broke through the 5 euros in the middle of the session, with an increase of over 28% compared to the first price, to then fall back.
BANKS WEAK IN THE AFTERNOON. INTERMOBILE FALLS
The basket of Italian banks sharply reduced gains in the afternoon, in line with the European one. Ubi Banca (+0,6%) and Unicredit (+0,6%) are up. Intesa Sanpaolo -0,1%. Fineco -0,51%, to 7,745 euros, on which Kepler Cheuvreux in any case raised the target price from 8,2 to 8,5 euros, confirming the buy recommendation after the results of the third quarter of 2017.
In addition to Carige (-2,8%), the former popular Creval (-3,45%), Bper (-1%) and Banco Bpm (-1,7%) suffer the most pronounced declines, downgraded to "hold" by Equita, which has eliminated its weight in the main portfolio. Banca Intermobiliare sinks into the abyss: -41,56%, at 0,571 euro per share, after the terms of the sale by Veneto Banca to Trinity, an investment company managed by Attestor Capital, which will then launch a takeover bid were announced . "The initial price offered for the control package and which will be the same for the takeover bid - writes Reuters - equal to 0,22411 per share, is decidedly lower than the stock market prices".
Among the insurance companies, Generali +0,8%. Vola Cattolica, promoted to "buy" by Equita, an upgrade that earned it a place in the broker's small cap portfolio.
FITCH PROMOTES LEONARDO, FCA BRAKES. SOGEFI DOWN
Among the blue chips, the best was Leonardo (-1,06%). Fitch has upgraded Leonardo's rating to 'BBB-', outlook stable. The decision reflects the improvement in the business profile and resilience resulting from the repositioning of the company's portfolio away from the "non-core" areas, as well as the improvements in the financial profile, explains the rating agency.
Among industrialists, however, Fiat Chrysler falls back (-3,23%). After the quarterly report, JP Morgan analysts raised the target price to 14,6 euros from the previous 10 euros, confirming the Neutral opinion. Deutsche Bank has revised its target price to 14 euros from 13 euros.
Sogefi – 9,7%, at 4,29 euros, is one of the worst stocks. Following the quarterly results just communicated, Kepler-Cheuvreux has decided to cut the recommendation to Hold da Buy, adjusting the target price to 5 euros from 4,80 euros.
FERRAGAMO CONTINUES THE DESCENT, DOWN MONCLER
The encouraging results and the euphoria on the stock market of Kering, +8,79% thanks to Gucci do not infect the listed Italian luxury sector. Salvatore Ferragamo dropped 2%, at 21,53 euros, the lowest for the year on the day JP Morgan changed its estimates and lowered its target price to 21,5 from 22,5 euros in view of the quarterly results. Friday ended the sixth negative week of the last seven. The positive performance since the beginning of the year has disappeared and is now in the red by 2%.
Moncler -0,9%. The luxury company yesterday presented its third quarter results. Revenues rose 12,4%, year on year, to 329 million euros.
Mediaset +0,46%, at 3,054 euro, benefited from the promotion by Mediobanca Securities from neutral to outperform, with the target price going from 3,63 to 3,61 euro.
