Stop QE and zero interest rates. Goodbye to Euroland since July, now the problem is inflation and everything must be done to fight it: a more hawkish than expected ECB today shook the stock and bond markets, which sank after these news, only to then recover slightly, however closing in red.
Business Square it is the worst and falls by 1,9%, below the psychological threshold of 24 points, to 23.776.
The blow is heavy a Frankfurt -1,71% Amsterdam -1,6% Madrid -1,45% Paris -1,4%%. Outside the eurozone London falls by 1,6% and overseas Wall Street, after a bad start, is moving weakly awaiting the dreaded Stars and Stripes inflation data to be released tomorrow, which could guide the Fed's next moves. If the ECB has steered towards a tightening, the US central bank is already moving in this direction and could accelerate further and to an extent that could block growth, or so investors fear. In an environment where central banks scare the bull, the dollar strengthens. The euro is trading lower around 1,066, after having danced a lot above and below 1,07 during the day.
Spread in orbit
Government bonds remain in the crosshairs: the 3-year Treasury sees prices falling and rates rising, over XNUMX%.
However, it is the Italian debt market that suffers the most. The 10-year BTP closes with a yield of 3,59% and, despite the Bund of the same duration pushing on the accelerator and marking +1,43%, the spread it surges up to 220 basis points, to finally close at 216, up 7,2% compared to yesterday's close. The umbrella that the ECB should open against these differences has not yet been opened.
Lagarde: "This is not a step, it's a journey"
If anyone hoped that Christine Lagarde would continue to move softly today, they had to think again.
Once the aid plan is over, the At the end of July, the ECB will raise rates by 25 basis points and it is the first time this has happened since 2011. In September he will then be able to opt for a larger increase, of 50 basis points (the strongest move in 22 years) and then we will see, but the Governing Council expects that a gradual path will be appropriate but backed by further interest rate hikes. This "is not just a step - explains Lagarde - it's a journey" and we will proceed with "a series" of increases, based on macro data, to bring inflation towards the 2% target. But today prices are running strong and will continue to do so.
La The ECB has also changed its projections, taking into account ahigher inflation and lower growth.
Regarding the safety net for the possible widening of spreads such as that of Italy, the ECB did not go into much detail: "in the event of new cases of financial fragmentation due to the pandemic, the reinvestments of the Pepp program can be regulated in the timing, asset type and jurisdictions at any time”. On the other hand, today's meeting focused “above all on the problem of high inflation and on the process of normalization of the monetary policy started in December”.
However, Lagarde assures that new instruments will eventually be introduced: "we will not tolerate episodes of financial fragmentation that hinder the correct transmission of monetary policy throughout the Eurozone". The ECB has existing tools and “knows how to design and deploy new tools if necessary”.
Intesa Sanpaolo: "The Fed will not be complacent"
Attention now shifts to the Fed which, in view of the June meeting (in which it already expects a rate hike of 50 basis points), will be able to draw indications from the data on consumer prices out tomorrow.
According to the Intesa Sanpaolo research office, the US central bank will not be very complacent in the coming months.
“According to the assessment of our economists – writes Intesa – inflation and the labor market will not allow the Fed to be complacent, with the expectation of monthly changes in core prices still between 0,4 and 0,5% and drop in the unemployment rate by a few tenths in the summer. The forecast of the Intesa Sanpaolo Studies and Research Department is for rates of 3% at the end of 2022 and between 3,5 and 3,75% in 2023, with a possible overshooting due to the new Fed strategy, no longer preventive, but conditional on the effective achievement of the slowdown in price dynamics and the rebalancing of the labor market".
Only three blue chips are saved in Piazza Affari
In Piazza Affari today only three blue chips are saved: Prysmian, +1,12% is confirmed as positive; Interpump +0,43%; Bper +0,62%, in view of the industrial plan after the entry of Carige. In general, the banking sector is limiting the damage, looking with some favor at the end of the era of sub-zero rates. On the other hand, asset management securities such as are confirmed in the red Finecobank -4,22% and Banca Mediolanum -2,98%. Bad nexi -3,86%.
The long red trail of the Ftse Mib then opens with Iveco, -6,67, in a context of overall weakness in the automotive sector.
Utilities starting from are negative Ivy -3,94% Italgas -3,43% A2a -3,18%.
The declines are also strong for oil stocks: Tenaris -4,39% Saipem -4,08% Eni -2,54%.
Il Petroleum but it stays on track. Brent appears little moved and trades around 123 dollars a barrel.
