From Asia comes the echo of new records on the Stock Exchange, accompanied by negative news for the economy. China slows down, Tokyo revises third-quarter GDP for the worse. Wall Street is starting the week on the back of Friday's strong new jobs data. Attention is already focused on the next Fed meeting on 16 and 17 December. Spotlights turned on in Europe on the outcome of the second Tltro auction, scheduled for Thursday 11. The markets are now concentrated on waiting for new measures from the ECB to counter the drop in prices.
Banks closed, stock market open. This morning the Italian market, in a semi-holiday version, faces the impact of downgrading of the Italy rating decreed on Friday evening by S&P with a lapidary judgment: Italy's downgrade reflects "the ongoing weaknesses in the performance of real and nominal GDP, including the erosion of competitiveness".
The downgrade shouldn't weigh too much on Treasuries in the short term, given Friday's current government purchases: the yield on the BTP dropped by eight basis points to 1,94%, with the spread to levels not seen since May 2014 at 116 basis points. Record drops also for the ten-year anniversary of Portugal (2,725%) and Spain (1,803%). The yield on Greece also fell (7,24%).
According to the Frankfurter Allgemeine, the ECB plans a bond purchase program for an amount exceeding one trillion euros. The situation of the stock market is more delicate, the one most exposed to the weakness of the economy denounced by the rating agency.
PRADA SINKS IN HONG KONG (-8%). LUXURY AT FIRE
A new negative signal arrived this morning for luxury goods, one of the few sectors of the Italian economy in good health until a few months ago. Prada collapsed on the Hong Kong Stock Exchange this morning (-8%). On Friday, the Milanese house announced a 44% drop in third-quarter profits to 74,5 million, underlining that “we are witnessing a revision of the objectives of the luxury market, the size and duration of which are not yet well defined. It is foreseeable that the shock will be transmitted this morning to the luxury stocks of Piazza Affari, already under stress last week. In the viewfinder Salvatore Ferragamo, Moncler and Tod's. The thud of Miuccia Prada and Gianfranco Bertelli's company is practically the only negative note coming from the Eastern markets.
SHANGHAI +1,4% WILL NEVER STOP, TOKYO RECORD
Shanghai was confirmed as the most effervescent market this morning: +1,4%, or +30% since the end of October. Since the beginning of 2014 the increase is 41%. Such euphoria contrasts with the slowdown in the economy: Chinese exports rose by only 4,6% in October (+8% in one year), imports are down by 6,7% confirming the lower demand for raw materials industry firsts. The market boom, the effect of both the common platform with Hong Kong and the devaluation of the renmimbi against the dollar, is putting Beijing in difficulty: on the one hand the economy needs liquidity, on the other there is the risk that in this way only feed financial speculation.
Tokyo also rose: the Nikkei index +0,5% exceeded 18 thousand despite the downward revision of the GDP data for the third quarter: -1,9% against the first estimate -1,6%. Operators are already looking to the upcoming elections on Sunday which will have to consolidate the leadership of Shinzo Abe as well as the comforting estimates for the end of the year: fourth quarter GDP should grow by 4%.
IT'S STILL SUPER DOLLAR. WALL STREET TO NEW HEIGHTS
The week begins under the sign of the dollar galloping towards new records. The dollar/yen cross is at 121,580, its seven-year high. The euro also fell to lows: 1,2270. As a consequence, the price of crude oil slips again: 65,07 dollars (-77 cents) for crude oil. Despite the slowdown in energy stocks, Wall Street stocks have already launched their year-end sprint. In the past week the Dow Jones +0,7% rose to a new high one step away from 18 (17.959,79). Standard & Poor's (+0,4%) revised its record to 2.075,37.
Positive week also for European stock markets, despite the reverse gear engaged on Thursday afternoon after the disappointing outcome of the ECB meeting: the Stoxx Europe 600 rose by 1,1%, fourth consecutive week up. The EuroStoxx 50 index rises by 2,5% and reaches the highs of the last two and a half months: from the lows of the last 12 months marked in mid-October, the index of the 50 blue chips in the Eurozone has gained 13%.
Conversely, the MSCI Emerging Markets Index recorded a decline of 1,9%. The BIS of Basel has announced the alarm on the sovereign debt of the Emerging Markets: the rise in the dollar risks creating major problems for countries that are in debt in the US currency.
SAIPEM IN THE TRENCH. WEDNESDAY THE BOD
Saipem's situation remains difficult: over the weekend, the CEO of Gazprom, Alexei Miller, reiterated that the Russian decision to cancel South Stream is irrevocable. It is the umpteenth cold shower that Saipem's board of directors will have to take note of next Wednesday. The company, according to what was declared by CEO Umberto Vergine, will suffer a loss of revenue of 1,25 billion euros from the cancellation of the project.
The first negative reactions from brokers have already rained down on the stock: Raymond James cut the target to 9,60 euros from 11,50 euros, an Underperform rating. Morgan Stanley reduced the target price to 12 euros from 16,50 euros, Equal Weight opinion. Today there may be new bad grades.
Among the utilities under scrutiny Enel Green Power, weak on Friday after the sharp decline the day before. Market rumors speak of a lowering of the objectives for the current year. Kepler Chevreux has removed the title from his favorites list.
FCA ACCELERATES: BOND AND PLACEMENT BY NEW YEAR'S EVE
Sergio Marchionne accelerates in view of the goal of an exceptional 2014. The CEO of Fiat Chrysler (+5,2% on Friday), intends to close by December the placement of 100 million FCA shares and the convertible bond for 2,5 billion dollars by exploiting the current favor of the market: shares at their highest levels since 2001 and declining yields.
In detail, the company announced the launch of an offer of 87 million ordinary shares (deriving from treasury shares and withdrawal), with an option reserved for placement banks to purchase an additional 13 million ordinary shares, and the launch of a mandatory conversion bond loan for a total notional amount of 2,5 billion dollars maturing in 2016. Also in this case, an option is envisaged reserved for the placing banks to purchase an additional 375 million of the bond loan.
As for convertible bonds, only 1,750 billion dollars will end up on the market because Exor (+4% on Friday), in order not to dilute, will subscribe around 750 million. The finance company increased the 150 million bond loan issued on 500 October last with maturity in October 8 by 2024 million euros.
RATING-PROOF INTESA AND UNICREDIT
Italy's downgrade is likely to be reflected above all on financial stocks, protagonists of Friday's leap. The quotation at 2,5220 euros is at its highest since June. Intesa is the second best blue chip in the Eurostoxx 50 index with a 37% gain since the beginning of 2014. Only the French Orange (+61%) has so far been able to do better. The Intesa Sanpaolo Vita division has organized a series of meetings with investors in the fixed income sector in view of the possible issue of a perpetual subordinated bond.
Between ups and downs Unicredit (+4,8% on Friday) archives the weekly balance at -0,6%. Nomura has decided to include SocGen, Barclays and Unicredit in the list of favorite banks in the eurozone (Top EU Banks Picks). The judgment is Buy with a target price of 6,70 euros.
THE VOLUNTARY DISCLOSURE SUPPORTS MANAGEMENT
To follow the march of Finecobank (+3,3%) which has achieved a new high since the quotation following the dissemination of data on funding. Still on the asset management front, banks and asset management companies are warming up their engines in view of the voluntary disclosure, afterwards the approval of the law. Signals are multiplying in view of the agreement on the exchange of information with Switzerland.
Mediolanum (+4%) and Azimut (+3,8%) advanced after the release of data on November collection.
