The Great Fear, at least for now, has returned. Italy, in the eyes of the market, remains a major problem, but not a threat to the future of the euro. This is the prevailing feeling while waiting for slightly clearer news from the Bel Paese. But the positive outcome of the government bond auction and the recovery of Piazza Affari have restored some serenity to the markets: this morning the euro is up slightly to 1,167 against the dollar, +0,1%. Italian events, warns Goldman Sachs, however, will force the ECB to postpone the first rate hike after mid-2019, despite the rise in inflation in Germany.
US DUTIES ON METALS TAKE OFF TOMORROW
Once Italy's risk has been reduced, the other problems re-emerge. Starting with the offensive on US trade. Wilbur Ross, the billionaire head of American policy on duties, reiterated that the new tariffs on metal imports from Europe will come into effect on June XNUMXst and reiterated his hard line towards China. The Iranian front is no less hot. Yesterday Tehran presented France with an ultimatum: either it refuses to comply with Washington's sanctions within two months or the work to double the South Pars terminal will pass from Total to the Chinese CNPC.
JAPAN RISES, CHINA ENTERS MSCI BASKET
In short, there is no shortage of problems. But the appetite for risk is growing again among the Stock Exchanges. The stock markets of Asia are up this morning. The Tokyo Stock Exchange rises by 0,5%, while the yen is little moved. Japan's industrial production data, which rose less than expected this month, was disappointing.
In China, however, an indicator of industrial activity elaborated by the central statistics office, went up to 51,9 points, from 51,4 in April. Better than expectations. The Hong Kong Stock Exchange is up by 0,9%, the CSI 300 index of the Shanghai and Shenzhen stock exchanges gains 1,5%.
It is a historic day in its own way for international finance. Today, after three postponements, 234 Chinese stocks that have so far remained outside the basket of the main products aimed at foreign investors have entered the MSCI Emerging Markets index. Beijing stocks will now account for about a third of funds dedicated to emerging markets.
WALL STREET OK. THE FED FILES THE VOLCKER RULE
Strong recovery yesterday evening Wall Street thanks to the recovery of financial stocks and the rebound of oil. All on major indices: Dow Jones +1,26%, S&P 500 +1,27%, Nasdaq +0,89%.
Another record for Russell 2000 (+1,5%). The small cap index thus signals the good momentum of employment (+178 new jobs in private industry) and growth (revised to +2,2% the first quarter figure now seen accelerating to 3%) .
Meanwhile, the Fed is working on a revision of the Volcker Rule, the legislation that prohibits large banks from trading with their own funds.
OIL IN FLIGHT AGAIN. ORDERS FOR SAIPEM
Oil is on the rise: Brent closed up 2,8%, at 77,5 dollars a barrel, also thanks to a report which talks about the possibility that Opec and Russia may agree not to increase production, keeping it on current levels. North Sea crude traded at $77,2 this morning. The WTI barrel gained 1,48 dollars to 68,21. Exxon +2,9%, Chevron +2,7%.
At Piazza Affari Eni +1,3%. An ups and downs day for Saipem which moved around parity for the entire session and then gained 1% in the final. HSBC has announced that it has initiated coverage with a Buy rating and a target price of €4,25. In addition, orders are arriving from Thailand, Mexico and Azerbaijan. Equita estimates a 2018 order collection of 7,35 billion euros.
MILAN RECOVERS, FOLLOWS FRANKFURT
Piazza Affari raised its head yesterday after a nightmare start to the week. The success (albeit at a high price) of the BTP auction and the bet on a positive outcome of the government crisis have momentarily eased the tension which remains very high. Paolo Savona's step backwards could unblock the crisis, as suggested by the Movimento 5 Stelle. But the situation remains uncertain: the Quirinale and Carlo Cottarelli have said they "do not want to force the times". In the meantime, the umbrella of the ECB remains open: the purchases have continued regularly, despite the very high volatility.
The Milan Stock Exchange closed up 2,09% at 21.798 points. Very sustained volumes for a value of 4,5 billion euro.
The other European Stock Exchanges are more contrasted. Paris fell (-0,2%), penalized by the coupon detachment and Zurich (-0,39%).
Among the European lists, Frankfurt shines +0,96%, also supported by a series of macro data: retail sales and unemployment in Germany, respectively up by 2,3% in April and down by 5,2% in May. Inflation rises +2,2%, beyond estimates. London +0,78%, Madrid +0,44%.
BLACKSTONE: ITALY, WHY NOT?
The tensions of the Bel Paese do not scare all the big names in finance. Blackstone Group remains open to the possibility of making deals in Italy despite the political uncertainty. This was stated by the president and chief operating officer Jon Gray. “Of course,” Gray said at a conference organized by Deutsche Bank, when asked if the company would buy Italian assets right now. “It depends on the price”, of course.
German Finance Minister Olaf Scholz said he was firmly convinced that the majority of Italians have "a very pro-European position" and that the eurozone is stable and better prepared to face difficult situations than in recent years.
BTP DAM HOLDS AT AUCTION, SPREAD BELOW 250 BP
It was another field day for the debt market. The main benchmarks on the Italian secondary market closed up, but below the maximums for the session, on a day characterized in any case by large fluctuations in reaction to the continuous evolutions of the Italian political scene.
The balance of the auctions is not exciting but, given the premises, the worst has been avoided. In total, €5,571 billion was placed out of a supply range between €3,75 and €6 billion.
The ten-year anniversary was awarded for 1,821 billion against a range expected between 1,5 and 2,25 billion. Offers asking for a rate above 3% have been cut.
On the other hand, the allocation of the other two securities, the 5-year and the Ccteu, is maximum, however they are also offered for a rather limited amount.
Demand from specialists on the 6-month BOT was particularly good at the reopening of the auction on Tuesday: in fact, all the 550 million envisaged were placed, with demand equal to 2,224 billion, more than four times the amount offered.
After reaching a peak of 324 basis points yesterday, the spread with Germany on the 249-year segment fell to 3 basis points, with a temporary return of the yield below 2%, while that on the 231-year segment reached a minimum of session below 2 basis points, with a return of the yield below 1,583%, up to a low during the session at XNUMX%.
The 5-year CDS fluctuated during the session between 247 and 272 basis points and around 17,30 it was 249 basis points.
FCA REVEALS ITS CARDS: JEEP DOUBLES ITS TARGETS
The expectation for tomorrow's Fiat Chrysler Investor Day (+4%) has partly diverted attention from the political crisis weighing on Piazza Affari. According to Bloomberg, the doubling of Jeep's targets and the creation of the luxury pole with the enhancement of Maserati will be announced for the occasion. The Fiat brand, on the other hand, will be withdrawn from the USA and China. The US agency is betting that, on the occasion of the Balocco meeting, where he presented himself to the international press for the first time in 2004, Marchionne could wear a tie. Ferrari also did well (+1,8%).
BANKS IN THE RALLY. FINECO AT THE TOP
However, it was the banks that led the fight. The sector index rose by 2,58%, in contrast with the European Stoxx for the sector -0,43%. The exception is Ubi, slightly below parity.
The best blue chip is Fineco +6,44%. The rest of the sector also did well despite the caution of BofA Merrill Lynch who, given the political situation, believes that the sector represents "a problematic investment". The broker therefore cuts his judgments on Italian institutions: Unicredit (yesterday +1,4%) and Intesa +3,2% to 'neutral' from 'buy' Banco Bpm +3% and Ubi to 'underperform' from 'neutral'. Mediobanca, among the best stocks on the list with a jump of 6,4%, remains 'buy' instead. The study also highlights other possible risks for the banking system, such as a future liquidity shortage or greater difficulties in the sale of non-performing loans. FinecoBank +6%.
The Moody's agency has decided to put 12 Italian banks under observation following the start of the review of Italy's sovereign rating in view of a possible 'downgrade'.
POSTAL +3,9%: THE SPREAD CAN BE AN OPPORTUNITY
Unipol +2,5%. UnipolSai +4%. There is talk in Il Sole 24 Ore of a reorganization of the chain of control, the article hypothesizes an equal marriage with another operator in the sector, even a foreigner
Italian post office +3,9%. CEO Matteo Del Fante declared that the widening of the spread between ten-year BTPs and Bunds "may constitute an opportunity for liquidity" of the group. Management has confirmed that the coupon will be increased by 5% each year between now and 2020, as envisaged in the plan.
ITALGAS ALSO GETTING READY FOR INVESTOR DAY
Italgas +3,04% to 4,48 euros: according to Berenberg (buy, Tp 5,3 euros) it could raise its dividend on the occasion of the Capital Markets Day on 13 June.
Purchases on Moncler (+0,84% at 38,55 euros) after HSBC increased the target price of the stock from 27 to 37 euros, confirming the hold recommendation.
SUSPENCE FOR TREVI, COIMA IS STILL SHOPPING
Trevi +3,33% awaiting news from the Board which met to evaluate Bain's proposal to subscribe a 150 million super senior bond with a rate of around 10% against the conversion into equity and equity financial instruments of about 300 million in debt.
Milan Fair +2%. Banca Imi raised its target to 3,6 euros from 2,6 euros and improved its recommendation (Buy from Add).
The shopping of Coima Res continues (-0,7%) which has purchased a 12.300 m58,5 property located in via Tocqueville, in the Porta Nuova area of Milan: price XNUMX million.
