There is an air of tightening on the monetary policy front. It now seems obvious that at the meeting on 14 June the ECB will develop the methods for ending QE purchases by the end of the year. The euro advances to 1,178 against the dollar, fourth day of strengthening. The statements of Peter Praet, the chief economist of the Central Bank, who has always been in close harmony with Mario Draghi, show that monetary policy in the euro zone does not change due to the Italian problems: the exit from QE will be gradual, but it will happen.
Already next week the Federal Reserve will proceed to increase rates, in line with the roadmap outlined by President Powell, not at all impressed by the collapse of the Brazilian real or the Mexican peso, put under pressure by the dollar.
This is not a time for international solidarity. Mexico has just introduced its tariffs, in response to Trump's measures. The European Union has given the green light to measures worth 2,8 billion euros against American imports. The topic of trade will be at the center of the G7 in Canada from tomorrow, but it is unlikely that the US president will take a step back. The trend of the markets, moreover, for now rewards the policy of the White House, galvanized by the good results of the economy. Bildenberg, the summit of the "strong powers" which will be held today in Turin, in the usual climate of great secrecy, will certainly deal with this.
ASIA ADVANCES IN THE WAKE OF WALL STREET
The markets, despite the tensions on currencies and bonds, confirmed the positive trend this morning. All the stock markets in Asia, from Japan to Australia, are up this morning, in line with last night's rise on Wall Street (Dow Jones +1,4%). The Tokyo stock market gains 0,8%, especially companies that sell abroad stand out, including automotive companies: Toyota +1,3%. The CSI 300 index of the Shanghai and Shenzhen lists rose by 0,2%. Hong Kong +0,6%. The South Korean stock market rises by 0,7%, India + 0,6%, Australia + 0,7%.
US markets are effervescent. The Nasdaq continues to advance (+0,6%) to a new record. The S&P 500 index did better (+0,86%) and especially the Dow Jones (+1,4%).
Financials are on the rise, supported by the performance of T bonds. Of note is Comcast's leap forward (+3,8%), in view of the battle to conquer Sky. Tesla flies (+9,7%) after Elon Musk guaranteed that from the end of June the production of the Model 3 will finally reach 5 thousand units per week.
Brent oil is trading this morning at 75,7 dollars a barrel, up 0,5%. All eyes are on the next OPEC meeting, where the possibility of increasing production will be discussed. According to Bernstein, it is possible that the Vienna meeting will end in nothing. If the current extraction limits remain in force, crude oil could reach around $100 before the end of the year. In Piazza Affari Eni -0,1%, Saipem -1%, Tenaris -0,4%.
MILAN FINDS THE PLUS SIGN AGAIN, COUNT PRO-NATO
The Italian political situation and the future moves of the European Central Bank have influenced the main European stock markets. The result was a volatile and contrasting session, not at all influenced by the new progress of the Nasdaq. The prospect of an imminent "normalization" of the ECB's monetary policy has pushed the euro upwards, rising to 1,178 against the dollar.
In his speech to the Chamber, Prime Minister Giuseppe Conte did not provide concrete elements on the coverage for the flat tax or the reform of the Fornero law but he gave assurances on the pro-Atlantic line in foreign policy and announced news regarding cooperative credit and cooperative banks.
With a boost at the end, the Milan Stock Exchange (+0,26%) closed in positive territory at 21.808 points, a predominantly red session in which a high of the day was recorded at 21.877 points and a low of 21.411 points .
THE MARKETS REWARD MADRID IN PINK
Frankfurt did better (+0,34%), which has now overtaken Piazza Affari in 2018. Flat Paris. Little movement in London +0,33%.
The Madrid Bolsa was in great form (+1,03%) which thus celebrated the pro-European government presided over by the socialist Sanchez, characterized by the strong presence of women (eleven women out of 16 ministers). Spanish industrial production in April grew by 1,9%, well below Reuters forecasts for a 5,1% increase.
PRAET AND WEIDMANN CONFIRM THE END OF QE
“It is clear that next week the Governing Council will have to assess whether the progress made so far has been sufficient to require a gradual end to our purchases.” Thus Peter Praet, member of the executive committee of the ECB, confirmed that at the meeting on 14 June in Riga, the board will discuss the timing for exiting QE. Bundesbank President Jens Weidmann is of the same opinion. “The markets have long expected the purchases to end by 2018 – commented the banker – It will be a first step on the long path towards the normalization of monetary policy”.
THE FEVER ON BTPS DOESN'T APPEATE: SPREAD UP TO 256
These signals have contributed to accentuating the sales on Italian debt securities, already under pressure due to the prospect of an increase in the deficit, aired by Prime Minister Conte and the utterances of Deputy Prime Minister Matteo Salvini who reiterated the "sacred commitment to dismantle piece by piece piece” the Fornero law.
This explains the deep red closing: the spread between ten-year BTPs and Bunds reached a peak of 256 points before closing at 247, with the rate rising to 2,925%. At the end, the gap was narrowed by the sales of German securities, influenced by the behavior of the US treasury. The two-year BTP, the most sensitive to the influence of politics, reached 1,25% +31 basis points.
The litmus test of market nervousness on Italian paper is the surge in five-year 'credit default swap' derivatives which rose to a maximum of 233 basis points from 205 the day before.
BANKS IN SWING, POPULAR TOWARDS RESURRECTION
Banking stocks are in flux, with the sector index starting off well after the wave of sales on the eve of the day, slipping heavily into the red and then closing with a clear recovery at +0,8%, in line with the European basket. The session was also influenced by the new warning from Moody's which focused the index on the high level of non-performing loans of Italian banks: the ratio between non-performing loans and total loans in the Italian system stands at around 11%, a level higher than that of the European average of 4%.
The banking topic was addressed by Prime Minister Conte in his reply to Montecitorio. The Prime Minister announced that the yellow-green government will review the regulations on cooperative banks and cooperative credit. The prime minister also confirmed his intention to proceed with the separation between investment and public credit banks.
DEUTSCHE BANK: BANCO BPM IS AN OPPORTUNITY
Banco Bpm in evidence (+4,4%). Deutsche Bank reiterated its 'buy' rating on the stock, noting that the bank is "improving quarter after quarter" and suggesting it should use the recent political weakness as a buying opportunity. Monte Paschi also increased (+2,9%). Mediobanca also rises (+3,2%).
Ubi +1,7%. The sale of a package of impaired loans, said CEO Victor Massiah, is proceeding "well, we are perfectly on time, everything is absolutely regular". Among the Bigs, in deep red in the morning, Unicredit closed on a recovery (+0,91%). Intesa -0,5%.
COLLECTION OK, FINECO AND BANCA GENERALI JUMP
Fineco Bank runs in the managed sector (+5,9%), which announced the collection numbers for May: 686 million, above forecasts. Banca Generali's collection +3,83% to 21,7 euros, equal to 603 million euros, was also judged positive.
THE ARRIVAL OF AMAZON FRIGHTENS INSURANCE
The news that Amazon is preparing to enter the home insurance sector is putting pressure on European insurance companies.
In Milan Generali closed flat. Unipol (-0,5%) expects strong and quick responses from Bper, of which it holds almost 10%, on the credit reduction front
deteriorated. Carlo Cimbri, number one of the insurance group, reiterated this during the annual Uilca congress.
Enel -0,2%. Deutsche Bank cuts target price. A2A -0,7%.
Telecom Italia +0,7%. Exane has reduced its target price from 0,72 to 0,7 euros (neutral), a level which remains significantly above current stock market levels.
FALK RENEWABLES AT THE TOP, GOLDMAN LAUNCHES AMPLIFON
In the Star segment Falck Renewables (+10%) is the best, after announcing the simultaneous signing and closing for the acquisition of three photovoltaic projects, already in operation, for a total of 14,5 MW of solar and for the rights to invest in future projects with Syncarpha Capital, valued in total at $27,44 million.
Astaldi still strong (+4%). Amplifon did well (+3,6%). Goldman Sachs and Kepler Cheuvreux raise their rating to Buy. Banca Sistema also rose significantly (+7,1%), driven by rumors of interest from private equity funds specializing in financial institutions.
