“We believe that, based on the partial results, the process of forming a government could prove complex and protracted, given that no party or coalition has obtained enough votes to form an executive,” reads the S&P report on the Italian elections. But, continues the agency, the outcome “should have no immediate impact on Italy's sovereign rating”. The opinion of US analysts effectively summarizes the opinion of the markets: the verdict of the polls it damages the Italian recovery, but it doesn't weigh much on Europe.
Italy is missing out on an important opportunity to influence the new architecture of the Eurozone, now a "private affair" of France and Germany. The banks are paying for the increased risk in Italy, manufacturing will have more difficulty in defending its rights in the trade war that is looming with the USA. Finally, the vote contributed to the relegation from neutral to underweight of the weight of Italian equities in UBS's portfolios. But there is no Italy syndrome, at least for now.
THE ANALYST: THE GAP COULD RISE TO 170 BP
An increase in the gap between the BTP and the Bund is taken for granted (“but- says Mario Piersimoni of Pictet – at 160-170 points it could be a buying opportunity”). However, as Lorenzo Portelli of Amundi explains, “we don't expect dramatic shocks on the spread, if anything, a lot of volatility with a possible widening of a few tens of basis points. In the short term, we could reach levels around 170 basis points if political uncertainty persists in the coming months, but they are significantly below the alert levels”. A domestic matter, therefore, but also a missed opportunity.
TRUMP LINKS DUTIES TO NAPHTA REVIEW
Meanwhile, tension has eased on the tariff front threatened by Donald Trump. The markets appreciated Donald Trump's offers to Canada and Mexico: accept the revision of NAFTA and the US will give you preferential treatment on steel and aluminum. According to Wall Street, the president's lunge on rates should be read in this way, as a tactical move within the negotiations rather than as a desire to open a general conflict that is also very much opposed in the USA.
The Republicans have not hidden their hostility, starting with the speaker in the House, Paul Ryan: "We are very concerned - he wrote - about the consequences of the trade war: we ask the White House not to go ahead with this plan". In addition, according to Bloomberg, even the first economic adviser to the White House, Gary Cohn, is trying to convince Donald Trump to desist.
AMAZON WANTS TO MAKE THE BANK, RECOVER CATERPILLAR
The US Stock Exchanges thus recovered the losses of the weekend: Dow Jones +1,37%, S&P 500 +1,10%, Nasdaq +1%. Worth noting are the leaps of Facebook (+2,14%) and Amazon (+1,58%). The e-commerce giant, according to the Wall Street Journal, has initiated contacts with some banks, including JP Morgan, for the launch of a current account and other placement services through its virtual network.
Leading the rise were companies using steel and aluminum. Among the best Caterpillar (+3,3%) and Boeing (+2,3%).
THE FED PREPARES SOFT RULES FOR CREDIT
The banks are doing well too. The sector was supported by the intervention of the governor of the Federal Reserve in charge of Banking Supervision, Randall Quarles, who affirmed that the rules of Volcker, in force after the crisis, are complex and ineffective, to be changed as soon as possible. Goldman Sachs +2%.
The dollar moved little: cross with the euro around 1,233. Bonds fell, the yield on the 2,88-year Treasury Bill climbing two basis points to XNUMX%.
OIL UP. SPOTLIGHT ON TENARIS, TODAY THE SAIPEM ACCOUNTS
Oil rose, Brent closed at 65,5 dollars a barrel (+1,8%): estimates on US consumption are positive. On Wall Street, oil finished up 1,1%.
In Piazza Affari it was a rough day for Saipem (+0,1%) which recovered six points from the day's lows. The company, which will announce the 2017 accounts today, has announced that it will update the 2016 financial statements within three weeks, object of objections by Consob. Positive Tenaris (+1,3%). The pipe maker is taking advantage of steel tariffs that the Trump administration has announced it would impose. Bernstein confirmed the outperform recommendation and the target price at 19 euros.
TOKYO AND HONG KONG ALSO RAISE THEIR HEADS
The positive trend continued this morning on the Asian lists. This morning the Japanese Stock Exchange marks a rise of 1,8% in the final session, awaiting the decisions of the director of the Bank of Japan. Hong Kong recovers (+1,6%) from last week's losses (-2,3%). CSI 300 index of Shanghai and Shenzhen stock exchanges +0,7%. BSE Sensex of Mumbai +0,3%.
MILAN SUFFERS, THEN RECOVERS. FLY FRANKFURT
Double score for the markets of the Old Continent. The positive solution to the German political crisis rewarded the partly unexpected result of the Italian vote and the thunderbolts arriving from the USA: the contagion effect, as expected, did not exist.
Milan, after a negative start, recovered positions during the session, thanks also to the soothing statements of Luigi di Maio, leader of the 5 Star Movement, and Matteo Salvini, leader of the League. But Wall Street's recovery also counted.
The Ftse Mib index, which at the start recorded a drop of 2% to 21.460 points, closed just below the highs of the session at 21.819,91 points (-0,4%). With yesterday's loss, the blue chip index erased its year-to-date gains. It should be underlined that the Star closed the day with an increase of 0,38%. Volumes around 3,26 billion euros.
Frankfurt (+1,49%) led the rise of the other stock exchanges in the Eurozone. The Dax index exceeded 12 (12.091 points) accelerating upwards after a negative start at 11.830 points. The main index of the German Stock Exchange closed last week with a loss of 4,6% due in large part to the trade war winds unleashed by Donald Trump. Many German industrial giants are heavy exporters. Since the beginning of 2018, the Dax, back from six consecutive upward years, has lost 7%. The two worst blue chips since early 2018 are Deutsche Bank (-20%) and ThyssenKrupp (steel producer, -13%).
Well, but more backward, London (+0,65%), Paris (+0,6%) and Madrid (+0,63%). The Stoxx 600 finished up about one percentage point.
BTPs HOLD UP, CDS ON RISK IN ITALY ON THE RISE
The post-voting uncertainty increased, albeit compoundly, the Italy risk measured by the yield differential between Italian and German ten-year government bonds.
At the opening, the Btp/Bund spread went up to 144 basis points, marking the highest level since 11 January, to then close at 136 basis points (+5,83%). The strengthening of the Bund following the newfound German political stability with the next Merkel government contributed to conditioning the increase in the gap.
The yield of the 10-year BTP stops at 2% after reaching 2,14% (from 2,04% at the last closing), the highest since mid-October, to then close in the 2,10% area.
Credit default swaps on Italian debt recorded a significant rise: the 5-year contract rose to 106,750, its highest since January 15, before closing the session at 105,375 from 97,837 on Friday evening.
The BTPs have also lost ground against the Spanish paper: the spread on the ten-year tranche has in fact widened to 61 basis points from 53 at the close on Friday, after a flare-up to 62, the peak since the end of January.
However, the presence on the market of the European Central Bank and the Bank of Italy, engaged in the quantitative easing programme, contributes to keeping the pressure from Italian bonds contained. In February, 3,638 billion euros of Italian public bonds were purchased as part of the QE, against 3,421 billion in January.
INFLATION HOLDS DOWN, CONSUMPTION GOES UP THANKS TO THE INTERNET
Long-term inflation expectations in the euro area fell to their lowest level in more than three months, extending a recent decline as investors' expectations of rising price pressures eased. Inflation fell to 1,6934%, the lowest since the end of November.
Meanwhile, euro zone retail sales in January rose more than expected thanks to non-food products, especially on the internet, according to data released by Eurostat. In the 19 countries that adopt the euro, retail sales fell by 0,1% on the month but by 2,3% on the year, against the +2,1% forecast by economists. Sales through mail and internet orders increased by 8,8% from +7,5% in December.
MEDIASET, THE BIG LOSER
At the end of a mixed day, 24 blue chips out of the 40 that make up the FtseMib basket closed in profit. In the morning it was close to zero.
Among the losers stands out Mediaset, which fell by 5,54%, to 2,94 euros, roughly what the Alfa title gained from 6 to 28 February on the prospect of a victory for the Berlusconi-led center-right and/or broad agreements with the Pd. The outcome of the vote could tip the balance in the dispute with Vivendi in favor of the French group. Mondadori is also in deep red (-4,33%).
ADVANCE TELECOM, FIREWORKS ON INWIT
Instead, Telecom Italia closed in positive territory (+0,6%), pending the Board of Directors on the accounts. The Persidera question remains open in the absence of an agreement between Gedi (owner of 30%) -3,51% and the buyer, ie the consortium Rai Way-F2i. Tim has granted power of attorney relating to the sale to the Advolis vehicle.
In the meantime, the subsidiary Inwit (+9,48%) has taken off pending the business plan to 2020 which will be approved today. The quarterly, approved on Friday evening, presents results higher than expected thanks, Equita writes, “to Tim's decision to keep the 350 sites potentially to be decommissioned. This led to a positive surprise on Ebitda (5 million better than expected), Ebit (8 million better, also due to the absence of the write-off linked to decommissioning) and net profit". RBC has revised its target price upwards.
BREMBO SUPERSTAR, TODAY MARCHIONNE IN GENEVA
Another title on display Brembo (+7,9%). The brake system manufacturer closed 2017 with a net profit of 263,4 million euros, up 9,5%, and proposes a dividend of 0,22 euros per share, against the coupon of 0,20 last year year.
Fiat Chrysler also closed the day (+0,3%), heavy in the morning. Today Sergio Marchionne will hold a press conference at the Geneva Motor Show.
Exor was also highlighted (+2,3%) thanks to the increase in the reinsurance sector after the purchase by Axa (-9%) of XL Group: the operation, for an amount of 15 billion dollars, took place in a high premium (a Price/Tangible Book Value multiple of 2 times), to the benefit of the enhancement of Partner Re, 100% in the hands of the holding company of the Agnelli group.
On the other hand, Italian insurance companies are under fire: Generali sells 2%, UnipolSai -1,8%.
BANKS, FORMER POPULAR BANKS UNDER FIRE
Another victim of the day was the banking sector, on which the sales triggered by the increase in Italy risk were concentrated: speculation cannot affect the BTPs, protected by the ECB's long arm, it has attached itself to the credit sector. The sector index thus experienced a drop of 2,6%. There was a significant drop in Bper Banca (-7,6%), Ubi Banca (-3,8%) and Banco Bpm (-6%). The big names are also in the red: Unicredit -3,5%, Intesa Sanpaolo -1,4%.
Among the positive notes worth mentioning is the leap forward of Stm (+3,2%): Equita Sim raised its target price from 21,6 to 22,3 euro, confirming the hold recommendation.
Highlights Moncler (+1,72%), confirmed as Mediobanca Securities' top pick with outperform rating and target price of 32,2 euros.
