“In the current situation of the US economy, not far from full employment, any strong fiscal expansion would risk having pro-cyclical effects. In that case, the Federal Reserve's process of normalizing monetary conditions may be less gradual. On the eve of the Fed meeting, the governor of the Bank of Italy thus expressed the fears of the markets: Trump's activism may make it necessary to accelerate the increase in the cost of money.
The thesis is confirmed by an article in the New York Times: the closing communiqué of the Fed meeting will point out that current growth is already very sustained. Any acceleration will only translate into more inflation. One more problem for the Eurozone threatened, in the words of the governor, by "nationalist policies and economic closure".
Under the apparent calm of the markets, high-risk situations are looming: the fracture of the United Kingdom with the possible tearing of Scotland, after Brexit yesterday overcomes one of the last parliamentary obstacles; the Türkiye effect on the Dutch vote.
The good news comes from China. In April, President Xi Jingping will be a guest of Donald Trump at the Mar-e-Lago resort in Florida. Many issues on the table, the most urgent is the nuclear threat from North Korea. all that remains is to hope for the diplomacy of golf.
TRIUMPH OF MODI, MUMBAI AT AN HISTORIC HIGH
In Asia, the Mumbai Stock Exchange shines, at its highest level in the last year after the landslide victory of the governing party in the state elections. Prime Minister Narendra Modi's BJP party won the parliament of Uttar Pradesh, India's most populous state: 312 seats out of a total of 403.
The BSE Sensex index gains 1,5% and the rupee appreciates against the dollar to 66,2, a level it has not seen since April 2016.
The Tokyo Stock Exchange fell slightly at the end of the session: the Nikkei index lost 0,12%. Both Hong Kong and Shanghai are flat. The macroeconomic data on China released today signal a comforting acceleration in industrial production and a slight slowdown in consumption.
The Kospi index of the South Korean stock market is up by 0,7% in the final session: the Seoul Stock Exchange, while a serious institutional and political crisis is underway in the country, rises, closing seven of the last eight sessions.
WALL STREET AWARDS MOBILEYE (+30%), HOLDS STM
US markets almost flat on the eve of the Fed's decisions: the Dow Jones lost 0,1%. S&P 500 +0,04% and Nasdaq +0,24% are in slightly positive ground. All economists who take for granted an increase in the cost of money in the US, the first of three forecast by the central bank for 2017. 50% expect the next increase as early as June.
The yield on the 10-year Treasury Bill rose three basis points to 2,61%, its highest since September 2014. The two-year yield, which reached 1,38%, is at its highest since June 2009.
The bipartisan congressional office has estimated that Trump's proposed health care reform will wipe out care for 24 million Americans. After the Stock Exchange, the shares of Valeant Pharmaceuticals collapsed (-9,3%): William Ackman, its major shareholder, announced the sale of all his shares with a strong capital loss.
The news of the day is the announcement of a takeover bid for 15 billion dollars on the Israeli Mobileye (+30%) by Intel (-2,1%). The company, founded 18 years ago in Jerusalem, is one of the leaders in the development of fully self-driving vehicles. With this move, Intel accelerates its interest in the automotive sector, where it is already collaborating with BMW in self-driving cars. The chip giant has also bought a share in Here, the electronic map company controlled by the German auto giants.
The news had an impact on Stm, which last May strengthened its alliance with its Israeli partner for the development of the fifth generation of microprocessors that will be used for autonomous driving systems. After an initial fall of 2,5%, the stock of the Italian-French joint venture recovered, closing up 0,2%.
Oil is still weak: WTI crude down 9 cents to 48,4 dollars a barrel, and Brent up 5 cents to 51,42. Eni +0,1%, Saipem +1%, Tenaris +0,4%.
THE US PRESIDENT CHANGES THE RULES ON EMISSIONS, FCA RUNS
Not just the Fed. President Donald Trump announced his visit tomorrow to Ypsilanti, a suburb of Detroit, for a meeting with the CEOs of US automakers in which he will anticipate the revision of the rules on vehicle efficiency, requested by the industry itself. In addition to the CEOs of General Motors (+0,3%), Ford (-0,1%) and FCA, managers of German and Japanese car manufacturers are also expected.
Fiat Chrysler, under investigation in the US for alleged violations of the regulations on pollution, is the company that can benefit most from the innovations. The stock gained 2,2% yesterday, to 10,41 euros. Since the beginning of the year, it has risen by 20% and the capitalization is 15,9 billion euros. In the morning note, ICBPI reported Saturday's rumors from the Spanish newspaper El Mundo of a meeting between Altavilla, FCA manager for the EMEA area, with Renault's number one (+1,8%) Ghosn at the Geneva Motor Show.
Ferrari is also on the rise (+1,4%): Jefferies has started coverage with a Buy recommendation and a target price of 74 dollars. The experts' report forecasts EPS growth at double the rate of revenues over the next 5 years.
Completing the excellent day of the Italian automotive sector (+1,5% the sector index) is Brembo (+1,62%): Equita Sim which raised the target price of the share by 1% to 73 euro , confirming the buy rating, following the improvement in sales.
SCOTTISH SHOWER ON THE MAY, LIVE BTP
The European stock markets closed a waiting session slightly higher, in view of the Fed meeting which begins tomorrow and will end on Wednesday. The Ftse Mib advanced by 0,2% to 19.706 points. The other European indices were also positive: Paris +0,3%, Frankfurt +0,3%.
London +0,4% despite the announcement of the new referendum on Edinburgh's independence. For the Scots, the choice between a "hard Brexit" and independence from the United Kingdom will take place with a referendum to be held between autumn 2018 and spring 2019. This was announced by Scottish premier Nicola Sturgeon.
Piazza Affari digested without jolts the negative data of Italian industrial production which in January recorded a drop of 2,3% on the previous month and 0,5% on the year. This is the most pronounced contraction since January 2012, the figure is lower than forecasts. The Confindustria Study Center estimates industrial production growth of 1,3% month on month for February after the -2,3% in January reported today by Istat, data which cancels the +1,4% of December 2016 reducing the first quarter at -0,3%.
The BTPs held back at the end of the session. After a low in the morning at 2,32%, at the end of the session the Italian 2,37-year rate returned to XNUMX%, which is the maximum since the beginning of February reached last Friday while waiting for a less expansive ECB line.
In a Reuters poll released among traders, 19 out of 21 responded that Frankfurt will not touch interest rates before the end of Qe. The Btp/Bund spread closed the session with little change, just below the 190bps threshold around which it has been fluctuating for about a month and a half now.
Thanks to the rise in yields, the Italian market easily passed the appointment with the medium-long term auctions, which saw the assignment of the maximum amount of 9 billion euros of Btp, of the new 7-year May 2024, of the reopenings on maturities 3 and 15 years and the thirty-year off-the-run September 2046.
The 3-year auction yield reached its highest level since July 2015, that of 7-year bonds to its highest since July 2014, and that of 15-year bonds to its highest since November 2014. The four BTPs at auction yesterday will be offered today as they reopen for the 'total additional amount of 2,013 billion (of which 1,05 of the new seven years); no requests came in today's reopening of the 12-month Bot at auction last Friday.
To date, the Treasury has covered around 28% of the refinancing needs assumed for this year (around 415 billion).
DEAR INTERIM DIRECTOR. THE SUN GOES INTO ORBIT (+11,8%)
Breakthrough at the Sole 24 Ore. The stock jumped 11,8% after the president of the group Giorgio Fossa reassured that for the necessary capital increase Confindustria has already guaranteed its willingness to subscribe pro rata and that there are also other potential investors interested.
In the afternoon, director Roberto Napoletano, investigated by the Milan prosecutor's office as part of the investigation into the publishing group, was placed on unpaid leave by the board of directors and was replaced on an interim basis by Guido Gentili. This can be read in a note from the company, which adds that the board of directors has given a mandate to the managing director Franco Moscetti to "put in place the most appropriate initiatives or actions" to protect the image and the interests of the company, also in relation to the developments of the ongoing investigation. From reading the search order issued last Friday, it emerges that the investigation by the Milan prosecutor's office into the group also concerns extraordinary operations, such as the Gpp Business Media and the intercompany loans to 24 hours Culture, and not just the "profiles associated with the distribution of copies" .
NEW PROMOTIONS FOR UNICREDIT, AZIMUTH DOWN
The banking sector has not moved much. Unicredit lost 0,4% but could recover this morning after Barclays brought the recommendation to Equalweight from the previous Underweight. Noting that the 13 billion euro capital increase ended in success, the target price rises to 13 euro from 10 euro. Yesterday Jefferies defined the Milanese bank as "attractive" compared to other European banks: he confirmed the Buy judgment, target price at 17,2 euros. Following the completion of the capital increase, the recalculated Cet1 transitional ratio at the end of December is equal to 11,49%, well above the capital requirement defined by the ECB in the SREP of 8,78%.
Intesa (+1,1%) and Banco Bpm (+0,3%) rose while Mediobanca (-1,4%) and Bper Banca (-1,6%) closed lower.
Fermentation in the asset management sector: Azimut lost 2,5% after signing an agreement to acquire 80% of New Horizon Capital Management Ltd, an asset management boutique based in the Dubai International Financial Center. Anima (+3,2%) and Banca Mediolanum (+2,2%) went up.
RECORD YOURSELF AT THE TOP, THE JUVE RACE CONTINUES
Recordati sets a new historical record at 31,15 euros, bringing the increase since the beginning of 2017 to +15%. This could be the sixth consecutive year of earnings. Bloomberg's updated consensus sees 5 buy suggestions, out of a total of 9 analysts. Average target 32 euros.
Datalogic +3,44%: following the 2016 results, Kepler Cheuvreux increased the target price from 21,5 to 24,5 euros (buy) and Banca Akros to 24,2 from 19,2 euros (accumulated).
Double-digit progress by Dada (+14%) which extends the race after the controlling shareholder has informed that it is considering the possible sale of its stake.
New rise for Juventus, which advances by more than 7%. The title has been on the rise since Napoli's exit from the Champions League last week, destined to bring higher revenues to the club, which is expected to go through against Porto instead. There is also talk of interest from foreign funds.
