After the hour of euphoria (premature), Bags under braking. The financial markets deal with the costs of conflict for the economies of the Old Continent. And with the possible therapies to deal with the decline in recovery. As a consequence, in the aftermath of the rally which brought some, including that of Frankfurt, to pre-war levels, the indices took the downward path starting from the German market -1,54% at 13, a point much worse than Piazza Affari -0,40%.
Stock markets in braking, Germany prepares for the gas emergency
After all, it was Germany in particular that extinguished enthusiasm by activating the early warning of the gas emergency plan. The decision came after Russia reiterated that it intends to be paid for energy supplies only in rubles.
Hence the choice of Berlin of prepare for the worst: no cuts, for now, but the message to the Germans is that "every saving of even one kilowatt hour will be important". In the meantime, a precise monitoring of consumption will take place in view of possible rationing for production activities. Norbert Wieland, the Frankfurt professor heading the task force, said that in the event of a supply disruption, “Europe's largest economy will end up in recession with a double-digit inflation rate” a signal that prompted Holzmann, the Austrian central banker, to reiterate the need for a half-point rate hike by December.
Stock markets in slowdown, Lagarde: more fiscal policy
More or less simultaneously with the announcements from Berlin, however, it has arrived Christine Lagarde's message. The diagnosis is equally negative: “Europe – she said – is entering a difficult phase. In the short term, we will meet higher inflation and lower growth", he has declared. Not only. "There is considerable uncertainty about how large these effects will be and how long they will last, the longer the war lasts the more significant the costs are likely to be." But the therapy suggested by the banker does not go through the traditional medicine of high interest rates. "To offset the short-term effects of rising energy prices and sanctions, national tax policies have a number of tools to implement, such as tax cuts and subsidies." Now, however, a European approach is needed "to adapt to the post-invasion world". That is, a series of initiatives that will have to involve governments and private individuals. Inflation? Optionality, gradualness and flexibility” remain the watchwords for the conduct of monetary policy in a phase of “high tide” in which we will have to get used to higher rates for quite a while, Madame Lagarde suggests.
In short, green light to a courageous expansionary common policy, far beyond the confines of the doctrine of the fiscal compact. Prudence in monetary matters, despite the upward push in US rates. But the United States, independent on the energy front, can face the risk of a modest recession in order to defeat the rise of inflation, perhaps before the November elections. Europe, waiting to find alternatives to Russian gas and dependence on oil, cannot allow itself sharp increases in official rates as the data demonstrate: consumer confidence, down to -18,7 in March from -8,8 in February, manufacturing sentiment dropped to 10,4 from 14,1. Confidence in the retail sector was also bad, down to 0,2 in March from 5,5 in February.
And the bonds are under tension
And so The bond market remains in tension. The 2,50-year Treasury Note, which arrived yesterday near the alarm threshold of 2,40% yield, trades at 2,34%, from 2,16% yesterday. Rates are also rising in Europe. BTPs up 5%, +0,66 basis points, Bunds up XNUMX%.
Meanwhile, on the equity front, the optimism of the eve has faded. To support the index of Piazza Affari, which limits the declines, remain in addition to the oil, the stocks of games in progress:
- Tim + 3,77%. The company asked KKR for further clarification on the terms of the offer for the entire group, indicating April 4 as the deadline for a response, explain two sources familiar with the situation. In particular, the clarifications regarding the confirmation of the price indicated preliminarily in November and whether KKR is willing to carry out a due diligence of an exclusively confirmatory nature.
- Generals + 2,18%. Francesco Gaetano Caltagirone holds 9,519% of the insurance company, according to a document. Delfin and CRT have announced that they have dissolved the consultation agreement on Generali.
