The markets are slowing down ahead of the weekend. Weighs the pressing of central bankers, especially concerned with turning off the euphoria. The decision of the Russia to cut 500.000 barrels a day (5% of production) since March in response to the embargo on certain derivative products pushes up the Petroleum. But the signs of caution do not obscure the reality that matured in the first 40 days of 2023.
Stock exchanges: Milan +16% since the beginning of the year
business square, at the end of the morning down by half a point, it is however starting to close with a fabulous final balance, at the highest for a year around 27.400 points, in the fifth positive week out of the last six. Year to date + 16,0% è the number one list in Europe, nonetheless in great shape.
The index eurostoxx 50 pushed to new highs since January 2022 (+12% year-to-date before closing: The index Stoxx 600 is al new top from April 2022 (+8,8%), the Dax40 of Frankfurt and at the highest level since January 2022 (+11,50%). Even the index 100 FTSE of the UK Stock Exchange went to new historical highs thanks to the powerful push of energy and banks, +6% from the beginning of the year.
Bags: the reasons for the increases
A predictable rise? Absolutely not, if you review the forecasts of the early January gurus, everyone had predicted one start with caution, before a possible extension in the summer. Taurus, as almost always, anticipated the turning point, catching a large portion of investors off guard. But, as Gianni Brera said, only those who dare to make predictions are wrong. And, just to refer to another famous saying by a sportsman, it is worth mentioning Yogi Berra, the legendary coach of US baseball; “Remember that the game ends only when it is really over”. Or, out of aphorism, what credibility does the leap deserve ahead of the markets? Do you maintain your positions by aiming for the tops? Or has the market run too far on euphoria and will we now see a return to volatility? These are the questions that surely many investors are asking themselves especially on the European market, typically less efficient than the American one and which has already given a lot.
The initial propellant to the upside came from vertical drop in gas prices, a phenomenon that could continue as the availability of stocks increases and the entry into operation of the regasification terminals, starting from Northern Europe.
The second positive element concerns interest rates. The markets are convinced that the increases, which have started gradually since last July, are winding down. More in the USA, where the upward race will probably stop before 6%, than in the ECB where, after the next half-point increase announced for March, the "hawks" are calling for new restrictions.
But Christine Lagarde hasn't made any specific commitments since May. On the contrary, the markets have bet on downward trend in yields, starting with the BTPs, in line with the forecast of a drop in inflation, the first signs of which are being felt.
Rain of profits for banks and energy
In this picture i risk lists, Milan in the lead, they were able to take advantage of the more favorable situation. This is especially true for the banking sector, starting with Unicredit which took advantage of the advantages of a "light" balance sheet in terms of loans but strong in excess capital with which to reward shareholders. The increase in interest rates has done the rest, favoring useful records for most European institutions, free to distribute coupons e buy back after the constraints of the pandemic years.
No less important is the shower of earnings from energy-related stocks. Not only the Big Oils (Eni travels towards 17 euros pending the placement of Plenitude) but also the sector ofoil equipment in full recovery after the phase of uncertainty linked to the pandemic: not surprisingly Saipem and Tenaris have been big players in recent months. This morning also the wagon of theEnel, returned to being the first capitalization of Piazza Affari.
All titles under observation
However, the list of stocks under observation is really substantial and promises to grow further as the quarterly reports confirm the feeling that the European economy has withstood the impact of the tightening better than expected.
Today is the stellar performance of Iveco +14%, already rallying in the quarter with earnings of more than 30%: the subsidiary of Exor, now together with Ferrari one of the few traded in Milan and not in Amsterdam (who knows until when), closed 2022 with a 14% increase in revenues to 14,16 billion euros better than expected. Adjusted Ebit at 424 million euros, one hundred million above estimates. The company expects an operating profit of between 2023 and 550 million for 590, much better than expected.
The other industrialists also raise their heads, from Stm and Leonardo (at their highest since June), as well as the fashion sector smelling new business in China. And so on.
In short, the march of the Bull seems to rest on relatively solid foundation. It is by no means certain that a "black swan" coming from the Ukrainian front rather than an outcry from central bankers could break the uptrend. But this could be a good return opportunity for latecomers.
In this context it is surprising that it is much longer the list of delistings compared to that of freshmen. But just yesterday Piazza Affari celebrated the first entry of 2023: Eurogroup Lamination entered the market with a 5% increase. which brings the freshman of Baranzate closer to a valuation close to one billion.
A message of good wishes for the large patrol of small caps in the Egm price list, from which the real surprises of 2023 could arrive, the auspicious year for now.
