Europe marks time, but the two real engines of the world economy, the USA and China, are back to full speed. After the positive signals coming from the Chinese indices, the confirmation came from the data of the US industry, which is showing a strong recovery. The fear of recession has thus subsided, with an immediate impact on the markets: the appetite for risk caused the collapse of the 8-year Treasury Note (whose yield jumped up by 75 basis points), reduced the gold rush and pushed oil up, on the day a secret kept for XNUMX years fell: Aramco's profits.
ARAMCO, 111 BILLION IN PROFITS
In 2018, the Saudi giant recorded profits of 111,1 billion dollars, double Apple, five times as much as Shell. More than the profits of the entire Italian and French stock exchanges combined.
This morning the markets are slowing down, but the prospects remain positive.
The Asia Pacific indices (+0,2%) confirmed their seven-month highs thanks to the boost from Chinese production. The Japanese Stock Exchange is down slightly (Nikkei -0,1%), modest gains for the CSI 300 index of the Shanghai and Shenzhen stock exchanges (+0,2%). Taipei +0,4%, Seoul +0,3%, Sydney +0,5%.
The race for safe-haven assets is slowing down: the dollar-yen exchange rate drops to 111,3. Gold fell to a four-week low at $1.286 an ounce.
Brent-type oil is traded in Singapore at 69,2 dollars a barrel, the third day of rising and the highest in the last four and a half months. Based on its own data, Bloomberg comes to the conclusion that in March Saudi Arabia reduced production to 9,8 million barrels per day, a minimum in the last four years: Riyadh is thus linked to Trump (the latest evidence is the espionage against Jeff Bezos) to be able to ignore the president's calls to produce more.
SAIPEM AND TENARIS TAKE FLIGHT
Oil stocks are flying at Piazza Affari: Saipem (+2,3%) was driven by the prospect of the sale of drilling activities. Tenaris also rose (+2,68%): the market is once again looking at the acquisition of the US Ipsco. Eni (+0,5%), sold some activities in Norway
RATES GO UP, US BANKS FLY
Very positive session for the US stock markets: Dow Jones +1,27%, S&P 500 +1,16% and Nasdaq +1,29%.
The banks (JP Morgan +3,3%) led the way, thanks to the rebound in market rates.
Cars and chips are also racing, but Lyft loses ground (-11,9%) after its triumphant debut.
BREXIT, RAIN OF NO. MA GS REWARDS STERLING
Nothing new on the Brexit front, after the new barrage of no from Parliament which rejected four government proposals yesterday. Sterling is down, but Goldman Sachs believes the pound is a good investment opportunity right now.
GERMANY, DOWN GROWTH, RECORD STOCK MARKET
Even the trend of the Eurozone price lists, Italy in the lead, is apparently paradoxical. The economy of the Old Continent is doing badly, but the European stock exchanges are celebrating, regardless of the negative signals, from the record drop in manufacturing activity (the German locomotive has dropped to 2012 levels) to inflation in the euro area, which rose less than expected to March (+1,4%). Barclays believes there will be no acceleration during the year.
The markets, for now, are taking the blows without drama. Hopes are placed, as usual, in the ECB and in the prospect of US-China peace. Yet, once the tariff game with Beijing has been resolved, it is foreseeable that Donald Trump will point his guns at the EU, weakened by the incredible Brexit epilogue.
BUSINESS PLACE +17,5% SINCE THE BEGINNING OF 2019
Milan closed the first session of the second quarter with a 1,1% gain which pushes the value to new highs since September, at 21.520 points. Year-to-date performance improves to +17,50%. On a fundamental basis, the average P/E ratio is around 11,8, the average dividend yield is 3,80%. Both values are not far from the European average.
The Frankfurt Stock Exchange does even better (+1,35%). Since the beginning of the year, the increase is 10,6%. In great evidence Infineon (+5,2%) which recovers the losses of Friday. Continental +4%, Daimler +3,6%.
Paris (+1,03%) and Madrid (+1,10%) also shine. The other lists are also positive: Paris +0,56%. In London (+0,5%) Easyjet plunges (-9,7%) under the pressure of the alarm for the drop in passenger flows in the event of a no-deal Brexit.
BUT THE OECD CERTIFIES: ITALY STALL
“Italy also weak for share 100 which will slow down growth and increase public debt”. And also criticisms of CBI, which “will have a modest effect on growth”. The OECD reserves the economic policy of the yellow-green government an outright rejection: the budget deficit will settle at the end of the year at 2,5% of GDP, well beyond the 2% target negotiated with Europe in December. GDP in 2019 will drop by 0,2 percentage points. The end of the third Italian recession in ten years is thus postponed to 2020, which should close with growth of 0,5 points but with a public deficit of 3% which will drag the debt upwards. Luigi Di Maio's reaction to the words of Angel Gurria was mild: "Let them do austerity at home". And Prime Minister Giuseppe Conte announces a protest to the OECD.
The climate of relative greater propensity to take risks penalizes German paper to the advantage of Italian paper as well.
While remaining in negative territory, the yield on the ten-year Bund is recovering from its recent lows and the German curve accentuates the slope on the 2/10-year stretch.
The Italy/Germany spread on the ten-year segment ends at 254 basis points from 256 on Friday evening and 259 at the opening. The 2,513-year yield closes at XNUMX%.
Implicit rates are beginning to contemplate the hypothesis of new expansionary measures by the ECB by the end of the year, with a 10% chance of a downward adjustment of 10 basis points in December.
Eurozone government bonds with a yield below zero are almost 47%, a record since September 2016.
The signs of a slowdown in the European economy weigh on the single currency, which remains weak against the dollar, with the exchange rate around 1,1,21.
CAR SALES FALL: FCA -21,7%
A new sign of crisis has arrived with closed markets: the collapse of car sales, aggravated by the disappointing response of theecobonus.
The drop in March (-9,6%) is heavier than those in January (-7,5%) and February (-2,3%) but sales to private individuals are up (+5%). A thousand cars were purchased under the eco-bonus scheme (20% less than a year ago). Cars subject to ecotax are better.
CNH FLIES, A BOOST FOR PIRELLI FROM THE BRAZILIAN TAX
Sales of Fiat Chrysler fell sharply (-21,7%) which experienced a positive day on the Stock Exchange: +2,40 to 13,59 euros on the wave of Bloomberg rumors which revealed negotiations for a collaboration industrial in Europe with PSA Peugeot. Ferrari +1,2%. The positive indications coming from China pushed Cnh industrial upwards (+3,33%).
Positive news arrived from Brazil in the evening for Pirelli (+1,5%). The taxman has recognized the company's right to exclude a tax: the positive component of income will be 107 million euros. The benefits in terms of cash will be seen in the five-year period 2020/24.
UNICREDIT IN THE RALLY THANKS TO GOLDMAN SACHS
The banking sector did well: the index rose by 2,49% thanks to the rally of Unicredit (+4,32%), in flight after Goldman Sachs added the shares to its conviction list. “I have great esteem and trust in Mustier. He took over the bank at a challenging time and made super-courageous operations,” said Allianz spa CEO Giacomo Campora. In view of the new business plan that UniCredit will present in December, Campora expressed his hope that the long-standing partnership between Allianz and the Italian bank in bancassurance will continue, "with which we are very satisfied".
STM SHINES, PRYSMIAN SUFFERS
Stmicroelectronics +4% on the wave of the improvement of the prospects of the Chinese economy. Prysmian -0,98% after Goldman Sachs' buy cut to neutral, target price at 17,5 euros from 21.
Telecom Italia lost 1,7%, correcting the positive closing
on Friday, following Vivendi's decision to waive the revocation of some Elliott fund appointees.
Buzz +3,5%. Deutsche Bank raises its target price.
