“A testosterone contest is underway between the two leaders who show off their strength. The risk is that, if the game lasts too long, it could plunge the economy into recession”. The warning of a US manager, Bernard Baumhol of Outlook Group, reflects the concern of the markets, hostages of a confrontation that promises not to be short. This morning in Asia the fury of sales that caused the sharp drop in price lists yesterday has calmed down for now, but no one is under the illusion that the muscular test with tariffs is destined to run out in the short term. And so, having acknowledged the situation, traders reduce their exposure to risk but do not despair also because Donald Trump has reiterated his intention to meet with President Xi Jinping during the next G20. In yesterday's joint press conference with the President of Hungary, Viktor Orban, there was also room for some optimism on the outcome of the confrontation. This is how Asian markets react to Wall Street's Black Monday.
THE YUAN RISES UP, BEIJING THREAT ON T BONDS
The Chinese Stock Exchanges, after opening with a fall of 1,6% (the lowest since 30 January) recovered during the session to close at -0,2%.
The Nikkei of Tokyo -0,5% and the Taiex of Taiwan (-0,2%) also limit the damage. The loss of the Hang Seng was more marked (-1,6%), but only because yesterday the Hong Kong stock exchange was closed. South Korea and India rose slightly.
It stabilizes at 6,87 against the dollar, after the strong devaluation of the last few days, piloted by the Beijing authorities as a weapon to counter the effect of the duties. Yesterday an article signed by the editor-in-chief of the Global Times, Hu Xijin, evoked the prospect of the progressive liquidation of Treasuries owned by China. An extreme move that the US could neutralize by forcing the Fed to buy Treasury bonds, with serious consequences for monetary policy. Tbond yields continue their descent: the two-year period reached 2%.
The Korean won settles, having fallen to its lowest level in the last two years. The Japanese yen reversed course, rising together with all the assets considered to be more sheltered from the winds of volatility that hit the markets in this first part of May. The dollar-yen cross rose by 0,3% to 109,6.
Gold is flat at $1.300 an ounce, just below the highs of the last month and a half touched yesterday.
CHINA TAXES TOOTHPASTE TOO: WALL STREET FALLS
Dramatic session yesterday on Wall Street: Dow Jones -2,38, S&P 500-2,41, Nasdaq -3,41%.
The storm unleashed after Beijing published the increase in duties on 60 billion US imports in response to Trump's measures. 2.493 categories of goods were hit with three rates, from liquefied gas to toothpaste.
The sectors most sensitive to trade with China are in sharp decline: Boeing, Caterpillar and semiconductors show declines of around 5%
For Bank of America Merrill Lynch, the new tariffs could have an average negative impact on the 500 largest companies in the list, in the order of 2% of earnings per share.
THE SUPREME COURT WAND APPLE
Apple closed down 6%, but the negative variation is not only related to the storm between China and the United States. Today the Supreme Court gave the green light for the filing of class action by the subjects who contest the high commissions on the apps. The verdict, 5-4, saw Judge Brett Kavenaugh, recently appointed by the White House, with the liberal wing.
New beating for Uber: the stock lost 11% yesterday, after -8% on the day of its debut.
STOP THE RISE OF OIL THIS MORNING
Brent oil rose 0,4% to 70,5 dollars a barrel after hitting 71,4 yesterday after Saudi Arabia announced that two of its tankers, about to pass the Strait of Hormuz, had been sabotaged.
Plus sign only for energy (and for some rare exceptions in the world of utilities): Eni +1,2%, Saipem +2% and Tenaris +0,2%. Saras advances (+3%). It closed the first quarter of 2019 with revenues of 2,09 billion euros. Italgas (+1,05%) and A2A (+1,28%) are also up.
EVEN EUROPE UNDER FIRE
Europe paid a heavy price yesterday to the trade war.
Piazza Affari dropped 1,35% at 20.593 points.
Reductions of the same order of magnitude for the other European price lists: Frankfurt -1,5%; Paris -1,22%; Madrid -0,81%. Outside the Eurozone, London limits damages to 0,5%.
AIR OF PEACE IN PARIS FOR ESSILOR-LUXOTTICA
Peace, albeit a precarious one, broke out in the Essilor-Luxottica house on the day of the trade war. Leonardo Del Vcchio and Hubert Sagnieres have signed an agreement which provides, pending the choice of a managing director, to grant more powers to the two lieutenants: Francesco Milleri and Laurent Vacherot. In this way, the request for an international arbitration, already made by Delfin, fails, but not that of the shareholders who ask for the integration of the board (today made up of 8 representatives for each of the contenders) with 2 independents. The proposal will undoubtedly be rejected by next Thursday's assembly, but it warns that true peace is still far away. Meanwhile, shares in Paris recovered 3%.
THE BTP/BUND CROSS RISES TO 277
High tension day for the Italian secondary market. The yield differential between Italy and Germany closed at 277 basis points from 275 at the start and 273 at the last closure. The Italian 2,70-year trades at 2,68%, from 0,06% at the closing. German Bund to -0,04%, from -174%. The differential with Spain's Bono also rose to XNUMX basis points, the highest in the last six months.
Operators are also held back by waiting for the medium-long auctions scheduled for this morning, when the Treasury will offer 3,7 and 30-year BTPs for a total amount of 5,25-6,75 billion euros.
THE CAR UNDER FIRE, BREMBO AND PININFARINA MISS OUT
Leading the decline in Europe were automotive stocks (-2,7% for the sector index). Under fire Daimler (-3,4%) at the center of purchases by the Chinese Saic intending to rise to 5%, the same share of compatriot Geely (+2,07%) which controls Volvo (-2,5%). BMW also down (-1,5%).
Fiat Chrysler drops 1,8% in Milan but losses increase on the US list to 2,9%: FCA exports US-made Jeeps to China. Ferrari -1,88%, Pirelli -2,06%.
Even heavier were the losses for Brembo (-6%), which inaugurated its third production center in China at the beginning of April (100 million investments, 450 employees).
Pininfarina -6,7%. The company closed the first quarter with a profit down to 0,4 million, a production value of 25,2 million, down by 11% due to the lower contribution of engineering services in Italy and licensing revenues of the brand, and a net financial position that became negative by 6,8 million.
STM, PRYSMIAN AND LEONARDO ARE FOCUSED ON
Among the industrialists, Leonardo (-5%) is also suffering, which should file an expression of interest for Piaggio Aero this week.
Prysmian (-3%) announced yesterday evening results in line with forecasts: revenues of 2,771 billion euros (+1,3%, +1,9% considering organic growth), adjusted Ebitda (gross operating margin excluding extraordinary items) to 231 million (from 198 in the first quarter of 2018) and profit tripled to 89 million (from 28).
Stm (-5,10%) is in the sights, hit by the storm over chips, the first victims of the clash of the Bigs on high technology.
The most popular stocks also mourn: Moncler -4,47%, Recordati -3,7%, Buzzi -3,6%.
BANKS ALSO IN RED
The bankers filed the session in the red, stressed by the pressure on the spread. Heavy Banco Bpm (-3,7%) and Ubi (-3,36%). FinecoBank -2,48% (rating hold, target at 9,3 euros from 10,3 for Banca IMI) after the separation from Unicredit (-2,8%), which deconsolidated its stake in the managed company as of yesterday. Jean Pierre Mustier reiterated that cross-border mergers in Europe remain very difficult to pursue.
GEOX, MONDO TV FALL. INTERPUMP DOWN
There is no shortage of thrilling excursions in the rest of the list. Mondo TV loses 15% after the quarterly accounts. Geox follows suit (-15%) which closes the first quarter with revenues of 261 million euros, 4 million euros less than in the same period last year. On a like-for-like basis, the decline is 2% year on year.
Interpump down (-7,6%). Banca Akros downgraded its rating to neutral from accumulated, while both Equita Sim and Kepler Cheuvreux switched to hold from buy. Tiscali overturns: -3% from +9% in the morning. Amsicora, a vehicle managed by Claudio Costamagna, Alberto Trondoli and Manilo Morocco, has signed an agreement to take over 22,06% of the group and support its relaunch, alongside the founder Renato Soru, a shareholder with 7,9%.
