In Italy the tension on the maneuver keeps the spread high. And the Bank of Italy angers the majority. In the US, Donald Trump is trying to lower rates on T bonds, once again blaming the (“unjustified” according to the president) increases decided by the Fed. Trump's worries coincide with the arrival of short-term US Treasury auctions, which during the week it will have to place 230 billion of government bonds. Yesterday there was just a taste of the placement of short-term bonds: starting today, we'll get to the heart of it, with medium-term maturities. There are concerns that the Chinese will not be among the buyers this round, an absence that could help push yields higher again.
Yesterday the ten-year Treasury note, the reference government bond, appreciated, reaching a yield of 3,20%, from the highs of the last seven years reached at the end of last week, at 3,24%.
AGAINST ASIA, THE YUAN ONE STEP FROM 7
The lesser pressure on bonds has allowed stock lists to take a shot in the arm: Hong Kong rises (+0,4%), Tokyo recovers (+0,2%). Mumbai +0,4%. China continues to decline: CSI 300 index of Shanghai and Shenzhen stock exchanges (-0,5%). The yuan trades at 6,9236 against the dollar, approaching the 7 cross level against the dollar, can be considered a response to Trump's tariffs on Chinese goods.
The drop in trade with China is starting to make itself felt on Wall Street. The sectors most linked to the trade of materials are losing blows. The Dow Jones index loses 0,21%, S&P 500 -0,14%. In equilibrium the Nasdaq (+0,03%).
HURRICANE MAKES OIL FLY
Brent oil returns to its highs of the last four years: yesterday it closed up by 1,3%, this morning it dropped slightly to 84,8 dollars a barrel. These days almost 40% of the production in the Gulf of Mexico is missing, where the plants have been made safe in anticipation of the arrival of hurricane Michael, while the consequences of the fire at the Canadian refinery in Saint Jean are weighing heavily.
On Wall Street, the oil index rose by 1%, in Europe by 1,5%.
ENI AND SAIPEM, TWO CRUTCHES FOR MILAN
Also in Milan the session was dominated by energy. Saipem +3,3% also thanks to the promotion of Kepler-Cheuvreux, which raised the target price to 5,50 euros from 4,40 euros. The share was supported (+42% since January) by the merger between the US drilling companies Ensco and Rowan Companies, a 12 billion dollar card-to-card transaction which confirms the dynamism of the market, stimulated by the prospect of an increase of investments.
Eni +2,3%. Kepler-Cheuvreux strengthened the Buy recommendation with the target price going from 18,50 to 21 euros. The Bloomberg consensus sees 23 purchase recommendations out of a total of 33 recommendations surveyed.
Tenaris is also in evidence (+3,3%).
MANY NO TO THE DEF. SAVONA: "MAYBE WE WILL HAVE TO CHANGE"
The latest rejection of the maneuver, in chronological order, came yesterday evening from the Parliamentary Budget Office, which said it "could not validate the macroeconomic forecasts for 2019 contained in the Nadef". But during the parliamentary hearings perplexities and criticisms emerged from Istat and the Court of Auditors. Even drier the deputy general manager of the Bank of Italy, Fabio Signorini, who stressed that, at current rates, the Italian debt carries 10 billion more interest.
After international criticism, an internal front opens up in front of which the majority raises a wall. Luigi Di Maio, via tweet, replies: "If Bank of Italy wants a government that does not touch Fornero, next time it will present itself in the elections with this program". Matteo Salvini evokes the Italians' recourse to savings (perhaps the Cir, the savings investment certificates developed by Armando Siri, the theorist of the Italian flat tax). But Paolo Savona admits that "if the spread continues to rise, it will be necessary to change the maneuver".
In this climate, Italy is moving towards a rating cut, in any case already anticipated by prices: the 3,51-year bond has reached 1,98%, against 4,57% for Portuguese bonds with the same maturity. Worse than us, for now, only Greece (XNUMX%). Meanwhile, the European supervisory authorities have intensified the monitoring of the liquidity of Italian banks.
MILAN (+1,06%) BOUNCES IN THE AFTERNOON
The FtseMib index (20.062, +1,06%) recovered in the afternoon, closing up by around one point, thus regaining the threshold of 20 thousand points. In the initial stages, it had reached 19.679 points, the lowest level since April 2017. The main index of Piazza Affari has recorded a loss of 8% since January XNUMX to today.
In the rest of Europe money on energy and mining, thanks to the rush of metals and above all copper, which allowed all the European Stock Exchanges to close on the rise together with the recovery of the technological ones. Frankfurt advances by 0,25%; Paris +0,35%; Madrid +0,67%. Flat London (+0,02%).
GUINNESS WORLD RECORD SPREAD, CDS AT 2013 LEVELS
Emotions and twists to no end yesterday on the bond market on the eve of the auctions. The spread at the close stood at around 300 after having gone as far as 317, one step up from 326 at the end of May, the maximum for 5 years reached in the most tense days that accompanied the birth of the M5s-Lega government. The Italy/Spain spread rose to 193 points.
The yield on the 3,52-year Italian bond closed just above the low of 3,72%, against 2014% at the end of the morning, a new high since February 4. The 2014-year bond fell below XNUMX%, the threshold exceeded for the first time since August XNUMX.
5-year credit default swaps on Italian debt returned above 270 points, the highest since July 2013 already reached at the end of May: this is a level of CDS in line with that of issuers with 'non investment grade' ratings.
THE BOT AUCTION IS UNDERWAY: THE HIGHEST EXPECTED FROM 2013
In this context, the mid-month auction round opens today, with the offer of 6 billion 12-month BOTs. On the gray market yesterday the Bot traded at 0,91/1,02, from 0,436% a month ago, to levels five years ago.
Tomorrow it will be the turn of medium-long bonds: up to 6,5 billion BTPs, divided between the new 3-year October 2021 and the reopening of 7- and 15-year bonds
Tomorrow, 3 billion 2028-year Bunds (August 2028) and up to 3 billion Portuguese 625-year bonds (October XNUMX) will also arrive on the primary market, as well as XNUMX million XNUMX-month Greek bonds.
BANKS IN RECOVERY, BUT JP MORGAN ONLY PROMOTES UNICREDIT
Banks took advantage of the drop in the spread: the sector index rose by 1,3% against a more modest +0,3% in the European sector thanks to the rebound of Intesa (+2,2%), Unicredit (+1,2%) and Banco Bpm (+1,1%). But it wasn't a choral rebound. Bper drops by 2,2% and the decline of Mps (-1,8%) and Carige (-3,7%) continues.
After Credit Suisse, JP Morgan also cut forecasts and target prices of Italian banks, incorporating a greater spread: 340 basis points in the fourth quarter. The broker promotes Overweight only Unicredit, while Ubi is downgraded to neutral and replaced in the broker's list by Commerzbank.
Asset management is down: Azimut -1,02%, Banca Generali -0,95%.
HURRY AT THE ASTALDI AND TREVI CONSTRUCTION SITE
In the luxury sector, on the eve of this morning's LVMH conference call (+10% turnover in the third quarter despite the slowdown in China), Salvatore Ferragamo's exploits (+2,57%) should be noted. Snam stands out among the utilities (+2,25%).
The infrastructure construction site is still in turmoil. Still on the shields Astaldi, up by 21,5% with volumes in line with the 30-day average. After very heavy falls in the last part of September, the stock recovered ground in the last week, totaling a gain of about 91%.
Betting on a bailout also helps Trevi, which grew by +3,7% after the Board approved the guidelines of the capital strengthening plan (130 million) and debt restructuring with the conversion of bank loans into financial instruments for 250 million.
Risanamento achieved an increase of more than 19%, with volumes well above the average. The group, its general manager said today, is in dialogue with some operators to rent the two new buildings (Spark One and Two) which will flank the Sky buildings in the Milan Santa Giulia area.
