The US economy gallops fast and unbridled like a thoroughbred horse that needs to be tamed with adequate rates. Therefore there are no doubts about the need for a forthcoming rate hike, but the markets are already looking beyond as demonstrated by the sharp drop in the price of US government bonds, or the sharp increase in yields involving Bonds, Bunds and BTPs. The causes?
The minutes of the last meeting of the Central Bank show that the great majority of Fed members, even before the election of Donald Trump, had expressed themselves in favor of "raising rates relatively soon", as reiterated by Janet Yellen before the Congress.
The excellent macro results announced yesterday push in this direction. In October, orders for durable goods recorded an increase of 4,8%, much higher than the +1,7% expected. Consumer confidence rose more than expected in November, with the University of Michigan index landing at 93,8 from 91,6 the previous month.
The markets have adjusted to the narrative of the Trump era in record time: the rise in rates is the magnet for capitals converging on the US currency: the Dollar index has risen to its highest level in the last 13 years against the six main currencies planet reference. The yield on the 10-year US government bond rose to 2,40% from yesterday's 2,31%.
BTP, THE YIELD RISES BUT ALSO THE SPREAD
The reaction on the European markets was immediate. The yield of the BTP rises to 2,167%, a new record since July 2015, while the Bund in August 2026 returns to pay over 0,3% for the first time since March. However, the Btp/Bund gap widens to 187 bp, the highest since October 2014. And the pressure tends to spread to France and Spain as well.
This also explains the nervousness of the EU Stock Exchanges which yesterday, surprisingly, lined up behind Piazza Affari, the protagonist thanks to the banks of yet another thriller session. “The divergence of European equities from that of the other 2 industrialized blocks (Japan and America), and the constant weakness of the euro (even against the pound) – writes Giuseppe Sersale of Anthilia – can be considered as the harbingers of what could become a speculative attack on the stability of the European Union”.
Just a rumor, for now, but which gives an idea of the tensions preceding the next meeting of the ECB (December 8) and the Italian referendum of December 4. Meanwhile, to ease the pressure on the Bunds, the ECB seems willing to make part of its securities available through repurchase agreements.
TOKYO AT HIGHEST FOR THE YEAR, ASIA WEAK
Thanksgiving falls by the way in this climate: today Wall Street is closed, tomorrow it will open its doors for only half a day, just enough to measure the first results of Black Friday dedicated to shopping. Stock market forecast reports declining activity.
The rise of the dollar pushed the Japanese stock market to a new high since January: Nikkei index +1%, yen 1 112,740 (down 7% since Trump's election day). "If you want to make the most of the opportunities of the new US policy - explains Chris Evans of Ig - bet on Japanese shares, in particular on banks".
Conversely, the prospect of an increase in interest rates caused other stock markets in the Asia Pacific area to decline. Hong Kong is down 0,2% and Shanghai is up 0,3%. Seoul -0,7% and Mumbai -0,3%.
RUNS JOHN DEERE AND DRAG CNH (+6%)
The Dow Jones index closes on Wall Street in a big way: +0,31% to 19.060,54 after marking a new high in the session at 19.074,51. The other stock exchanges were calmer: S&P 500 +0,05%, Nasdaq -0,11%.
Caterpillar (+2,7%) and, above all, John Deere (+10,6%) contributed to driving the industrial index. The world leader in tractors and agricultural equipment closed the quarter with net income of $285 million, down from $351 million a year earlier but much better than analysts' expectations of $119 million. Revenues were $6,52 billion, $800 million more than forecast.
Cnh Industrial, listed in both Milan and New York, is also flying on the wave of these results: +6,08%. The collapse of Eli Lily (-500%) weighed on the S&P 11,5 index. The pharma giant has announced that tests on the new drug for the treatment of Alzheimer's have not given positive results. Biogen (-4,2%) which is developing a similar drug, also fell sharply.
Positive energy stocks in Piazza Affari. Saipem gained 1,3%, Tenaris +2,1%. On Eni parity at 12.7 euros.
MILAN REVERSES THE COURSE AND CLOSES IN POSITIVE SOIL
The march of the dollar against the euro (down in 13 of the last 14 sessions) favored the final recovery of Piazza Affari. Today busy macro calendar: confidence index in Germany and France, final GDP data for the first nine months in Germany and Spain. Futures signal a moderately positive start for the stock exchanges.
The Milan Stock Exchange archives a two-speed session. After hitting a low at 16.265 points (-1,5%) it closed at 16.532 points, up 0,1%. The other European lists did worse: Paris -0,2%, Frankfurt and Madrid -0,3%. London is also in negative ground (-0,02%) after a record morning thanks to mining stocks.
MPS, TODAY GREEN TO THE INCREASE
The highlight of the day is without a doubt the Monte Paschi assembly, which closed up 1,55% yesterday. The ECB has authorized the plan which envisages a capital increase of up to five billion, removing the last obstacle to the green light of the assembly which will be able to count on the quorum required by law. The news allowed the stock to cancel the declines made in the morning, which emerged after the updates on the accounts for the first nine months of 2016. The period closed with a pro forma loss of 4,54 billion, 360 million euros more than what was published previously. The out-of-pocket costs of the restructuring plan amount to 448 million.
BPM AND POPULAR, RECOVERY IN EXTREMIS
However, the banking sector remains in the sights, protagonist of evolutions worthy of a circus trapeze artist. The Italian sector index lost 0,45%, after a drop of up to about 3% against the -0,09% of the European index.
Banca Popolare di Milano and Banco Popolare in particular were on a roller coaster which, after reaching respectively 1,774 euro and 0,2792 euro, recovered the declines closing at 1,894 euro (+1,2%) and 0,2994 euro (+1,4 .1%). The sales on the securities of the betrothed arose from the rumors according to which the ECB, in the inspection it conducted in the two banks, would have found, for the Veronese group, the need to raise the levels of coverage on impaired loans by 2-XNUMX billion.
The Bank said the extraordinary adjustments, together with the ordinary provisions already foreseen in order to increase coverage levels, take into account the talks with the ECB and will not lead to "substantial changes" to the forecasts of the strategic plan on the merger.
Unicredit and Intesa close in negative territory, with a decrease of less than 1%.
GENERALI, INVESTOR DAY WILL NOT WARM UP THE MARKET
Disappointing market response toinvestor day of Generali (-3%). The new industrial plan envisages disposals for one billion euros and cumulative dividends over the next three years for 5 billion thanks to cash generation of 7 billion. Furthermore, the insurance group plans a cost cut of 200 million to increase productivity by 15%, with the aim of bringing the average Roe to a level of 13%. Not just excluding acquisitions.
“The ideal company is a medium-small one that we manage to integrate with other companies in a country where we are already present,” explained the CEO of the Lion of Trieste, Philippe Donnet. “A small company in the Non-Life sector interests us more than a large one that operates in both the Life and Non-Life sectors”.
VIVENDI STRENGTHENS IN TELECOM. GOLDMAN PROMOTES FCA
Good rise for Telecom Italia (+0,8%): Vivendi, following the dilution of its stake from 24,68% to 21,91%, purchased further shares of the Italian telephone group on the market to bring their participation back to previous levels. As of November 22, Vivendi owns 23,15% of the common stock
Among the industrialists, the Agnelli companies do well. In addition to the boom of Cnh, there is the rise of Fiat Chrysler (+1,5%) which benefited from the valuation of Goldman Sachs (target price raised to 9,9 from 7,5 euros, confirmed the buy recommendation). Ferrari also rose (+0,1%).
On the other hand, Atlantia is negative (-0,4%). The CFO, Giancarlo Guenzi, told Reuters that he expected a higher proceeds from the sale of 15% of Autostrade per l'Italia than analysts expected. According to experts, the Benetton home group could raise around 2,5 billion euros from the sale, an operation that should be completed in the first quarter of next year.
