The financial week is off to a good start in Asia. In Tokyo, the Nikkei index recorded an increase of more than 3,4%, in line with the rebounds on Friday afternoon in Europe in the wake of Wall Street. Less brilliant, but still up, were the stock exchanges of Shanghai +0,5% (on the eve of the data on GDP for the third quarter) and of Hong Kong +0,7%, despite the increasingly heated political situation.
The opening of the Stock Exchanges looks positive, albeit with great caution. The forecast by Byron Wien of Blackstone, one of the historical gurus of the markets, who speaking in Dubai said: “I think the correction is almost over. I don't think that downside can last more than 10% from the highs”. Compared to the highs, the drop in the S&P index is around 6%.
In this context, the public offer reserved to the public for the seventh tranche of the BTP Italia, the second of 2014, gets underway this morning. In April, the Treasury raised more than 20 billion. This time a slightly lower figure is expected: the Treasury's goal is to exceed the ceiling of 100 billion from the 87 billion collected so far with this type of operation. As is well known, the security is indexed to domestic inflation and provides for a minimum provisional guaranteed annual coupon of 1,15% but, given the market situation, the issuer could be forced to be a little more generous.
The other most relevant deadlines for Europe are concentrated from Friday onwards. The rating agencies will be the protagonists: Fitch will update its judgment on Italy and Spain on Friday. Moody's, on the other hand, will issue Germany's debt rating on the same day.
CHINESE GDP AND THE US QUARTERLY IN THE FORE
In the spotlight, from this morning to Sunday, the banking sector awaiting the key data of the European season. Indeed, on the 26th the verdict will be pronounced on the Asset quality review and stress test for the 135 system banks of the ECB. Great attention has also been paid to PMI data, an expected thermometer of the economic situation. The most awaited appointment for Asia is the Chinese GDP data for the third quarter: a slowdown to 7,2% on an annual basis is expected. For the United States, on the other hand, the head of the quarterly reports continues. After the good results of the banks, in the week it will be the turn of Apple, Microsoft, GM, Ford, Boeing, Amazon Mc Donald's and Amazon, among others.
BUSINESS CENTER IN THE RED FOR SIX WEEKS
Thanks to the robust recovery on Friday, US lists limited the damage. But the fear remains for the very strong price excursions of the S&P index and the Dow Jones: the streak of negative weeks has been extended to four, as it hasn't happened for three years. The navigation of the European stock exchanges was no less painful, all in negative territory. Investors globally unwrapped their positions in European equities by $5,7 billion in the week ending Wednesday, setting a record weekly redemption in absolute terms. This is what emerges from data from Bank of America Merrill Lynch Global Research according to which global equity funds have recorded net outflows of 2 billion euros, experiencing the third consecutive week of redemptions.
The robust rebound on Friday (+3,4%) was not enough to prevent Piazza Affari from closing the week in negative ground for the sixth week in a row.
DEFLATION IS SCARY, BUT THE DROP IN OIL IS A BUSINESS
We need to go back to the stormy days of 2008 to find such violent swings in the price lists: on Wednesday the yield on American T bonds, generally the most stable asset in world finance, fell from 2,21 to 1,86%, thus signaling the fear of the markets for the deflation effect. This morning the yield climbed back to 2,221%, but the feeling of great fragility remains. The 0,78-year German Bund, in the stormiest moments of Wednesday's session, touched a low of 203,2%. In this context, the BTP broke through the spread up to a maximum of 160 and then returned to more "normal" levels just above 2,46 basis points at the end of the week. At the same time, the Italian XNUMX-year rate returned to XNUMX% in the evening.
Greece's bonds, which suffered the most during the last few sessions, also showed marked progress. The spread is cut by almost 100 basis points to 690. The euro weakens against the dollar to 1,2755 from 1,281 at the close.
STILL IN THE HANDS OF THE CENTRAL BANKERS
The market emergency partially subsided towards the end of the week due to the intervention of the central banks. Jams Bullard, the US central banker, said that the Fed could postpone the end of Qe and in any case review its rate hike strategy over time. Benoit Coeuré, a member of the ECB, instead confirmed that the purchases of ABS by Frankfurt will soon begin.
In short, the markets are increasingly dependent on the action of central banks. But there are positive aspects, linked to the decline in the prices of raw materials. Gavyn Davies summarizes the trends in action on the markets in the Financial Times as follows:
1) A sudden change of direction of speculation, in retreat from fashion assets in the first part of 2014.
2) The slowdown in the economic situation in the Eurozone, now at risk of deflation.
3) On the other hand, a strong shock in oil prices is underway (-25% since July) which affects inflation but promises expansionary effects for economies dependent on crude oil, such as Italy.
BANKS, FEAR BEFORE EXAMS
Great rebound at the weekend for banks overwhelmed by waves of sales in the previous days which mainly invested Mps and Popolari. It is by no means excluded that the volatility will continue into the week in parallel with the inevitable "rumors" on the European polls and the tensions linked to macro data.
Decisive days for the sale of Uccmb by Unicredit (+5,5% in Friday's session). In the coming days, in fact, the exclusive sale will be given to Fortress-Prelios or Lone Star. CEO Federico Ghizzoni said: “We will soon decide who to continue with. We hope to arrive at the choice within a few days”. Morgan Stanley has decided to remove the title from the list of favorites on the European stock market (Europe Best Ideas).
Spotlight concentrated on Monte Paschi: +4,3% on Friday, after Consob banned short selling for the day. Today we return to the normal trading regime: Odey Asset Management has opened a new net short position on Banca Monte dei Paschi di Siena equal to 0,61% of the capital. This is what emerges from Consob communications on net short positions.
Also the Popolari are in tension after the zigzag trend of the week. Friday was a very positive session for Banca Pop. Milan (+6,8%) and Banco Popolare (+7,2%). Insurance companies and asset management securities were also positive: Generali +2,8%, UnipolSai +4%, Mediolanum +4,6%, Cattolica +2%.
AMERICAN FCA TOWARDS ACCOUNTING TIME
A week of passion for the automotive sector, the cyclical sector par excellence, has come to an end. But final in pink thanks to the recovery led by Pegeot +4,8% and Renault. FCA also recovered (+4,5%) which passed the test of its debut on Wall Street which coincided with the sharp increase in the turbulence in the price lists. In the meantime, the countdown has begun in view of the board meeting at the end of the month, the first in the new tax office in London. In addition to the data for the third quarter, guidance is expected for the whole of 2014 and, above all, a definitive indication on any capital transactions.
In the meantime, the markets appreciated the fact that Sergio Marchionne bought 6,8 million shares at 7,73 euros each. With these purchases the CEO it nearly doubled its exposure to the automotive group to bring its total number of shares to 13,3 million. Good news from European registrations in Europe (EU28 + EFTA) in September, up by 6,1% over the same period last year, not far from the +5,8% in 9 months. The Fiat 500 was the tenth best-selling car in Europe in September, with a double-digit increase in the first 9 months of the year compared to 2013, according to the Jato Dynamics ranking.
Great expectations also for Pirelli (+5,4%) Friday: The company signed an agreement with Rosneft which provides for the identification within three months of a technological partner for the further development of activities in the rubber sector.
OIL, TARGET SHOOTING ON TENARIS. UTILITIES IN FERMENT
The rebound in crude oil prices over the weekend favored the recovery of Eni and Saipem prices. In the crosshairs of downward speculation, however, is Tenaris, down by 2% the day after the investor day in which the pipe producer warned that with the oil price so low, the extraction of shale gas fields could slow down. Among the utilities, the bet on the measures envisaged by the stability law takes off. On Friday, A2A (+5%) and Iren (+2%) shone. The market is looking at the risk among companies controlled by public bodies after the draft stability law provides incentives for local bodies for mergers.
JIMMY CHOO POWERS LUXURY
The sector finds comfort in the positive debut in London of Jimmy Choo, with a slight gain compared to the IPO price (140 pence). The designer's company was the only freshman to brave the storm on the stock markets. Today the luxury sector, from Ferragamo to Yoox, is looking for confirmation that the worst is over. Luxottica, +3,9% on Friday, remains subject to special supervision. Stocks owned by the Benetton family made substantial recoveries: Autogrill +8% and World Duty Free +5%.
