Draghi and the relief on tariffs give wings to the markets

Draghi's move on the new bazooka and the air of US-China understanding on tariffs give the stock exchanges a boost and Wall Street is one step away from the record - The banks celebrate

“It will be very difficult for the Fed to overlook the message coming from the ECB,” a Carmignac manager commented yesterday after the Frankfurt announcements. Donald Trump thinks so, who dedicated a poisonous tweet to Frankfurt's decisions to Jay Powell: “The ECB is trying, and succeeding, to depreciate the euro against a very strong dollar, hitting US exports. And the Fed wait, wait, wait. They get paid to lend money, we pay the interest." Asian stock exchanges also reacted favorably to the turnaround by the ECB this morning.

CHINA THINKS ABOUT REPUBLIC DAY. SOY TRUMP

But what galvanized the price lists was above all the rapprochement on the question of duties between the two superpowers. To stir things up, writes the Wall Street Journal, China is ready to set aside the Huawei case and the matter concerning security for now. In this way, Beijing aims to close at least one of the open games, also to be able to present itself at the solemn celebrations for the XNUMXth anniversary of the birth of the People's Republic of China, scheduled for October XNUMXst. to October XNUMX, with a tangible result. President Trump, for his part, has opened up the possibility of "small agreements" on individual aspects of trade, as long as Beijing returns to purchase agricultural products from the Midwest.

TOKYO AT HIGHEST SINCE APRIL, OIL HOLDS DOWN

The stock exchanges recorded the improvement in the climate this morning on the eve of the weekend.

This morning, Tokyo's Nikkei gains 1% in the final session: with tonight's step forward, the Japan Stock Exchange returns to levels last seen in April. The dollar-yen exchange rate appreciated at 108,2, for the fifth consecutive day.

Hong Kong's Hang Seng index is up 0,3%, Shanghai's and Shenzhen's CSI 300 1%, Seoul's Kospi 0,8%. Dollar Yuan cross at 7,07, slightly moved, from -0,5% in the previous session.

Effervescent Wall Street: the S&P 500 index +0,29% to 3.009,57 points, just a breath away from the historic record of 3.024,50 points set in July. The Dow Jones finished up 0,2% at 27.182 points, the seventh consecutive session with the plus sign, the longest positive streak for a year. NASDAQ +0,3%.

Google rises (+1,2%) after the agreement concluded with the French tax authorities.

Brent oil loses 0,3% to 60,2 dollars a barrel, closing yesterday -0,7%. North Sea crude is about to end one of the worst weeks of this second half of 2019. At yesterday's Abu Dhabi summit there was no agreement on new production cuts. The international energy agency has signaled that the increase in production in the United States and Canada will unbalance the market in 2020 towards an overproduction scenario.

MAXI SAIPEM ORDER IN NIGERIA

Eni -0,7%. Saipem +0,2%: the consortium it belongs to should have won a tender in Nigeria. Upstream News writes that the letter of intent has been signed between the client (Nigeria LNG) and the executor of the works. The project to be implemented in the Niger Delta is worth about seven billion dollars, the part falling under Saipem's responsibility could be in the order of four billion.

Gold jumped to $1.525 immediately after the ECB's announcement, but lost everything during the evening, tonight it got by just below $1.500.

ECB CUTS DEPOSIT RATE AND RELAUNCHES QE

A package of measures to counteract the slowdown in the economy, support trade and revive inflation. Mario Draghi's latest challenge, despite the fact that the ammunition available to his bazooka is now scarce, was up to the courage and determination shown during his mandate.

In summary, the ECB cut the deposit rate by ten basis points, to -0,50%, and restarted purchases of securities, starting in November, for 20 billion euros a month and for as long as necessary. The measures also envisage more favorable conditions in the granting of liquidity, the restart of a stimulus plan (QE) worth 20 billion euros a month and the introduction of a staggered system for liquidity deposited with the ECB, one of which, should be zero. Draghi also announced the change of the so-called forward guidance, i.e. forecasting future interest rate movements. These, the ECB expects, will remain “at current levels or lower until inflation “converges robustly towards a level sufficiently close to but below 2%”.

Draghi thus has a reduced version of Quantitative Easing (20 billion a month compared to 80 in the first Qe) in exchange for an open (and perhaps eternal) duration of the same. Northern European banks were granted tiering, i.e. the possibility of reducing the impact of low rates on accounts, while those of Southern Europe were rewarded with a more generous Tlter.

THE BAZOOKA BRINGS TWO BILLION TO THE BANKS

In short, a cautious mix that took into account the resistance of a part of the directorate (six out of 25 members did not hide their criticisms) partially disappointing market expectations. The double regime on deposit rates, the instrument that was supposed to protect the banks, crushed by the effects of low rates, according to Websim "brings modest relief to the sector, around 2 billion euros for the entire euro zone system, slightly more of 200 million euros a year, for the Italians. But more was the difficult to do. Now the word passes to Christine Lagarde who will have a more political task. On one point, moreover, all the bankers agreed: the margins of monetary policy are now reduced. The word is up to fiscal policy- But here opinions are divided. Germany, comments Stephens Philips in the Financial Times, "will move, as usual, when it is too late".

BTP YIELD DOWN TO 0,78%

Yesterday the strongest reaction to the ECB's measures was that of the bond markets.

The yield of the 0,78-year BTP plunged to 0,97%, a new record, from 138% yesterday. Sharp contraction of the spreads, those against Germany (64) and Spain (15) drop to the lowest level of the last XNUMX months.

Conversely, the yield on the 0,56-year German Bund remains at -XNUMX%, almost unchanged.

Previously, in the morning auctions the Treasury placed 4 billion BTPs in 2023 at -0,01%. For the first time, therefore, Italy too has thus entered the club of sub-zero medium-term securities. Historical lows also for 7-year BTPs while the 2015-year bond fell to its lowest since March XNUMX.

This morning the euro-dollar ratio, up 0,5% yesterday, is at 1,106.

Futures on European stocks moved little before the open.

BUSINESS PLACE AT THE HIGHEST FOR TWO MONTHS

Yesterday the reaction of Piazza Affari was sensitive, which achieved a rise of 0,88% to 22.083 points, the highest in the last two months.

The gains of the other European lists were more modest: Paris +0,44%, Frankfurt +0,41%, Madrid +0,25%.

Outside the eurozone, London is not very busy (+0,09%). The British government appears intent on withholding Hong Kong's potential $36,6 billion takeover of the London Stock Exchange Group on the grounds that the LSE is too critical a part of the country's financial infrastructure.