Mario Draghi chose a solemn occasion, the annual meeting of the ECB in the splendid setting of the castle of Sintra in Portugal, to signal the change of course to the markets: "Deflationary pressures - he said - have been replaced by reflationary forces", for effect of the recovery that is strengthening. It is not yet the turning point, because, he added, the recovery is due to Quantitative easing, so any change must be evaluated with extreme caution. But Draghi is too sensitive and attentive a communicator not to have evaluated the effect of his exit, moreover in the presence of Ben Bernanke, the former Fed governor who was the first to experience the difficulties of tapering. It is therefore unlikely that he was surprised by the reaction of the markets, already resigned to the increase in the cost of money: shares down, starting with utilities, the stocks most sensitive to the increase in interest rates; on bond yields (Btp again above 2%); euro soaring to 11-month high against the dollar.
YELLEN: THERE WILL NOT BE ANOTHER 2008. PIRATE ATTACK HALF THE WORLD
Janet Yellen from London multiplied the effect of the message. Speaking before another prestigious audience, the Royal Academy, the president of the Fed, after reiterating the need to raise rates "very gradually", took sides in defense of the rules introduced after the 2008 crisis. A cold shower for the hopes of US bankers, galvanized by the positive outcome of the stress tests. Things are going better, the two most important bankers on the planet agree, but more attention and discipline are needed for this. To those who reminded her that in 2005 she had ruled out the possibility of crack, Yellen replied: “May I say that there will never be another financial crisis again? I hope it won't happen while we live and I don't think it will."
But to remind us that we live in a complicated world, full of pitfalls and possible black swans, was the cyber attack that yesterday knocked out the systems of half of Ukraine, including those that monitor the remains of the Chernobyl plant, Rosneft, the Russian energy giant, and numerous other sensitive nodes in Europe as well as in the United States. In Asia, India's largest container-handling port, near Mumbai, is on lockdown because its handling system has been attacked by a virus.
WEAK ASIA, ANOTHER DELAY FOR US HEALTHCARE
Signals of caution thus prevailed on the markets. The Tokyo Stock Exchange (-0,3%) slows down from Monday's highs, following on from the US markets. The yen rose against the dollar (-0,3% to 112,2 against the Japanese currency) already retreating against the euro which trades above 1,13. China's stock markets were down: Hong Kong -0,4%, Shanghai -0,1%. Seoul -0,3%, Mumbai -0,2%.
The new postponement of the examination of the health reform contributed to push the US markets downwards. This will be discussed after July 4, in the hope of breaking the opposition of the American right who are calling for even more drastic cuts to the plan which, as it stands, will already cut health insurance to 22 million Americans.
The new setback caused the S&P 500 index to drop sharply (-0,81%). The Dow Jones limited the decline to 0,46%. Much more significant was the plunge of the Nasdaq (-1,61%), dragged down by the retreat of technology stocks.
THE EU FINE SENDS GOOGLE TO THE CARPET
Among the worst Alphabet. The company that controls Google drops 2,5% after the record fine of 2,42 billion dollars imposed by the European Union for anti-competitive practices. Google is accused of having favored its search engine in the price comparison service.
The other Bigs are also down, including Facebook (-1,96%), which yesterday announced that the social network's customers have risen to two billion. Down Amazon (-1,73%) and Apple (-1,43%). The most massive loss was that of Netflix (-4,2%).
The yield on the 10-year Treasury Bill rose again to 2,16%, from 2,14% on the previous day. The index of financial stocks was the only one to close the session in positive territory.
THE WEAK DOLLAR HELPS OIL
Oil also rose, thanks to the weakening of the dollar: Wti at 44,24 dollars and Brent at 46,47 dollars a barrel. In Piazza Affari Eni fell by 0,6%. Saipem rebounds (+1%).
EUROPE IN RED. MAXI BUY BACK FOR NESTLÉ
Draghi's words dyed the stock lists of the Eurozone red. The black jersey fell to Milan. The Ftse Mib index lost 1,01% to 20.791 points. Frankfurt lost 0,78%, while Paris lost 0,70%. Madrid also down (-0,40%). London limited losses to -0,17%. Zurich was also down (-0,53%) mainly due to Nestlé (-1,6%) which yesterday, under pressure from shareholder activist Daniel Loeb, announced a gigantic 20 billion dollar buyback to be carried out in the coming three years. The giant has also put in the pipeline a major overhaul of the product portfolio. The leading European food group will concentrate purchases in coffee, pet food, baby products, mineral waters and diet foods.
THE BTP 10 RISES UP TO 2,07%. ALSO A NEW XNUMX-YEAR AUCTION
Field day also for the secondary market. The Italian ten-year rate returned above the 2% threshold, to its highest level since mid-June, to 2,02%, from 1,89% at the last closing. The yield differential between the BTP and the Bund on the 10-year stretch is worth 167 basis points after having widened up to 169 points. Particularly affected was the thirty-year September 2046 which dropped more than two figures with a rate rising to 3,139%.
This morning at the auction of the six-month BOT, the Treasury will make available to investors up to 6,75 billion euro compared to the 6,5 due. Despite upward pressures, the yield could hit a new all-time low as on MTS' gray market, the stock traded at -0,365% yesterday, down from -0,358% on its last placement.
On Friday, the Ministry of the Economy will make available to investors between 6,5 and 8 billion euros in 5-year BTPs, in the new 10-year term in addition to the October 2024 Ccteu. During the third quarter, the Treasury announced the launch of a new Btp five years, a new seven years and a new ten years.
UTILITIES UNDER PRESSURE: ENEL -3%
Banks on the rise, utilities under pressure. The prospect of an increase in the cost of money immediately caused a change of course in the choices of the operators. The sectors most exposed to debt suffered, such as utilities (sector index -2,3%), greatly benefited in recent months by the downward trend in the cost of money. Very weak Enel (-3,03%) despite yesterday the subsidiary Enel Green Power North America started operations of the Aurora solar photovoltaic park in the United States.
Also bad were A2a (-2,24%) and Terna (-2,87%) which completed the purchase from the Planova group (for 180 million dollars) of two concessions for the construction and operation of approximately 500 km of electricity infrastructure in Brazil. Italgas (-3,2%) and Snam (-3%) are also down.
THE INTESA RALLY CONTINUES. SHINE UBI AFTER THE RISE
Conversely, the hypothesis of an increase in interest rates favored bankers: the Stoxx index gained 0,9%. The sector's consolidation news from Spain contributed to supporting the sector: Bankia completed the purchase of Banco Mare Nostrum, creating the fourth largest bank in the country.
But the spotlights remain on above all on Intesa (+1,8%), still in the wake of the market appreciation for the operation on the Veneto banks, which will not penalize the institute's shareholders and will not change the guidelines of the next business plan , as CEO Carlo Messina reiterated yesterday. According to analysts, the operation could also have positive effects on capital.
Tonic also Ubi, up 1% on the last day of the 400 million capital increase launched as part of the acquisition of the three good banks. The operation was subscribed for 99,31% of the capital increase of Ubi Banca for a total amount of 397,24 million euro compared to the 400 million of the announced operation. Kepler Cheuvreux confirmed the Buy judgment and the target price of 3,9 euros.
Carige still down (-3,4%) in a market that discounts a greater amount of the capital increase in sight than the bank's initial forecasts. On the shields for the second day in a row Banca Intermobiliare (+5,3%) on the expectations of the sale of the institute in the light of the liquidation of the parent company Veneto Banca. CEO Giorgio Girelli told Reuters that he is confident that the sales process can be completed quickly.
DIFFICULT DAY FOR THE CAR: THE COMPONENTS SUFFER
Difficult day for the automotive industry. In the USA, General Motors loses ground (-0,8%), which has revised downwards its sales estimates for 2017. The sector was also one of the worst at European level with a drop of 1,6% after the manufacturer German components manufacturer Schaeffler (-12,8%) cut earnings estimates on mounting pricing pressures and high costs. In Milan, Fiat Chrysler lost 1,2%, Exor -3,5%. Among the component manufacturers, Brembo fell by 2,4%, Sogefi by 4,9%.
Salini Impregilo goes against the trend (+2,21%): the US state of Virginia has announced investments in infrastructure for 18,6 billion dollars to be made in the area over the next six years.
