"The collapse of the economy in the second quarter will be unprecedented", Christine Lagarde warned yesterday, explaining the reasons for the new massive injection of liquidity that the European Central Bank will inject until well into 2021 in the economy of the Old Continent, which this year will retreat by 8,7%. Meanwhile, the markets are preparing to welcome another shock: the statistics on US unemployment, which, according to forecasts, should have risen to 19,7%: exceeding 20% would mean returning to the levels of the Great Depression of 1929.
These signs have cooled the enthusiasm for the recovery of recent days, which in any case pushed the stock market to its highest level since March and even beyond, while the euro, in tow of the German engine, as usual slow to get going but constant action, it is starting to close at a three-month high, just below 1,14. In short, the Bull is taking a well-deserved break, supported by the gains in government bonds.
The global Dow Jones Asia index, up 0,3% this morning, rose 5% during the week.
Tokyo's Nikkei climbs 0,3%, the Shanghai Composite index falls 0,2%. Ties Hong Kong, at the end of a very delicate day: Parliament has approved the law that punishes anyone who insults the Chinese national anthem. Despite the government ban, hundreds of people attended the vigil to remember the Tiananmen Square massacre. There have been clashes and arrests.
The Korean Kospi flies: +1,2%, even +9,4% in the week. Samsung Electronics, regardless of the legal troubles of the heir to the dynasty, has lined up ten positive sessions, a sequence not seen since 2015, the last leap of a stock that has gained 150% in the last two years. The Asian chipmaker follows the fate of the Philadelphia Semiconductor sector index, which returned within a few weeks to contact the highs of February.
Singapore does even better: +10% during the week. In Mumbai (+0,4%) Tata Motors (+4%) stood out.
The S&P500 index lost 0,3% yesterday, a day of struggle and racial protests, but has gained 2,3% since last Friday. The Nasdaq is also down (-0,69%), the Dow Jones flat (+0,05%).
The yield on 0,82-year Treasury Notes climbs to 122%, a level not seen since the end of April. Market rates are rising more on the long end than on the short end, as a result of the arrival of the colossal new debt issuance by the Washington Treasury and because the Federal Reserve is expected to advance next week control interventions on the first section of the curve. The spread between the five-year and thirty-year Treasury yields is XNUMX basis points, on the highs of the last three years.
Brent oil up for the seventh consecutive day, at 40,2 dollars a barrel.
The euro appreciates this morning to 1,135 against the dollar, close to the highs of the last three months, in the aftermath of the announcements by the ECB, which did not disappoint expectations yesterday.
A DRAGONS DAY FOR THE OLD CONTINENT
Nervous session yesterday for the financial markets of the Old Continent, even if the ECB did not disappoint expectations. But the new injection of liquidity, albeit more generous than expected, hasn't warmed up share prices, except for a flare-up from Milan, the most conditioned by the trend of the debt market. It was still a "Draghi Day", not only because the Bank of Frankfurt, having filed the discontent of the hawks and the diktat of the Karlsruhe Court, proceeds in the wake of the "whatever it takes", but above all because Germany has finally adopted that policy fiscal expansion that Super Mario has been advising in vain for years.
ANOTHER 600 BILLION COMING FOR THE ECB'S BAZOOKA
The central bank has gone beyond expectations in the PEPP programme, increasing the budget by another 600 billion euros (against expectations of 500 billion), up to a total of 1.350 billion overall. The duration was extended until mid-2022, while the market expected the deadline of December 31, 2021 to be confirmed.
Purchases will continue under the banner of maximum flexibility, ie they will be concentrated where they are most needed (Italy, Greece, Portugal and Spain). Christine Lagarde assured that the BCA will continue "to use the PEPP to address the risks of fragmentation".
PURCHASES CONCENTRATED IN THE SUBURBS, NO JUNK BOND
However, the president specified that the board has not discussed including "junk bonds" (or "fallen angels") in the program.
Lagarde avoided a head-on confrontation with the German Constitutional Court, but reiterated that "the ECB is subject to the jurisdiction of the European Court of Justice", which judged the bond purchases "in line with the mandate. We are confident – he added – that a good solution will be found that will not compromise the independence of the ECB, the European law and the sentence of the European Court ”.
MARKET SQUARE APPLAUDS, THEN BRAKES
The president's words marked the evolution of the day in Piazza Affari, which closed a multi-speed session with a slight decrease (-0,04% to 19.634 points): morning dominated by sales, rebound in the afternoon after the announcements of the ECB up to the maximum of the last three months at 19.848. Finally, a correction on the wool thread.
GERMANY STARTS ITS RELAUNCH PLAN
The other European stock exchanges slowed: London's Ftse 100 -0,63%, Paris' Cac 40 -0,21%, Madrid's Ibex 35 -0,73%.
Frankfurt archives at -0,47% the day in which, according to Angela Merkel, “the most complete economic recovery plan in German history was launched”. After a two-day marathon, CDU-CSU and SPD have reached an agreement on a 130 billion plan which completes the 1.100 billion program launched in May.
VAT DROP, FUNDS FOR ELECTRIC AND HYDROGEN CARS
The 57-point agreement provides for both measures to support families and businesses and investments in digital and green economy. VAT will drop in the next six months, a bonus of 300 euros per child will be granted, while businesses will enjoy tax relief. 50 billion will be allocated to investments, plus 6,7 billion for the electric car and the development of a hydrogen production chain.
While waiting for the panzer economy to return to full capacity (appointment for 2022 according to the Minister of Economy, Peter Altmeier), Italian finance can console itself with the improvement of conditions for BTPs, which in any case represent a debt, albeit less onerous.
BTPs TAKE FLIGHT, SPREAD AT 170.
After the ECB's announcements, government bonds on the periphery of the eurozone took flight. The 10-year BTP gained 1,20% during the day, achieving the best daily performance since last March 26th. The yield fell to the levels of the end of March, at 1,39%, with the spread narrowing to 170 basis points. Significant progress also for the governments of Spain, Portugal and Greece. Conversely, the yield on the 0,32-year Bund rose to -XNUMX%, its highest since early April.
INVESTORS FROM 40 COUNTRIES LINE UP FOR THE NEW XNUMXTH YEAR
As many as 490 investors arriving from 40 countries bought up 76% of the new BTP placed via syndicate with record orders for 108 billion euros.
BONDS EFFECT ALSO FOR POST AND MANAGED
Banks and asset management took advantage of the improvement in the bond market. Poste Italiane increases (+3,2%). Banca Mediolanum (+3,8%) does even better, followed by Azimut (+2,5%), promoted by HSBC. FinecoBank +1,5%; net inflows of 873 million in May.
Among the banks, Bpm (+4,35) and Popolare Sondrio (+4,19%) stand out.
ATLANTIA -2%. COUNT SIDES FOR THE REVOCATION
Atlantic -2%. “There are many elements that justify the revocation of the Atlantia group's motorway concession and a decision will be made soon”. Prime Minister Giuseppe Conte said this at a press conference yesterday evening, adding that the negotiations with the company, which went on for months after the collapse of the Morandi bridge in Genoa in August 2018, have not led to satisfactory conclusions.
OIL SERVICES AND ITALGAS GROW, BARCLAYS PROMOTES ENEL
The oil sector is up: Saipem +1,9%, Tenaris +1%. Among the utilities, Italgas stands out (+1,3%) which won the tender for the management of the natural gas distribution service in the “Belluno” Territorial Area for the next 12 years.
Barclays has raised the judgment to Overweight on Enel.
Among the mid caps, Mondadori (+8,11%), Ovs (+7,9%) and Astaldi (+7,35%) shine.
SIGNS OF LIFE FOR TRAVEL. ENAV DOES BUSINESS IN TAIWAN
Enav (+2,88%) was awarded a contract with the Civil Aeronautics Administration of Taiwan, a government agency of the Ministry of Transport.
On the travel front, Aim Trawell (+20,37%) and Sistravel (+20,59%) are reawakening, with a view to a slow recovery in travel. Trevi still on the shields in the volatility auction after an 18% increase. The company has denied extraordinary transactions with Webuild (+6,4%).
