“Debt sustainability depends on the willingness and ability to pay debt obligations, and on both, Italy's debt is sustainable.” When the going gets tough, Mario Draghi takes the field for Italy (and beyond). The president of the ECB speaks to the economic and monetary affairs commission of the European Parliament, just as bank stocks are sinking under the sales stimulated also by the Financial Times article on the risk of bankruptcy for eight banks in the Bel Paese. Draghi does not mention it but reiterates that Italy, six days after the referendum, is not a car on the verge of the abyss. Indeed, "also thanks to our monetary policy measures - he added - growth is gradually accelerating", the only nod to the probable confirmation of the Central Bank's purchase plan which will be approved on 8 December. That day the outcome of the Italian vote will be known, which is sowing uncertainty throughout the eurozone, a construction "today fragile as it is like a half-built house". It is to be hoped that the foundations will hold up to the stress.
It was not only the tension on Italian banks (-4% the sector index at the end of the day, -1,9% the European one) that influenced the start of the financial week. The markets are weighed down by the uncertainty surrounding the agreement between the big oil companies engaged for the whole day yesterday. Some countries, such as Russia, Iran and Iraq, are willing to freeze production at current levels (although high), but hostile to cuts. Saudi Arabia is threatening, at this point, to blow up the agreement that should be signed tomorrow because, says the energy minister, "the market will find a balance by itself anyway". Hence a series of ups and downs punctuated by declarations and news of contacts (including a phone call from Putin to Iranian president Rouhani) which have fueled doubts and uncertainties to the detriment of both the dollar and the stock lists. And so the markets had their weakest day since the election of Trump.
CHINA TIGHTEN ON CAPITAL MOVEMENTS
The Asian markets were weak this morning: Tokyo -0,2%, affected by the drop in the dollar against the yen. The main markets of the Asia-Pacific area are down. Seoul's Kospi index rises after President Park Geun-hye declared in a televised speech that she is ready to resign if Parliament formally impeaches her. The Indian Stock Exchange is up 0,6%.
Beijing wants to curb capital flight from the yuan. From today, foreign mergers over 1 billion and portfolio investments over 10 billion will have to be authorized by the authorities. In the first ten months of the year, Chinese companies made purchases for 146 billion (against 121 for the whole of 2015). The South China Morning Post anticipates a similar provision for private individuals as well: there will be restrictions for operations over 5 million dollars. The decision caused a rebound in the currency, after the sharp declines of recent days. Both Hong Kong and Shanghai were down slightly by 0,2%.
THE DOLLAR STOPS, FINANCIAL SLOW DOWN
Wall Street took profits after the recent rain of records: the Dow Jones lost 0,28%, the S&P 500 index 0,53%. NASDAQ -0,56%. Financial stocks, the main protagonists of the post-election boom, are under pressure: Wells Fargo loses 2%, Bank of America -2,7%, Citigroup -2,3%. New signs of strength are coming from the real economy pending the Fed meeting: the boom in industrial activity in Texas is spectacular, the Dallas Fed index jumped to its highs of the last two years at 10,1 in October, five times more than consensus expectations.
Amazon is also slowing down (-1,7%) despite the data arriving from Cyber Monday: web sales rose by 9,4%, a slight decrease in those of traditional Black Friday commerce: Americans spent 288 dollars each (one less than a year ago). Time Ind shares jumped (+17,6%) after the company rejected the offer of billionaire Edgar Bronfman.
OPEC TOWARDS AGREEMENT, MARKETS CAUT
The OPEC delegates closed their meeting in Vienna last night without having found a final agreement on the modalities of the production cuts. But optimism reigns on the markets: barring a sensational break, which would cause prices to plummet, a compromise is likely by tomorrow's deadline. The price trend reflects the uncertainty of investors: Brent prices in Asia fell this morning (-0,4% to 48,07 dollars) after yesterday's rise which in turn had led to a steep drop (-4 %) on Fridays.
Big oil prices are down on Wall Street: Exxon closes at -0,65%, Chevron -0,45%. Oil companies also lose share in Piazza Affari: Saipem -2,5%. Tenaris -2,6%.
EDISON AIMS AT ENI GAS CUSTOMERS. AND LOOK FOR PARTNERS
Eni fell by 1,5%. The six-legged dog is aiming to further reduce its stake in the Zohr gas field, after selling 10% to BP last week, down to 50%. “There will certainly be other phases of dilution, because we think we can operate with 50% (from the current 100%). This is my goal”, said CEO Claudio Descalzi. For the CEO, the agreement on the Mozambique field is also mature, but there are issues related to the authorizations that are lengthening the time frame.
Edison announced yesterday that it intends to triple its customer base and is therefore ready to buy Eni's customer portfolio. The CEO, Marc Benayoun, said yesterday, adding that EDF could sell 20-35% of the stake in Edison to a long-term Italian investor to finance the operation.
SPREADS AT THE HIGHEST. TODAY HOT AUCTION ON BTPs
Bags in the crosshairs as the Italian referendum approaches. Logically, Milan is the epicenter of the crisis: Piazza Affari once again wins the black jersey with 16.2174 points, down 1,8%. The other price lists of the Old Continent were also negative: Paris -0,9%, Frankfurt -1,1%, London -0,6%. Over the course of the day, the spread between the Italian 193-year bond and the German Bund rose to 2015 points, the highest since October 187 and then closed at 2026. The 2,17-year December XNUMX yield, still a safe distance from the recent peaks up to XNUMX%.
The spreads of the French, Spanish and Dutch 4-year bonds are also in tension. Today's medium-long auction also weighed on Italy. The Treasury will offer this morning between 6,25 and 5 billion in 10- and 6-year BTPs and two CCTEUs. Yesterday 6 billion of the 0,199-month BOT were assigned with a yield of -0,295%, up from the all-time low of -XNUMX% marked in the October placement.
GENERALI GOES TO THE RESCUE OF MPS IN THE STORM
“No one likes going to sea in rough seas – commented Pier Carlo Padoan, referring to the risks on banks mentioned by the Financial Times – but the sun will come back”. While waiting for the minister's poetic vision to come true, however, it is necessary to record the increase in fever in the Italian banking sector.
The umpteenth tragedy of Monte Paschi (-13,8%) took place in Piazza Affari on the day Consob gave the go-ahead for the prospectus relating to the voluntary conversion of subordinated bonds into shares, a tender offer which will last, "subject to extension" until 16pm next Friday.
Before the opening of the markets, the Bank wanted to underline that the rescue operation, which provides for the deconsolidation of 27 billion bad loans and an increase from 5 billion, presents "significant uncertainties" exposing the institution to a risk of bail -in. The prospectus prepared for the offer consists of 146 pages full of cautions and warnings. Vice-President Valdis Dombrovskis announced that the EU Commission said it was ready to handle any situations of volatility that might arise on the markets after the constitutional referendum or in the event of failure of the MPS capital increase plan.
While waiting for the arrival of an anchor investor (possible, but only after the referendum, to intervene in the capital of the Qatari sovereign fund, which could invest between 0,75 and 1 billion euros), the Bank received the favorable opinion of the Board of Generali (-2,4%) to the conversion of the subordinated bonds, around 400 million, into MontePaschi shares and mandated the CEO Philippe Donnet to continue with the operation which will lead the company to have 8% pre-increase of capital.
CARIGE AND CREVAL ALSO IN THE SIGHT
A day of passion also for Carige -9%, another bank at risk of bail in on the map of the Financial Times. Similar discount for Credito Valtellinese. All other institutes in red. Bper drops 6,58% without benefiting from the transformation into a joint stock company, approved last Saturday by the shareholders' meeting. Reductions of around 5% for Banco Popolare and Popolare di Milano. Even the big names are bad: Unicredit -4,5%, Intesa -3,2%. Ubi defends itself better (-2,6%) waiting to finalize the purchase of the good banks.
FCA: FOR EVERCORE IT CAN DOUBLE
Fiat Chrysler defends itself (-0,4%) in a black day for the rest of the list. During the session, the stock rose up to 1,8%. The report by the broker Evercore ISI (International Strategy & Investments) contributed to the performance, which promoted the judgment to Buy from Sell, doubling the target price to 10 euros from 5,0 euros. Analyst George Galliers justifies the U-turn in the price by writing that "the big day has arrived". According to the analyst, many factors will work in favor of the stock over the next 18 months: the Fiat Chrysler group will record growing profits, beat expectations and will benefit from debt reduction.
In a world where CEOs seem inclined to reassure investors by promising new business models and substantial capital outlays, Sergio Marchionne has remained relatively calm. However, in our opinion, there is no CEO who gives greater consideration to shareholder value. While Marchionne hasn't always delivered, we believe he truly cares more about shareholders than any of his other peers in the industry. His close relationship with Exor (-1,59%%) and the chairman John Elkann probably plays a role "as well as the fact that Marchionne himself is a shareholder".
Minus sign also for Cnh (-1,4%): in the morning Mediobanca Securities reduced the recommendation from outperform to neutral, at the same time increasing the target price from 8 to 8,7 euro.
YOOX ALSO ADVANCES IN THE GULF
Enel drops by 0,8%: Kepler Cheuvreux has raised the target price to 4,7 euros from 4,6 euros, confirming the Buy rating. Terna runs (+1%), promoted to Buy by the American broker Jefferies. Yoox Net-A-Porter is making progress, bucking the market trend (+0,23%), benefiting from the announcement of a joint venture with Mohamed Alabbar's Symphony Investments and record sales for the 'Cyber Weekend' and 'Black Friday' '.
