Will the coronavirus be Trump's Vietnam? If you ask the Bloomberg agency, citing the overtaking of infections in the United States on China on the day of the historic leap in new applications for unemployment benefits for over three million jobless. But the financial markets are looking at the gigantic stimuli put into action by the White House and the Fed, which took the field yesterday with a surprise press conference to reassure the stock markets. Next to the monetary interventions there are also the fiscal ones. The two trillion to be approved in Congress include support measures for families and subsidized loans to sectors in crisis. But the part that pleases the markets the most is that half a trillion that will probably be increased tenfold by the Fed and which will be allocated to the establishment of mixed Treasury-Fed vehicles that will purchase various monetary and bond instruments with maturities of up to 5 years. A real Kasko policy for the Bull to which the ECB will contribute which yesterday, in practice, dramatically expanded the securities guaranteed by the Frankfurt coffers. The Stock Exchanges, in the face of such a bonanza, can only go up, even if the reasons for pain and uncertainty for the future multiply.
ASIAN PRICE LISTS RISE
Asian price lists were all up at the weekend: Tokyo's Nikkei +1,8%, Hong Kong's Hang Seng +1,2%, Shanghai Composite +1,4%, Seoul's Kospi +0,8%. At the extremes, there is +8% in Jakarta and -4,4% in Sydney, which retraces after the strong increases.
Indian BSE Sensex rises 1,8%. The Reserve Bank of India cut interest rates by 75 basis points to 4,40%.
US EXCHANGES DO NOT STOP: DOW +21% IN THREE DAYS
On Wall Street, the Dow Jones index scored an incredible trio: +21% from Monday's lows. We have to go back to 1931, in the midst of the crisis, to find a similar performance, a clear sign of instability. Yesterday the Dow closed up 6,38%, S&P 500 up 6,24%. NASDAQ 5,8%. Volatility has dropped to 61.
Tonight, there was an emergency meeting between Treasury executives and the country's major financial institutions, including Powell of the Fed and Jay Clayton of the SEC, the US Consob. At the end it was considered appropriate not to close or reduce the opening hours of the financial markets, as someone had asked. Steven Mnuchin, in favor of opening, has promised particular assistance to mortgage lenders.
WEAK DOLLAR, EURO RISES FOR FIVE DAYS
The yield on T bonds slows down, in the face of the rain of money promoted by the Fed and the White House: the 0,7979-year bond trades at XNUMX%.
Pause in the rise of gold after a roaring week: the yellow metal trades at 1.626 dollars an ounce (-0,34%).
Brent oil rose to 26 dollars a barrel (+56&). The market remains weak due to the fall in world demand.
Yesterday Eni (-0,5%) announced that it will cut investments by a quarter, -2 billion euros. In 2021 the reduction will be even heavier, at least 2,5 billion euros, up to 3 billion euros. As a result of this containment maneuver, production will drop to 1,84 million barrels per day. Tenaris (+5%) issued a note to warn that the board will examine later the amount of the dividend to propose to the shareholders' meeting.
The dollar weakens, depreciating against the yen, Korean won and Chinese yuan. But above all, the US currency loses new blows on the euro, up for the fifth consecutive day, to 1,106.
NO EUROBOND, ITALY REBELS
Last evening the European Council failed to reach an agreement on the emergency measures (eurobonds) requested by Italy, Spain, France and six other countries in the euro area: Germany and the Netherlands vetoed. At the end of the six-hour teleconference discussion, it was agreed to give the technicians of the respective finance ministries two weeks to find new financial instruments capable of bringing resources to countries in difficulty. The 27 leaders agreed on the immediate use of the resources contained in the Save States fund, from which each country will be able to draw up to a maximum of 2% of its GDP.
This is not enough for Italy: "We need to react with innovative financial instruments - said Prime Minister Giuseppe Conte - and truly adequate to face a war that we must fight together, to win it as quickly as possible". Otherwise? “We will do it ourselves,” Conte said, asking for a decision within ten days.
Moreover, yesterday the ECB made a historic gesture, by reviewing the parameters for bond purchases. The Pandemic Emergency Purchase Program (PEPP), active since yesterday, will have no limits: it will be able to exceed the 750 billion initially envisaged, operating without constraints also with regard to purchases.
THE ECB PUSHES PURCHASES
Buy, in short, buy and buy again. Without hesitation, because, as stated in the document issued by the ECB's legal office to clarify the modalities of the Central Bank's purchase programme, "the Eurosystem will not tolerate any risk to the regular transmission of its monetary policy in all the jurisdictions of the EUR". An unequivocal signal of monetary policy that has not, however, found correspondence in the attitude of a majority part of the Eurogroup, which in any case asks for specific commitments and guarantees before widening the purse strings.
Milan closed up 0,73%, at 17.369, eliminating the loss of the morning, thanks to the new rally in the US markets.
The performance of Piazza Affari since January 27st is still in deep red (-50%), slightly worse than the European average: Eurostoxx25 -20%. But since the low in March, the FtseMib has rebounded by XNUMX%
In the rest of Europe, Frankfurt +1,35%; Paris +2,5%; Madrid +1,65%; London +2,1%; Zurich +2,4%
GUALTIERI: PUBLIC GUARANTEES AS DRAGHI WANTS
Treasury Minister Roberto Gualtieri, referring to thespeech by Mario Draghi, announced "its intention to make unprecedented public guarantees available to allow the financial system to disburse all the necessary liquidity to businesses", at the level of the most substantial and ambitious initiatives implemented in Europe: Germany, France and Spain they have already moved with interventions ranging from 550 billion to 200 billion euros.
THE SPREAD IS DOWN, THE BOT AUCTION TODAY
However, the effects of the Frankfurt bazooka were immediate. The yield on BTPs, protected by central bank purchases, fell to 1,22% (-26 basis points).
The spread fell to 159 basis points despite the drop in the yield on the 10-year German Bund, which fell by 0,37 basis points to -XNUMX%.
German rating agency Scope estimates that the massive costs of the coronavirus could push Italy's public debt-to-GDP ratio above 145%. Scope forecast a deficit of over 6% of gross domestic product at the end of the year.
Yesterday the Treasury placed just under the maximum amount between indexed CTZ and BTP, with the yield on the zero-coupon bond climbing back to its highest level since June.
Today it's the turn of the six-month Bot, offered for 7 billion euros. On the gray market, shares expiring on 30 September traded around 0,50% yesterday evening.
On March 31, securities worth 8,5 billion in 5-year and 10-year BTPs (two issues) and Ccteu will be auctioned.
The ECB's new extraordinary purchase program will be able to exceed the 750 billion initially envisaged, operating without constraints as regards purchases. The restriction on the overall debt of the issuer (previously set at 33%) has been suspended. Bans on the purchase of no more than 33% of a single bond issued by a national body, 50% for a supranational body, such as the European Investment Bank, EIB, are set aside. The time limit at the end of the year also expires: it goes on as long as needed. The audience of bonds is extended, so as to make it possible to purchase even very short-term bonds, such as bots. The ECB will thus be able to operate not only on the medium-long term debt financing front, but also in support of the deficit, the part of the budget financed with short and very short-term instruments.
MANAGED SAVINGS TAKES FLIGHT
In the wake of the strong increase in debt securities, asset management companies were the great protagonists of the day. Leading the race is Anima Holding (+12,24%); Finecobank advances by 9%. Banca Generali (+4%) and Azimut (+3%) also made progress. Runs Poste Italiane (+3%).
In February, before the outbreak of the epidemic, redemptions fell with a marked improvement in funding, albeit a negative 406 million.
LEONARDO'S RISPRSA CONTINUES, SALE BUZZI
The best stock was Buzzi (+7%). The Piedmontese company anticipated that it expects a deterioration in business for the rest of 2020 but for the 2019 financial year it has proposed a €0,15 dividend and a share buyback plan of up to €140 million. Kepler Cheuvreux confirmed the buy recommendation and the target price at 26,5 euros.
Leonardo did well (+6,1%), benefiting from the prospect of continuing to operate with open factories given that it operates in strategic sectors.
Banks were positive: Mediobanca +2,73%; Ubi +2,47%; Banco Bpm +1,42%; Understanding +0,92%. Bper (-1,96%) and Unicredit (-1,54%) are down.
KEEPS THE FCA/PEUGEOT AGREEMENT. MITSUBISHI TO RENAULT
Exor +3%. The Agnelli holding company will distribute a dividend of 0,43 euros, in line with last year's value. At the end of 2019, the net debt was 2,6 billion euros. In the note presenting the accounts, there was no mention of the merger between FCA (+0,8%) and Peugeot but, as Les Echos writes, it is probable that the crisis will lead to the reduction of the extra coupon provided for Fiat shareholders (including Exor stands out).
The French newspaper reports the sale of 10% of Renault to the Japanese Mitsubishi. Ferrari +0,93%. Morgan Stanley cuts its target price to $163. Piaggio +1,5%: Standard&Poor's downgraded its rating and autolook.
TIM AND LUXURY SUFFER
Among the worst performers in the main index, Tim stands out (-5%), down despite the telecommunications business going through a positive phase.
Luxury down after attempts to rebound in recent sessions. Salvatore Ferragamo loses 3,2%, Moncler +0,9%.
HERA ACCOUNTS PROMOTED
Hera +0,5%. In the aftermath of the publication of the 2019 data, Mediobanca raises the rating to Outperform. The company said the lockdown should only marginally penalize EBITDA.
Atlantia -0,3%. Autostrade per l'Italia has published the data on motorway traffic: the drop is 71% since the beginning of the year.
Among the mid-caps, Technogym (-4,46%) fell sharply. Bad Sogefi (-4,31%), on which Kepler Cheuvreux cut the target price from 1,1 to 0,7 euros, confirming the reduced recommendation.
Fila -2,13%: Banca Akros reduced its rating to accumulated from buy, target of 10,2 euros from 17,3 euros, after the publication of accounts lower than analysts' expectations.
